In a scenario of ever increasing irregularities in the financial sector, the appointment of Dharma Dheerasinghe, retired Deputy Governor of the Central Bank of Sri Lanka (CBSL) as Deputy Chairman of the Commercial Bank of Ceylon and a few days later as Chairman of Bartleet Finance is not only questionable but deplorable as well, for the simple reason that both these institutions are regulated and supervised by the Central Bank, being one of its mandatory functions. A few months ago, Rani Jayamaha, another retired Deputy Governor, became the Chairperson of Hatton National Bank. It is being questioned as to whether it is ethically and morally correct for these officers to accept such posts as it is quite evident that the posts are not offered on a platter by these institutions but obviously compelled to make available in order to compensate for certain unhealthy underhand services rendered to these financial institutions by them. It is no secret that the CBSL was partly responsible for the collapse of the Golden Key Credit Card Co. after it was found that the top management of the CBSL ignored a warning report compiled by its own officers.
While learning our basic economics, our teachers taught us that the CBSL is an autonomous unique institution performing certain unique functions. It was in this context that the late NU Jayawardene, who succeeded John Exter as Governor in early 1950s was found unsuitable to function as Governor of the Central Bank of Ceylon by a one-man committee appointed by the Government for committing certain financial and other transactions unworthy of the Governor of the Central Bank. This is an example of how the CBSL functioned more than half a century ago.
Other than this particular instance there is no record of top Central Bankers engaging in activities unbecoming of the post held either while working or after retirement until the early 1980s when a few joined the private sector in various capacities after retirement. In the early 1980s, a retired Controller of Exchange joined a travel firm unbecoming of the post he held.
In the early 1990s an Examiner of Finance Companies joined the finance company that he examined for several years but as envisaged he could not last long. A Director of Bank Supervision and an Executive Director found their way to a commercial bank as advisors immediately after retirement. However for their misfortune that particular bank had to be salvaged in no time by the intervention of the CBSL and the whole empire collapsed forcing its chief to go behind bars at Welikada. What is noteworthy is that all these officers are the products of the free educations system and came from not-so affluent families.
In contrast, the top management of the pre-1980 period, the likes of P.M. Jeyerajan Asst.Governor/CCS/ICS/Barrister, Dr/W.M.Tilakaratne, Deputy Governor/Secretary to the Treasury. K.Kanagasabapathy, Deputy Governor, K.Gunaratnam, Asst.Governor/Asian Development Bank, S.D.Amerasinghe, Asst. Governor, Dr. S.T.G.Fernanado, Deputy Governor/Chairman Peoples’ Bank, Dr. L.E.N. Fernando, Director of Economics Research/Chairman Bank of Ceylon/IMF, and many others in their wildest dreams never opted to join the private sector after retirement although many received paltry pensions compared to today and the most important aspect was that they came from very affluent families and valued their upbringing more than anything else.
That obviously was the difference between then and now.
A Concerned Senior Citizen
Business Editor notes: While there have been many instances of retired top officials of the Central Bank (CB) taking up positions in the private sector, there are some cases of officials taking positions in banks or financial institutions, which raises serious questions of a conflict of interest.
There are international examples too of retired central bank officials joining private sector financial institutions but after a ‘cooling off’ period of two years which is for example a regulation in the Swedish Central Bank. Any involvement in a bank or financial institution without a ‘cooling off’ period raises questions of ethics, conflict of interest, accountability and governance. Two senior CB officials, the late Manik Nagahawatte and the late S. Amarasinghe served as Bank of Ceylon and People’s Bank chairman, respectively, many years after retirement which one would consider a sufficient cooling period. Mr Nagahawatte went on to become chairman of the DFCC.
There have also been other retired directors of the CB who have served in private banks of financial institutions soon after their retirement, again an unhealthy practice. The need for a ‘cooling period’ for bank officials to join institutions that are governed by the CB is a priority today in the context of CB-controlled institutions like the EPF and ETF, jointly holding controlling interests in some private banks.