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New Risk Management Dept. to oversee EPF fund management

06 Mar 2015 - {{hitsCtrl.values.hits}}

A new risk management unit has been set up by the Central Bank to outline proper rules and regulations that would ensure risks are minimized in the process of managing the Employees’Provident Fund (EPF).The unit has been established on the instructions of Central Bank Governor, Arjuna Mahendran in a bid to avoid explicit conflict of interest, when the EPF invests in banks’ shares, which are regulated by the Central Bank.

“One way of addressing this issue (conflict of interest)in managing debt or the EPF is establishing rules and ways of conducting business that would ensure risk in its broader sense is managed effectively.

I have recently opened up a new department in the bank – Department of Risk Management,” Mahendran said.Speaking at the Sri Lanka Legal Summit held yesterday at the Cinnamon Grand hotel Colombo, he further said the Central Bank is currently working with institutions in the United States and other developed countries on knowledge transfers to enhance risk management functions of the bank.

The newly appointed Governor is of the belief that such a system will enable the Central Bank to alleviate some of the issues and allegations of mismanagement and conflicts of interest surrounding the bank, in managing the country’s single largest pension fund, particularly due to its controversial investments in certain listed shares.

According to Mahendran, the new unit will not just oversee the EPF but will also apply its expertise to all other agency functions such as public debt management and fiscal advisory role to the government, official depository and financial advisor and administration of Exchange Control Act.

The observation made by Central Bank Governor yesterday on the future course of action on EPF is however in contradiction with what he said a month ago.
“I wouldn’t want to jump the gun and divest these (shares of listed banks) immediately, though it is desirable, because we have to have more liquidity in public markets for these bank shares, and indeed all the other shares which have been acquired by the government through the EPF in the last few years,” Mahendran told a post-budget seminar organized by Ceylon Chamber of Commerce.

Under the previous regime, the Central Bank had been accumulating shares of banks and other nonbank finance institutions (and other listed entities) through the EPF— up to the single shareholder limit of 10 percent in certain cases, and appointed directors to their boards, virtually nationalizing private sector banks in the country in order to fund state projects, if otherwise would not get funded.

Business Main

New Risk Management Dept. to oversee EPF fund management

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