Arjuna Mahendran

Lakshman Arjuna Mahendran is a Sri Lankan-Singaporean economist and banker.^[1] He is a former Governor of the Central Bank of Sri Lanka (CBSL), having been appointed by President Maithripala Sirisena in January 2015.^[2] He was the former Managing Director of HSBC Private Bank, Chief Investment Officer of Emirates NBD as well as Chairman and Director-General of the Board of Investment of Sri Lanka.^[3] In January 2015 he was appointed as Governor of the Central Bank of Sri Lanka.^[4][5] The Central Bank of Sri Lanka announced he would not seek an extension of his term which ended June 30, 2016.^[6]

Education

He was educated at Royal College, Colombo in Sri Lanka^[7] and at Balliol College, Oxford, he gained a MA in Philosophy, Politics and Economics.^[4]

Career

Mahendran joined the Central Bank of Sri Lanka, he had served as a senior economist before moving into investment banking in Singapore going on to serve as Managing Director and Chief Investment Strategist-Asia at HSBC Private Bank. He was responsible for driving research and providing in-depth analysis of markets in the Asia Pacific. Mahendran also led the analytics team in interpreting market economics and developing investment strategies for HSBC's clients in the region.Later he served as Chief Investment Officer-Wealth Management division at Emirates NBD. From 2001 to 2004 he served as Chairman and Director-General of the Board of Investment of Sri Lanka (BOI). For Mahendran's instrumental role in establishing the Board of Investments of Sri Lanka and driving its strategy, he was named a runner-up in Euromoney Strategic Direct Investor's "CEO Lifetime Achievement Award" in 2003.^[8] He served as Chief Economist & Strategist – Asia Pacific at Credit Suisse Group AG and was its Head of Research for Asia Pacific since October 2006.^[9]

In 2015 he was appointed as the Governor of the Central Bank of Sri Lanka.^[3] He was extremely critical of the Sri Lankan tax system and called the revenue which is only 10% of the GDP "pathetic" and compared the low tax collection in the country to the tax collection of a poor Sub-Saharan country and also criticized the complexity of the tax system and proposed to simplify it and introduce online tax payment systems to streamline tax collection.^[10] He also slammed inefficient loss making state-owned enterprises as they have created losses in state banks while giving a "free ride" to private banks as they exploit significant lending spreads by the government banks and proposed to make public enterprises more efficient so that the banking system can be more efficient and make the economy grow faster.^[11]

Controversy

In February 2015 CBSL advertised the sale of Rs. 1 billion in 30 year government bonds at a coupon of 12.5% ^[12] though several accounts erroneously cite an indicative rate of 9.5%.^[13][14][15] The sale was oversubscribed with 36 bids of totaling Rs. 20 billion.^[13] The majority of bidders, 26, bided for Rs. 100 million or less at a rate of 9.5%–10.5%.^[13] However, a few bidders, including Perpetual Treasuries Limited, wanted interest rates of 11%–12%.^[13] On 27 February 2015 the CBSL accepted Rs. 10 billion in bids at rates of 9.5%–12.5%.^[13][15] The issuing of ten times the advertised bonds, and at a higher than expected rate, was alleged to cost the Sri Lankan government an additional Rs. 1.6 billion ($ 10.6 million), though this alleged loss was disputed by the Leader of the House of Parliament.^{[16][17][18][19]} A petition was lodged in the Supreme Court of Sri Lanka contesting the methodology used to allege such a loss.^[20] Perpetual Treasuries was issued, directly and indirectly, with Rs. 5 billion in bonds at 12.5%.^{[21][22][23][24]} Perpetual Treasuries was one of the primary dealers in the sale and is owned by Mahendran's son-in-law Arjun Aloysius.^[14][25][26] The primary dealer had also appointed the sister of the former Central Bank Governor Ajit Nivard Cabraal onto the Board of its holding company.^[27]

This situation became a controversial political issue in Sri Lanka as the newly elected Sri Lankan Government of President Maithreepala Sirisena came to power with a slogan of good governance in the country.^[13] A three-member Committee of eminent lawyers was appointed to investigate the issue and the report produced by the committee claimed that there was no direct involvement by Mahendran in the deal.^[28] The Supreme Court of Sri Lanka did not grant leave to proceed in a fundamental rights case that requested a separate inquiry into the bond issue, as no laws were broken.^[29]

Mahendran denied any wrongdoing in the controversial bond auction and asserted that he was ready to face any inquiry to prove his innocence. He also said he had been made a victim due to his own transparency. ^[30]

On the other hand, former governor of the Central Bank of Sri Lanka, Ajith Nivard Cabraal who preceded Mahendran charged that a higher hand was involved in the scandal given the scale of the cover-up attempts by the Sri Lankan government.^[31] Cabraal himself is the subject of several investigations by the law enforcement authorities on alleged misconduct during his tenure as Governor.^{[32][33][34][35]}Among other allegations, he is supposed to have hired former disgraced IMF Managing Director Dominique Strauss Kahn onto the payroll of the Central Bank of Sri Lanka after the latter left the IMF.^[36]

On 28 October 2016 the Committee On Public Enterprises (Sri Lanka), after a lengthy investigation, found Mr. Mahendran responsible for the Bond Issue Scam and recommended legal action be taken against the above.^[37][38] However President Maithripala Sirisena has announced that he has appointed a Commission of Inquiry to further investigate the case.^[39]

References