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EPF new banking sector investments unlikely as exposure already high

31 January 2020 09:24 am - 0     - {{hitsCtrl.values.hits}}

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The Employees Provident Fund (EPF), the largest pension fund in the country representing private sector workers, may not buy banking sector shares further, as its exposure is already too high. But any investment decision is purely up to the investment committee overseeing the management of EPF funds, according to the Central Bank. 


Responding to a question on why the Central Bank is yet to detach the custodianship of EPF from the hands of the Bank Supervision Department, Senior Deputy Governor Dr. Nandalal Weerasinghe said as long as the fund does not invest in banking sector shares, he does not see room for conflict of interest. 


“The EPF is not actively investing in banking sector shares now. It’s only a passive investor. I don’t see one Assistant Governor supervising both areas in terms of bank supervision and the EPF leading to a conflict as long as we do not engage in active investing,” Dr. Weerasinghe noted. Ring fencing the fund management of the EPF has been debated for a long time, but it really became a hot topic only after the infamous bond scams in 2015 and 2016, where EPF money was used to buy controversial 30-year bonds at above market yields causing significant losses to the fund. 


However, the Central Bank assured that necessary firewalls and steps had been taken to safeguard the fund and ensure no conflicts of interest occur. 


Meanwhile, Central Bank Deputy Governor H.A. Karunaratne said EPF is no longer accumulating banking sector shares as its exposure to the sector is already too high.  After over a four-year hiatus, the EPF returned to the stock market last year purchasing  Dialog Axiata PLC shares but since then had remained less active.


Last week, the stockbroking fraternity met Prime Minister Mahinda Rajapaksa to see if they could, among other things, entice policy makers for a EPF return to the stock market in a big way.

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