Central Bank sets record straight on CIFL

• Says CB officials acted according to regulations
• Forensic audit on CIFL accounts already done and with AG’s Dept.
• No credible investor came forward to bail out CIFL

By Chandeepa Wettasinghe

The Central Bank last week defended itself against the accusations of misconduct made by the stakeholders of the troubled financial institution, Central Investment and Finance PLC (CIFL), saying that the banking and finance sector regulator has acted according to the regulations in this particular case.

A member of a CIFL subsidiary board had called for a forensic audit, saying that it would reveal the irregular and possibly illegal actions taken by the Central Bank officials with regard to CIFL and that the Central Bank is closing down CIFL to cover up these irregularities.

Central Bank Governor Dr. Indrajit Coomaraswamy said that he is reacting “very badly” to the “extremely unfortunate” accusations.

“Let me say on the accounting. The Central Bank conducted a forensic audit, which is what has been called for, way back in September 2013 and the findings of that forensic audit have been shared with the Attorney General’s Department and CID; I don’t know who in the Central Bank is trying to hide anything,” he said.

He noted that legal action has been taken against former CIFL Chairman Deepthi Perera for fraud, in addition to another fraudulent CIFL subsidiary, following the initiatives undertaken by the Central Bank, while several letters have been sent to the Attorney General’s Department and CID for legal action against other parties as well.

“I don’t know what else the Central Bank could have done,” Dr. Coomaraswamy said.

With regard to the accusations that the Central Bank officials had not fulfilled their role in ascertaining the fit and proper requirements for a string of chairmen and directors appointed to the CIFL group from 2009 to 2014, Dr. Coomaraswamy was less resolute.

“From what I have seen, nothing is perfect in this world. I don’t want to say that the Central Bank hasn’t made mistakes. Along the way, we may have been able to do things better but I don’t think that anybody in the Central Bank staff has done anything with a maleficent intent,” 

he said. However, he said that under his governorship, the Central Bank officials have performed to the best of their abilities. Further, an enforcement unit to take action against the directors and senior management of failed financial institutions was also set up under Dr. Coomaraswamy’s watch.

Concerning accusations from the CIFL Depositors’ Association that the Central Bank has turned away potential investors, Dr. Coomaraswamy said that no credible investor has appeared for the CIFL group or its subsidiary, City Finance Corporation Limited.

“The easiest thing for us is, if an investor came and bailed this company. That’s the best thing that can happen. It makes our life very easy. Unfortunately, there is no credible investor who has come,” he said.

He added that one investor, who approached the Central Bank, had presented a fraudulent bearer bond. 

“Issuing a fraudulent document to a government institution is a very serious violation. He claimed it was an HSBC bearer bond but when we checked with HSBC, it was fraudulent. Then we’re told that we are not encouraging investors. Secondly, that party also has a case about fraudulent activity ongoing,” Dr. Coomaraswamy said. He said that if anybody is able to find a credible investor for the group before the set period to wind it up passes, the Central Bank would facilitate such investment.

“One, give us a proof of funds. Two, the money must come cleanly, from bank to bank. That would make our lives so much easier,” Dr. Coomaraswamy said.

He said that if the depositors accept the Central Bank’s decision to repay Rs.600,000 each, under the Sri Lanka Deposit Insurance and Liquidity Support Scheme, 61 percent of the depositors would be paid off in full, while a further 15 percent of the depositors would get 60 percent of their money back.

“In our view, that is the just thing to do,” he said. CIFL has 4,200 depositors with funds amounting to Rs.3.5 billion.