New appointments to Monetary Board

Wednesday, 25 March 2015 00:00 - - {{hitsCtrl.values.hits}}

I refer to the news item regarding the appointment of two members to the Monetary Board. I am happy about the appointment of R.A. Jayatissa who is an erudite economist. However, questions arise as to whether the principles of good governance would be breached by the appointment of these two gentlemen because: Arjuna Herath is a partner of Ernst and Young a firm of auditors which audits banks and finance companies – institutions which are regulated by the Monetary Board. Jayatissa is a pensioner of the Central Bank. Section 11 (2) of the Monetary Law Act is quoted below for easy reference. 11. (2) A person shall be disqualified for appointment as a member of the Monetary Board under paragraph (c) of subsection (2) of Section 8 if – (a) he is a Member of Parliament, or a member of any Provincial Council or any local authority; or (b) he is a public officer or judicial officer within the meaning of the Constitution of the Democratic Socialist Republic of Sri Lanka, or holds any office or position (other than an academic position) either by election or appointment, for which salary or other remuneration is payable out of public funds or the funds of any local authority; or (c) he is a director, officer, employee or shareholder of any banking institution (other than the Central Bank) or any other institution supervised or regulated by the Central Bank. Under the Banking Act No. 30 of 1988 and Finance Business Act No. 42 of 2011, a list of auditors to audit banks and finance companies respectively are approved by the Monetary Board. However it has to be mentioned that when A.S. Jayawardene was appointed as Governor Central Bank, he was made a pensioner by the Central Bank and both Dr. Thilakarathne and Dr. P.B. Jayasundera attended Board meetings as ex-officio members by virtue of being the Secretary of the Finance Ministry while receiving a pension by the Central Bank. However they were ex-officio members of the Monetary Board and not appointed members. Regarding a partner of an audit firm being appointed as a member of the Monetary Board, consideration would have to be given to the matter that senior officials of the Central Bank are members the Board of Securities and Exchange Commission and the Accounting and Auditing Standards Board. These two Boards are empowered to check the work of audit firms indirectly. Hence, consideration may be given to the above matters before these issues are raised; as it is the Central Bank has suffered a reputational risk. Senehe Perera