Rumblings of discontent are emerging at the Central Bank where dozens of transfers have caused a lot of heartburn among senior staff. When Arjuna Mahendran took over as Central Bank Governor, the professional banker decreed that he would clean up the bank, get rid of the ‘rot’ during the former regime and put things right. [...]

The Sunday Times Sri Lanka

Rumblings at the Central Bank

View(s):

Rumblings of discontent are emerging at the Central Bank where dozens of transfers have caused a lot of heartburn among senior staff.
When Arjuna Mahendran took over as Central Bank Governor, the professional banker decreed that he would clean up the bank, get rid of the ‘rot’ during the former regime and put things right.

There were indeed many problems in the previous tenure when former Govenor Ajith Nivard Cabraal was in charge about unauthorised expenditure and money being funneled out for non-Central Bank activity, all of which is part of an investigation by CID and the Financial Crimes Investigation Division (FCID).

In one of the first interviews with a local newspaper after taking over, Mahendran told the Sunday Times that “The Central Bank’s role is to be more objective… not gush about projects where the feasibility study had not been done. From that point of view, the CB seems to have strayed from its role of being an objective advisor to the Government and the people of Sri Lanka.”
But he was quick to point out that this didn’t mean the entire bank was ‘rotten’ and irredeemable. “I don’t think the CB has lost its way – we just need a slight course correction to get back on track,” Mahendran said, adding that the bank had a qualified and very competent team of officials to move forward.

Having said that, a series of transfers were effected some months ago including officers seen as a favourites of the former governor. However the latest round of transfers of senior officials – a total of 28 – doesn’t make any sense as the directive to all heads of departments merely informs them of the changes and no reason. But, three circulars from the Human Resources Department: Ref. No. : 05/03/003/0001/015; Ref. No. : 05/03/003/0001/015 and Ref. No. : 05/03/003/0001/015, said the “The Annual Job Rotation which was postponed due to the General Election 2015, will be effective from 01st October 2015” and gave the names of a number of employees.

At Monday’s news briefing, a day after the Sunday Times story hit the streets over the transfer issue, Mahendran denied that he had a verbal spat with 30 staff who were discussing these transfer issues, saying the discussion was cordial. A few officers present at the meeting told this newspaper that the meeting was far from cordial and that the Governor was not an invitee in the first place.

The Governor also told reporters that these transfers (or some of them) had been after discussions, another statement that some officers disputed as the transfers came from the ‘blues’. In some case, officers found they didn’t have the capacity and experience to handle the new assignment.

When the Central Bank bond issue hit the banking regulator, accusations swirled about the conflict of interest between the Governor and his son-in-law’s family firm Perpetual Treasuries being the main beneficiary when the bond was raised to Rs. 10 billion from Rs. 1 billion.

A furore broke out after that with opposition politicians and the media demanding an investigation. Mahendran denied any impropriety and Prime Minister Ranil Wickremesinghe appointed a committee of lawyers, all UNP members, to probe the issue.

That drew further condemnation and as the case would be the committee in its report absolved Mr. Mahendran of any involvement but recommended that the matter be further investigated. Subsequently as pressure mounted – with even President Maithripala Sirisena urging the Prime Minister to call for Mr. Mahendran’s resignation – a parliamentary committee was appointed.

The committee had representation from all parties but clearly with biases – opposition parties gunning for the Prime Minister and the Governor while United National Party MPs were unsure how to absolve Mahendran if there was proof. Disagreements ensued and came out into the open when just before the August Parliamentary election, Committee Chairman D.E.W. Gunasekera unilaterally called a media briefing and reading from the report said there was enough evidence to prove the Governor’s involvement in the bond saga. That attempt was angrily dismissed by UNP members on the committee who said they have so far not endorsed the contents of the draft report.

Committee Chairman D.E.W.Gunasekera called a media briefing and reading from the report said there was enough evidence to prove the Governor’s involvement in the bond saga. That attempt was angrily dismissed by UNP members on the committee who said they have so far not endorsed the contents of the draft report. However the effort by the former Communist Party MP to keep the issue alive seems to have lost momentum after the election.

While UPFA members during the election campaign vowed to continue committee hearings on the bond issue, the Government has deftly put that on the back-burner by a series of probes, investigations, arrests and recording statements sending shivers down politicians who have allegedly robbed this country.

Rajapaksa’s top trio of advisors – Lalith Weeratunga, P.B. Jayasundera and Ajit Nivard Cabraal – have been called 2-3 times for statements to be recorded with the possibility of impending arrests.

Some ministers of the former government who are in the new administration are also to be investigated.
Thus while all former ministers are with their backs to the wall digging into their reserves to save themselves, the Central Bank bond issue has taken a backseat and virtually swept under the carpet with no final report on whether or not there was impropriety in the deal yet to be made known to the public.

Thus rather that move on with economic and monetary management, the Central Bank Governor has opened a can of worms with an autocratic style of governance contrary to today’s age of openness professed by UNP sections of the Government and the much-touted ‘Yahapalanaya” and “Good Governance”.

Transfers and management changes should not be the issue on which the head of the banking regulator should be taken to task. It is on policy issues, managing the currency, juggling between import and export policies and making sure the country’s finances are sound that the CB hierarchy has to be accountable for.

However the drama at the bank is affecting morale and creating uncertainty which would impact on officers being able to work at their best. In two other incidents, one officer has been transferred thrice after the new Governor took over while one officer was reportedly transferred for pasting the former President’s picture on facebook!
What can we say other than Cabraal (once unshakable) and Mahendran being great survivors however much stones are thrown from the gallery.

Advertising Rates

Please contact the advertising office on 011 - 2479521 for the advertising rates.