Ethics Of Asking Bank Contributions

• Commonwealth Games’ Bid

The ethics of Government of Sri Lanka’s (GoSL’s) decision to request public banks to make a contribution to strengthen GoSL’s bid to hold the Commonwealth Games in Hambantota in 2018 are being questioned by certain quarters.

One banker told this reporter that as banks are custodians of depositors’ funds, it’s not right to make such a request.
That request has been made by the joint committee chaired by Central Bank of Sri Lanka (CBSL) Governor Ajith Nivard Cabraal and Sports Minister Mahindananda Aluthgamage which is spearheading Sri Lanka’s thrust to host the Games here, as opposed to Goal Coast, Australia.
A decision as to where the 2018 Games will be held will be taken by Commonwealth members at St. Kitts and Nevis next month.
When this reporter asked Cabraal as to why he is asking banks to make such contributions, his retort was why is it that your newspaper canvasses for advertisements?
This reporter’s banker contact further said that banks by law are permitted to leverage up to 10 times their capital, meaning that the balance “nine times” are depositors’ funds or public money (as opposed to shareholder money)  that are qualified to be lent to bank borrowers.
He therefore questioned the propitiousness of banks, being the custodians of public money, donating such monies for the promotion of a Commonwealth Games bid.
“Aren’t there more worthy causes other than a Commonwealth Games bid to which such a contribution could have had been made?” he asked.
“It may be tax free, but then might not it have been better if such monies were given to the staff of such banks rather than for the promotion of a Commonwealth Games bid?’ he further queried.
The source further said that part of the reason for this sad state of affairs is that bank boards nowadays are weak and as such don’t have the power to resist such pressure when it comes from top.
CBSL of which Cabraal heads is also the island’s banking regulator.
The weakening of bank boards and substituting them with GoSL’s nominees are being done by using government controlled funds such as the EPF to buy shares in public quoted private banks, followed by nominating GoSL names to such boards, he said.
If therefore there are truly independent directors, GoSL/CBSL ensures that they are removed by virtue of the fact of making inroads into banks’ shareholdings this way, the source alleged, giving the example of what happened to Ranjith Fernando, a former director of Commercial Bank of Ceylon plc, who was allegedly removed for questioning the regulator and Cabraal; with government nominees moving in thereafter to fill in the breach.
CBSL’s job it to regulate banks and not be involved in extraneous matters dealing with the same, he said. Another issue is ministry secretaries serving on bank boards.
They are privy to confidential Cabinet papers, as such giving rise to the possibility that the boards on the banks in which they serve may have an unfair advantage compared to that of their peers due to the possibility of asymmetrical flows in information, the source said.
There is, as a result, a question of governance that arises due to CBSL’s/GoSL’s interference in the island’s banking industry.
Meanwhile one private commercial bank has made a Rs. 50 million contribution to GoSL in support of their Commonwealth Games bid venture; another, Rs. 10 million. An official of yet another private commercial bank refused to disclose their contribution, but said that it was between Rs. 10 and 50 million, while another said that their commitment will be under Rs. 100 million, but refused to go into details. Yet an official of another but smaller commercial bank said that it’s with difficulty that they are keeping themselves afloat, as such they won’t be making any contribution.
A manager of a foreign bank said that they had not been approached by GoSL or its agents to make a contribution to the Commonwealth Games promotion bid.
Meanwhile the official whose bank made a Rs. 10 million contribution justified their decision saying that it was from their retained profits, but didn’t want to be quoted.

Family Bandyism
Two directors of a private commercial bank are in-laws of a powerful Central Banker; the director/CEO of another is his first cousin, while his sister heads a licensed specialized bank.
Who said that the adages “Caesar’s wife must be above suspicion”  and “Not only must Justice be done; it must also be seen to be done.” is applicable to the Central Bank of Sri Lanka and to its key officers?