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Sri Lanka cbank suspends business of Perpetual Treasuries amid bond sale probe
July 6, 2017 / 2:30 PM / 5 months ago

Sri Lanka cbank suspends business of Perpetual Treasuries amid bond sale probe

COLOMBO, July 6 (Reuters) - Sri Lanka’s central bank on Thursday suspended the business operations of a company at the centre of an investigation into possible irregularities at a government bond sale in 2015.

Perpetual Treasuries Ltd, a subsidiary of a company owned by the son-in-law of Sri Lanka’s then-central bank chief Arjuna Mahendran, bought more than half of the controversial bond issue on Feb. 27, 2015, prompting charges of a conflict of interest.

President Maithripala Sirisena appointed a commission to investigate suspected irregularities after opposition lawmakers charged that the sale had cost the state more than $1 billion in rising borrowing costs over the past two years.

The central bank has rejected the opposition claims.

Mahendran and his son-in-law, Arjun Aloysius, have denied any wrongdoing, as have officials at Perpetual Treasuries.

In a statement announcing its action against Perpetual Treasuries, the central bank said: “The central bank will take necessary measures to ensure that this regulatory action does not have a disruptive impact on the market.”

“Action will also be taken to facilitate the handling of the interests of the customers and counterparties of PTL in an orderly manner,” it said.

However, some analysts said the central bank move could trigger a market reaction.

“Finally the central bank has taken some action. But this is an abrupt action as the probe is not concluded yet. For some market participants, it will be negative as there could be some disruption in the market,” a Colombo-based economist told Reuters on condition of anonymity.

The auction of 30-year bonds at the centre of the controversy was originally planned at a modest 1 billion rupees ($7 million) but was then scaled up by 10 times to meet government borrowing needs.

Sirisena appointed career central banker Indrajith Coomaraswamy to replace Mahendran last July. (Reporting by Shihar Aneez and Ranga Sirilal; Editing by Gareth Jones)

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