NSB-TFC deal reverberates in Parliament

The contentious NSB-TFC deal on Friday reverberated in Parliament with the main Opposition UNP MP Harsha De Silva firing a stinker to the Government benches asking under what law did President Mahinda Rajapaksa order the non-payment for a transaction in the Colombo stock market.

The question raised during debate on a private members bill however didn’t trigger a reply.

Dr. De Silva reiterated what Daily FT too has been raising since last week that buy and sale on the Colombo Stock Exchange (CSE) was a binding contract if the facility of rejection (available to NSB) is not exercised. It was in that context that the UNP MP posed the question under what law of the country did the President, who is also Minister of Finance, order the non-payment by NSB.

Though the UNP legislator flagged off President as the one who ordered non-payment, NSB in its statement last week said it was its decision.

However it is public knowledge that NSB’s u-turn follows President ordering Finance Secretary Dr. P.B. Jayasundera to look in to the ill-fated deal of savings giant effecting a transaction to buy 13% stake in The Finance Company Plc (TFC) for Rs. 390 million from a consortium of sellers.

This move was after outcry from the UNP and several market stakeholders against the transaction, done at Rs. 20 premium paid for a share in a company with a negative net worth of Rs. 23 per share and saddled with Rs. 9 billion retained losses.

Dr. De Silva in his comments in Parliament said as per laws pertaining to capital markets it is the Securities and Exchange Commission (SEC) under its Act which can make a ruling whilst the Government can use other laws to take necessary action if it wishes to deal with those responsible for the controversial deal.

The UNP underscored Daily FT’s assertion via its lead story on Friday which emphasised Government’s cure was worse than the disease as non-payment tantamount to a default in the stock market thereby flagging off possible systemic risk.

Analysts said under the SEC law as well as CSE regulations there are provisions to deal with default, whilst savings giant despite Rs. 466 billion in assets now owns the dubious achievement of being responsible for the first ever non-payment in Colombo bourse’s history.

Also last week, in response to JVP MP Anura Kumara’s poser in Parliament Senior Minister Sarath Amunuganma said the SEC was investigation in to the transaction as well.