Former Central Bank Governor Arjun Mahendran yesterday said that he submitted a briefing note to the government in March 2016 with regard to the events that transpired at the February 27, 2015 auction.
He said that he can provide the said briefing note to the Treasury Bond Commission for perusal.Following a question from Senior Additional Solicitor General Dappula de Livera, Mahendran explained that he was asked to submit an explanation regarding the February 27, 2015 auction. He further said that he gave an oral report regarding the matter and said that he submitted a briefing note subsequently.
Meanwhile, it was also observed at the Commission that any decision taken by the Central Bank of Sri Lanka should come from the Monetary Board only, according to the Monetary Law Act.
Senior State Counsel Shahida Barrie led evidence on Mahendran’s involvement in the decision to remove the 5% penal rate. She suggested that the decision was solely taken by Mahendran and not the Market Operations Committee. Barrie also pointed out that the decision should have come from the Monetary Board.
In reply, Mahendran said he did not take the decision to remove the penal rate but that he only suggested doing so. He observed that the MOC, following his suggestion, took a decision remove the 5% penal rate. He also said he thought that it was a prudent decision.
Speaking on removing direct placement method, Mahendran said he had extensive discussions with regard to its removal with Central Bank Deputy Governors and Public Debt Department officers. Evidence given by respective witnesses suggests that they only complied with the decision to do away with Private Placement method which was originally taken by Mahendran.
Mahendran was also questioned on the phenomenal profits gained by Perpetual Treasuries Limited at the February 27, 2015 auction.
SSC Barrie also pointed out to the Commission that PTL in 2015 have had a significant rise in their market share in the primary Treasury Bond market where as EPF consequently has recorded a decrease in their market share in the Primary Treasury Bond market. According to SSC Barrie, PTL market share has risen by 15.45% where as the EPF market share has gone down to 18.66%. Mahendran said it was not only PTL who recorded a large profit at the February 27, 2015 auction.
The Commission will sit on Monday.