Arjuna Mahendran

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Arjuna Mahendran
Governor of the Central Bank of Sri Lanka
In office
26 January 2015 – 30 June 2016
Preceded by Ajith Nivard Cabraal
Succeeded by Indrajit Coomaraswamy
Personal details
Born (1959-07-16) 16 July 1959 (age 59)
Colombo, Ceylon
Nationality Sri Lankan (Previously)
Singaporean (Currently)
Alma mater Royal College, Colombo
Balliol College, Oxford
Profession Banker

Lakshman Arjuna Mahendran is a Sri Lankan born, Singaporean economist and banker.[1] He is a former Governor of the Central Bank of Sri Lanka (CBSL), having been appointed by President Maithripala Sirisena in January 2015 and served until the end of his term in June 30, 2016.[2] He was the former Managing Director of HSBC Private Bank, Chief Investment Officer of Emirates NBD as well as Chairman and Director-General of the Board of Investment of Sri Lanka.[3] [4][5] Mahendran is currently absconding from justice in Sri Lanka over his involvement in the government bonds controversy and is believed to be residing in Singapore, evading an INTERPOL Red Notice. [6] [7]

Education[edit]

He was educated at Royal College, Colombo in Sri Lanka[8] and at Balliol College, Oxford, he gained a MA in Philosophy, Politics and Economics.[4]

Banking career[edit]

Mahendran joined the Central Bank of Sri Lanka, he had served as a senior economist before moving into investment banking in Singapore going on to serve as Managing Director and Chief Investment Strategist-Asia at HSBC Private Bank. He was responsible for driving research and providing in-depth analysis of markets in the Asia Pacific. Mahendran also led the analytics team in interpreting market economics and developing investment strategies for HSBC's clients in the region.Later he served as Chief Investment Officer-Wealth Management division at Emirates NBD. From 2001 to 2004 he served as Chairman and Director-General of the Board of Investment of Sri Lanka (BOI). For Mahendran's instrumental role in establishing the Board of Investments of Sri Lanka and driving its strategy, he was named a runner-up in Euromoney Strategic Direct Investor's "CEO Lifetime Achievement Award" in 2003.[9] He served as Chief Economist & Strategist – Asia Pacific at Credit Suisse Group AG and was its Head of Research for Asia Pacific since October 2006.[10]

Central Bank Governor[edit]

In 2015 he was appointed as the Governor of the Central Bank of Sri Lanka.[3] He was extremely critical of the Sri Lankan tax system and called the revenue which is only 10% of the GDP "pathetic" and compared the low tax collection in the country to the tax collection of a poor Sub-Saharan country and also criticized the complexity of the tax system and proposed to simplify it and introduce online tax payment systems to streamline tax collection.[11] He also slammed inefficient loss making state-owned enterprises as they have created losses in state banks while giving a "free ride" to private banks as they exploit significant lending spreads by the government banks and proposed to make public enterprises more efficient so that the banking system can be more efficient and make the economy grow faster.[12]

Government bonds controversy[edit]

In February 2015 CBSL advertised the sale of Rs. 1 billion in 30 year government bonds at a coupon of 12.5% [13] though several accounts erroneously cite an indicative rate of 9.5%.[14][15][16] The sale was oversubscribed with 36 bids of totaling Rs. 20 billion.[14] The majority of bidders, 26, bided for Rs. 100 million or less at a rate of 9.5%–10.5%.[14] However, a few bidders, including Perpetual Treasuries Limited, wanted interest rates of 11%–12%.[14] On 27 February 2015 the CBSL accepted Rs. 10 billion in bids at rates of 9.5%–12.5%.[14][16] The issuing of ten times the advertised bonds, and at a higher than expected rate, was alleged to cost the Sri Lankan government an additional Rs. 1.6 billion ($ 10.6 million), though this alleged loss was disputed by the Leader of the House of Parliament.[17][18][19][20] A petition was lodged in the Supreme Court of Sri Lanka contesting the methodology used to allege such a loss.[21] Perpetual Treasuries was issued, directly and indirectly, with Rs. 5 billion in bonds at 12.5%.[22][23][24][25] Perpetual Treasuries was one of the primary dealers in the sale and is owned by Mahendran's son-in-law Arjun Aloysius.[15][26][27] The primary dealer had also appointed the sister of the former Central Bank Governor Ajit Nivard Cabraal onto the Board of its holding company.[28]

This situation became a controversial political issue in Sri Lanka as the newly elected Sri Lankan Government of President Maithreepala Sirisena came to power with a slogan of good governance in the country.[14] A three-member Committee of eminent lawyers was appointed to investigate the issue and the report produced by the committee claimed that there was no direct involvement by Mahendran in the deal.[29] The Supreme Court of Sri Lanka did not grant leave to proceed in a fundamental rights case that requested a separate inquiry into the bond issue, as no laws were broken.[30]

Mahendran denied any wrongdoing in the controversial bond auction and asserted that he was ready to face any inquiry to prove his innocence. He also said he had been made a victim due to his own transparency. [31]

On the other hand, former governor of the Central Bank of Sri Lanka, Ajith Nivard Cabraal who preceded Mahendran charged that a higher hand was involved in the scandal given the scale of the cover-up attempts by the Sri Lankan government.[32] Cabraal himself is the subject of several investigations by the law enforcement authorities on alleged misconduct during his tenure as Governor.[33][34][35]

On 28 October 2016 the Committee On Public Enterprises (Sri Lanka), after a lengthy investigation, found Mahendran responsible for the Bond Issue Scam and recommended legal action be taken against the above.[36][37] However President Maithripala Sirisena has announced that he has appointed a Commission of Inquiry to further investigate the case.[38] During the inquiry, Mahendran defended his actions before the Commission stating that he had not acted in a manner detrimental to the interests of the Government.[39].

The commission handed over the report on Central Bank bond issuance to the President Maithripala Sirisena on 30 December 2017 [40]. This commission consisted of commission’s chairman Justice K. T. Chitrasiri and members Justice P. S. Jayawardene and retired Deputy Auditor General, V. Kandasamy. The full report in PDF form is available for public viewing through the Presidential Secretariat web page [41]. In the findings of the report, Arjuna Mahendra was held directly responsible for causing a loss of LKR 11,145 million to public institutions [42]. However, Prime Minister Ranil Wickremesinghe has announced that 'No financial loss will be caused to the government on account of the Central Bank Bond issue since the government will recover the Rs 9.2 billion involved from Perpetual Treasures Ltd. according to the procedure recommended by the Presidential Commission. The Central Bank functioning under the Ministry of National Policy has already blocked and retained a fund of Rs 12 billion belonging to the Perpetual Treasures Ltd'[43]

The prolonged nature of the inquiry may be linked to a growing rift between Sri Lanka's President and Prime Minister and the two political parties they each represent in an increasingly fraught coalition government[44]. A group of ministers from the President's party along with opposition MPs failed in a recent attempt to pass a motion of no-confidence against the Prime Minister in Sri Lanka's Parliament[45]. A key issue in the motion was the Prime Minister's alleged interference in the Central Bank[46]. The President has subsequently had to prorogue Parliament[47]

Arrest order[edit]

On 15 March 2018 Colombo Fort Magistrate’s Court issued an arrest warrant on Arjuna Mahendra on charges of criminal breach of trust for allegedly providing confidential information of the Central Bank of Sri Lanka to Perpetual Treasuries Limited, a primary dealer connected to and owned by his son-in-law Arjun Aloysius who was arrested on 4 February 2018 along with Kasun Palisena, who was the CEO of Perpetual Treasuries Limited [48]. Arjuna Mahendra has not to date surrendered himself to the court and continues to abscond himself. The Supreme Court of Sri Lanka had earlier rejected a similar petition [49]. News reports state that Mr Mahendran has challenged the order through the International Police (Interpol).[50]

References[edit]

  1. ^ Arjuna Mahendran. emiratesnbd.com
  2. ^ Sri Lanka names international banker Mahendran as central bank chief. Reuters (15 January 2015). Retrieved on 2015-11-19.
  3. ^ a b Arjuna Mahendran new CB Governor. Dailymirror.lk. Retrieved on 19 November 2015.
  4. ^ a b Arjuna Mahendran. Emiratesnbd.com. Retrieved on 19 November 2015.
  5. ^ "PROFILE-Sri Lanka's Central Bank Governor Arjuna Mahendran". Reuters. 13 April 2015. Retrieved 30 October 2015. 
  6. ^ https://www.newsfirst.lk/2018/04/20/interpol-red-notice-issued-on-arjuna-mahendran/
  7. ^ http://www.dailynews.lk/2018/04/21/law-order/148877/interpol-red-notice-mahendran
  8. ^ On behalf of all her sons and daughters. Archives.dailynews.lk (18 November 2010). Retrieved on 2015-11-19.
  9. ^ Central Bank looks at risk management structures and investment policy guidelines. Sundaytimes.lk (4 February 2015). Retrieved on 2015-11-19.
  10. ^ "List of Public Companies Worldwide, Letter – Businessweek – Businessweek". Businessweek.com. Retrieved 30 October 2015. 
  11. ^ "Sri Lanka seeks to connect tax payers with revenue office online". Lanka Business Online. Retrieved 30 October 2015. 
  12. ^ "CB Governor slams CEB, CPC and SriLankan for dragging down state banks". Lanka Business Online. Retrieved 30 October 2015. 
  13. ^ "Advertisement by the Central Bank of Sri Lanka" (PDF). 
  14. ^ a b c d e f "CB Governor faces 'family company' charges; calls mount for probe". The Sunday Times (Sri Lanka). 8 March 2015. 
  15. ^ a b "Harsha vows to go after fraudsters". The Nation (Sri Lanka). 8 March 2015. 
  16. ^ a b "Sri Lankan central bank chief cleared over bond scandal". Mail Online. Agence France-Presse. 19 April 2015. 
  17. ^ Aneez, Shihar (23 April 2015). "Sri Lanka c.bank head resumes duty after bond probe report". Reuters. 
  18. ^ "Ceylon Daily News 8 July 2016". 
  19. ^ "CB Bond Issue Call For Independent Probe". The Sunday Leader. 26 April 2015. 
  20. ^ Fernando, Tharushan (24 May 2015). "Voice Against Corruption Movement condemns PM's statement on CBSL fraud". News First. 
  21. ^ "Monk's petition on eve of bond debate in House: Sunday Times 22 Jan 2017". 
  22. ^ Samath, Feizal (22 March 2015). "News Bond issue: Probe committee to question dealers on inside info". The Sunday Times (Sri Lanka). 
  23. ^ "Primary dealers seek urgent meeting with CB on bond issue". The Sunday Times (Sri Lanka). 15 March 2015. 
  24. ^ Shauketaly, Faraz (12 April 2015). "Trying To Stop The Third Force". The Sunday Leader. 
  25. ^ Perera, Yohan (11 March 2015). "Finance Minister dismisses bond issue allegations". The Daily Mirror (Sri Lanka). 
  26. ^ "Central Bank Governor under fire". The Sunday Times (Sri Lanka). 15 March 2015. 
  27. ^ "The Central Bank Bond Fiasco". The Nation (Sri Lanka). 14 March 2015. 
  28. ^ "Cabraals sister responds to allegation: The Nation 4 July 2015". 
  29. ^ "No direct involvement by Mahendran-Committee". www.dailymirror.lk. Retrieved 31 May 2015. 
  30. ^ Court cannot direct CB Governor as no law has been broken: Counsel | The Sunday Times Sri Lanka. Sundaytimes.lk (10 May 2015). Retrieved on 2015-11-19.
  31. ^ I’m a victim of my own transparency – CB Governor Mahendran http://nation.lk/online/2015/06/13/im-a-victim-of-my-own-transparency-cb-governor-mahendran.html
  32. ^ INTERVIEW: Higher hand involved in bond scam http://nation.lk/online/2015/06/20/major-mission-to-cover-up-bond-scam.html
  33. ^ "Daily FT 8 July 2015". 
  34. ^ "Newsfirst.lk Oct 6 2016". 
  35. ^ "Newsfirst.lk 20 Aug 2015". 
  36. ^ Mahendran responsible for CB Bond scam: COPE report http://www.dailymirror.lk/article/Mahendran-responsible-for-CB-Bond-scam-COPE-report--118266.html
  37. ^ Mahendran responsible for CB Bond scam: COPE report http://newsfirst.lk/english/2016/10/cope-report-former-cbsl-governor-arjuna-mahendran-found-accountable-bond-scam/153007
  38. ^ "Daily FT 23 Jan 2017". 
  39. ^ http://www.ft.lk/front-page/Mahendran-stands-ground/44-640888
  40. ^ "Bond commission hands over report to President Sirisena". Adaderana. 30 December 2017. Retrieved 23 March 2018. 
  41. ^ "REPORT OF THE BOND COMMISSION". Presidential Secretariat. 16 January 2018. Retrieved 23 March 2018. 
  42. ^ "Sri Lanka's ex-Central Bank chief Arjuna Mahendran held responsible for bond scam". The Hindu. 3 January 2018. Retrieved 23 March 2018. 
  43. ^ http://dailynews.lk/2018/01/19/local/140425/govt-will-recover-rs-92-bn-perpetual-treasuries
  44. ^ http://www.straitstimes.com/asia/south-asia/tumult-in-sri-lanka-the-statesman
  45. ^ http://www.straitstimes.com/asia/south-asia/sri-lankan-pm-defeats-vote-of-no-confidence
  46. ^ http://www.straitstimes.com/asia/south-asia/sri-lankan-pm-ranil-wickremesinghe-survives-no-confidence-vote
  47. ^ http://www.straitstimes.com/asia/south-asia/sri-lankas-president-suspends-parliament-until-may-8
  48. ^ "Arjun Aloysius, Kasun Palisena arrested". Daily Mirror. 4 February 2018. Retrieved 23 March 2018. 
  49. ^ http://www.ft.lk/article/419817/SC-dismisses-FR-case-against-Treasury-Bond-fiasco
  50. ^ "Coalition in do-or-die battle to win back hearts and minds of the people". The Sunday Times Sri Lanka. Retrieved 2018-05-31.