Focus/Spotlight

Cabraal and family links uncovered

By Skandha Gunasekara
The final forensic audit (FA) report carried out into the Central Bank of Sri Lanka (CBSL) bond issuances has uncovered a link between former Governor of the Central Bank Ajith Nivard Cabraal and the controversial primary dealer Perpetual Treasuries Ltd. (PTL).
The final report, titled “Examination on the Conduct of the Supervisory and Regulatory role by the Superintendent of Public Debt/Director, Supervision of Non-Bank Financial Institutions pertaining to selected Primary Dealer from 1 January 2009 to 31 December 2017” had identified that current or former Central Bank employees had direct associations with primary dealers.
With regard to conflicts of interest, the Establishment Code – Chapter XLVII of the Public Administration Circular of 1985 states: (Section: General Conduct Sub Section 1.5) “An officer shall not do anything which will bring his private interest into conflict with the public duty or which compromises his office. He should always so conduct himself as to avoid giving rise to any appearance of such conflict or of being so compromised.”
With regard to former Governor of the Central Bank Ajith Nivard Cabraal, it was found that there were several instances of conflicts of interest due to his close relations holding vital positions in financial institutions that were primary dealers.
Cabraal was appointed as the Governor of the CBSL in July 2006 but up until November 2005, Cabraal was the head of a management consultancy firm called Cabraal Consulting Group which specialised in corporate governance, strategic planning, and turnarounds.
He was also the Chief Economic Advisor to then President Mahinda Rajapaksa during his tenure as the Governor from July 2006 to January 2015.
The report found that Cabraal’s relations held influential positions in primary dealers and/or related companies of primary dealers during his time as the Central Bank Governor and identified his sister Siromi Noel Wickramasinghe and niece Shibani Renuka Thambiayah, as relatives who were directly or indirectly connected to select primary dealers.
Wickramasinghe was associated with the holding company of Perpetual Treasuries Ltd. – Perpetual Capital Holdings (Pvt.) Ltd. – as a director from 23 December 2013 till 9 March 2015.
In addition, she was also a director of Hatton National Bank Assurance – a fully-owned subsidiary of Hatton National Bank – from 2013 to 2017, as well as being associated with Commercial Bank of Ceylon as one of its directors from 1 February 2009 to 26 May 2010.
She was also the Chairperson of the Housing Development Finance Corporation Bank of Sri Lanka (HDFC) from May 2010 till January 2015.
It was also found that PTL Head Arjun Aloysius was also associated with HDFC Bank during the said period and was appointed as a director from May 2011, and it was noted that Wickramasinghe was sharing key managerial positions at the holding company of PTL and previous organisations, along with Aloysius.
Meanwhile, Cabraal’s niece Shibani Renuka Thambiayah was associated with the Renuka Group in which Perpetual Treasuries had heavily invested in.
“Perpetual Asset Management (Pvt) Limited, which was the immediate Holding Company of Perpetual Treasuries Limited, made substantial Investments in ‘Renuka Group of Companies’ in which Ajit Nivard Cabraal had close family connections,” the report stated.
Another irregularity that was uncovered was that Perpetual Treasuries (Pvt.) Ltd. – a private limited liability company set up on 1 October 2012 – was denied being made a primary dealer of CBSL when its application in this regard was rejected due to the foregoing conflicts of interest.
However, the application was resubmitted on 9 May 2013 after the company changed its name from “Perpetual Treasuries (Pvt.) Ltd.” to Perpetual Treasuries Ltd.
As per the Monetary Board paper MB/PD/23/19/2013 dated 30 September 2013, the appointment of PTL as a primary dealer in government securities was approved in principle on 9 May 2013, based on conditions to be fulfilled within 90 days, as a direct participant and a dealer direct participant in the Lanka settlement system.
Nevertheless, the conditions were only fulfilled on 25 September 2013 which had crossed the 90-day deadline from the date of approval.
The primary dealer had been approved by the Monetary Board members, namely B.D.W.A. Silva (Deputy Governor), P. Samarasiri (Monetary Board Secretary), A. Kamalasiri (Assistant Governor), and N.W.G.R.D. Nanayakkarra (Superintendent Public Debt), regardless of these shortcomings and despite Nanayakkarra recommending the rejection of the appointment of PTL during October 2012, at the time of the initial application.
Subsequently in May 2013, at the same time, Perpetual Treasuries was approved by the Monetary Board of the Central Bank; Wickramasinghe was also appointed as the Director of the Perpetual Treasuries holding company in December of that year.
However, the concerns related to the conflict of interest of the then Governor Ajith Nivard Cabraal were not raised before this appointment.
In addition, the FA reports also found that the Central Bank Governor and the Monetary Board that held office in 2015 had been politicised.
This highlights the fact that the then Governor Cabraal, as well as members of the Monetary Board, namely, Nimal Welgama and Neil Umagiliya, had resigned from office on 9 January 2015, immediately after the presidential election results were announced on 8 January 2015.
These resignations were in contradiction to the Monetary Law Act which stipulates that a governor of the Central Bank of Sri Lanka or an appointed member of the Monetary Board can be removed from office only by the president of the country and that the governor or a member of the Monetary Board must hold office for a full term of six years.
However, Cabraal, Welgama, and Umagiliya deemed it necessary for them to resign when the new President was elected in January 2015, before completion of their six-year term.

The report noted that “the President who appointed the three gentlemen ceased to be President, so they regarded themselves to ‘political appointees’ who held office at the will of the President and resigned from the Monetary Board. (sic)