Saman Kumara predicted Deepa’s internal transfer

Bond Scams

Interdicted Senior Assistant Director of the Central Bank Saman Kumara had informed Deepa Seneviratne of the Currency Department of her impending transfer to the Public Debt Department even before the Human Resources Department officially conveyed to her the then Central Bank Governor Arjun Mahendran’s decision to move her, well informed sources told The Island yesterday.

Sources said that Kumara, who was with the Public Debt Department at that time, while assuring Seneviratne of his unstinted support, had urged her to accept the new post.

Responding to a query, sources said that Seneviratne had received Kumara’s assurance before she succeeded Dhammika Nanayakkara, who was perceived by some to be a loyalist of Ajith Nivard Cabraal. Kumara had got in touch with Seneviratne on the evening before the Human Resources Department officially informed her of the decision on Feb 3, 2015. She assumed duties in the new post on Feb. 9, 2015.

Sources said Saman Kumara’s call to Seneviratne hadn’t transpired in the ongoing Presidential Commission of Inquiry (CoI) into alleged Central Bank-Perpetual Treasuries bond scams committed in Feb 2015 and March 2016.

Seneviratne appeared before the CoI on early March 2017. The suspension of Saman Kumarawas announced just a few days after he had testified before the bond commission.

Seneviratne was chosen to head the vital department ahead of the Central Bank offering a 30-year treasury bonds at 12.5% interest rate to the market.

The Feb. 27, 2015 treasury bond sale was the first auction under Seneviratne and the Public Debt Department was asked to accept bonds worth Rs. 2.1 bn.

Speculation is rife that Governor Mahendran was alerted to the recommendation made by the Public Debt Department soon after the closure of the treasury bond auction. Mahendran, chairing a top level Corporate Management Committee meeting at the Central Bank, after receiving two telephone calls around 12.15 pm, rushed to the Public Debt Department, where he directed Seneviratne to accept Rs. 10 bn though senior management had warned of dire consequences if Rs. 20 bn was accepted as recommended by Governor Mahendran.

Auditor General Gamini Wijesinghe recently explained to a group of Colombo Municipal Council (CMC) officials how Seneviratne’s had exposed an unprecedented irregularity by placing a note in respect Governor Mahendran’s directive on the recommendation made by the Public Debt Department. Underscoring the pivotal importance of Seneviratne’s note, Wijesinghe said that if not for that she would have been in a difficult situation today.

Former Deputy Governor of the Central Bank W.A. Wijewardena, in response to a query posed to him on live ‘Face the Nation’ on TV 1 said the Central Bank as a matter of routine had offered to the market a thirty-year treasury bond carrying interest rate at 12.5 per cent and in the absence of demand for such long term bonds from individual personal investors with the demand coming only from provident funds, pension funds and insurance funds they had offered to the market only one billion rupees. But, he said, subsequently it had been claimed that there was a bigger cash requirement for the government and they could raise that money through that particular bond auction. The CBSL had accepted up to ten billion rupees worth of the 30-year bonds at 12.5 per cent, causing the state to pay interest at the rate of 12.5 per cent over the next 30-year period. In the particular bond auction within the last 15 minutes before the closure of the bond auction there had been many bids presented by one particular primary dealer connected to the then Governor of CBSL. In their own name, they bid Rs. 2 bn and they had got another primary dealer, Bank of Ceylon, to bid on their behalf Rs 13 bn and initially the Governor had wanted to accept all the bids that had been submitted to the bond auction, Wijewardena said.

Had Rs. 20 bn offer been accepted, bonds worth Rs. 15 bn would have gone to primary dealer, Perpetual Treasuries. But, because of the protests from the senior management of the Public Debt Department it had been finally decided to accept bonds up to Rs. 10 bn, one half of which went to Perpetual Treasuries. Dr. Wijewardena said: “It’s a 30-year bond which was traded in the secondary market on that particular day at Rs. 121 for 100 bond. It was traded at a premium. And the CBSL also wanted to sell it at a premium so that the government would get a premium.” The bonds had been allocated to Perpetual Treasuries at a price range of Rs. 89 to 90 so that the government had to incur a loss on account of a discount given to the investor there.”

Dr. Wijewardena said that the Feb. 27, 2015 treasury bond auction had caused a significant change in the entire interest rate structure of the country. The National Savings Bank, the Employees Provident Fund, the Insurance Corporation and the ETF, holding government securities as part of their portfolios had suffered massive losses. He described the NSB as the biggest casualty as about 90 per cent of its funds had been invested in government securities.