May 24, 2012 (LBO) - Sri Lanka's finance ministry will issue a circular to set up investment committees at state entities to make equity purchases through a defined process with exposure limits, Treasury Secretary P B Jayasundera said.
"A new circular on investment committees will be issued," Jayasundera told reporters after releasing the finance ministry's annual report Thursday.
"There will be a process where the committee will be protected from interference (angili nogaseemater krama vedayak)"
His comments came after the sale of stock in a troubled finance company whose liabilities exceed its assets by 3.7 billion rupees by December 2012 at over 60 percent above market price to state-run National Savings Bank.
Several purchases of stock by the Employees Provident Fund, including investments in Laugfs Gas and Nawaloka Hospitals have been controversial.
Jayasundera said there were Treasury nominees in many state entities but they did not necessarily have expertise in stock purchases.
"There are people who know better in these institutions. Also government entities have to depend on market participants to make investments," he said.
"If there is a defined process it will protect everyone. These institutions also have to set exposure limits."
Jayasundera said there was a justification for long term contractual savings institutions, including the EPF to invest in stocks. Some state entities had also rushed into stock when interest rates fell to improve returns, he said.
Jayasundera said all except one director of National Savings Bank had resigned and Sri Lanka's post master general was acting as chairman until the appointment of a new board.
Thought the finance ministry representative to the board had also resigned, it was not clear whether he was actually attended the meeting when the decision to buy The Finance stock was made. Only four directors were needed for a quorum officials said.
Senior career officers of the bank had been unhappy at the deal, according to reports.
Jayasundera said a committee had been appointed to probe the deal.
In Sri Lanka resignations over financial scandals are rare.
The country does not have an independent civil service to ensure rule of law or justice as the institution of permanent secretary was broken by successive constitutions in 1971 and 1978 paving the way to arbitrary rule.
But Jayasundera said there was no interference by ruling politicians on this matter. NSB halted the deal after Jayasundera intervened.
Jayasundera said he had told the board to stick to the bank's core business.
source - www.lbo.lk
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