A former chairman of the Ceylon Chamber of Commerce, Chandra Jayaratne, has asked the Institute of Chartered Accountants of Sri Lanka (ICASL) to arrange for independent accounting and auditing committees, to review institutions which collect public funds, that are investing in shares of listed and unlisted companies.
“In the above context, I urge you to kindly arrange the Independent Accounting Standards Committee and Auditing Standards Committee, which functions within the scope and overview of the Institute of Chartered Accountants, to review all applicable standards dealing with and likely to have a significant application to banking and non banking institutions which collect public deposits, premiums and contributions,” said Mr Jayaratne’s letter to the ICASL.
“In the event the present trend of state owned or state managed banking and non banking financial institutions continue to invest heavily in shares of listed and unlisted entities, such a review should specifically address issues pertinent to this segment of the financial services sector,” said Mr Jayaratne.
Mr Jayaratne says the committees should review the risks associated with state banking and non banking institutions being heavily leveraged to support long term investment objectives of the public sector.
Mr Jayaratne says the reported active engagement or proposed engagement, of state owned/managed banking and non banking institutions, such as the Bank of Ceylon, Peoples Bank, National Savings Bank, State Mortgage Bank, Insurance Corporation, the Employees Provident Fund (EPF) and the Employees Trust Fund (ETF), in making significant long term investments in shares of listed and unlisted companies, are of concern.
These institutional investments are believed to include investments in SriLankan AirLines and new insurance, finance, leasing, merchant banking ventures, including some investments directly in, or via some entities believed to have been negatively impacted by the recent financial crisis, said Mr Jayaratne.
The Sri Lanka Insurance Corporation has made significant investments via the stock market with a heavy exposure in the leisure sector, whilst already having a subsidiary engaged in the hospital business.
The EPF and ETF have also made significant investments in the stock market with selective heavy exposure believed to be in diversified holdings, telecom and the leisure sectors. The government appears to have plans to buy back the foreign holdings of SriLankan Airlines, Shell Gas and also the gas pipeline and storage network, in addition to acquiring additional stakes in the petroleum distribution and energy sectors. These investments may also be parked in state owned banking and non banking institutions, said Mr Jayaratne. |
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