The Employees’ Provident Fund (EPF) welcomes the clarification made by Standard
and Poor’s (S&P) today that there was “no information of any specific incidences
occurring” of “a potential conflict of interest” due to the Central Bank’s oversight of
the EPF which is “a large investor in Sri Lankan banking stocks”.
In the clarification, S&P has also stated that they “expect the central bank to have
mechanisms to limit this risk”. In this connection, the EPF wishes to re-affirm that the
Central Bank has the required mechanisms to limit any risk referred to, particularly
because the EPF functions independently of the Bank Supervision Department, Public
Debt Department, and other departments of the Central Bank, with the required
firewalls having been established for such purpose. These firewalls are particularly
effective, since in terms of Section 45(1) of the Monetary Law Act, No. 58 of 1949,
every officer and servant of the Central Bank is legally bound to preserve and aid in
preserving secrecy with regard to all matters in performing their duties.
Consequently, in its investment decision making process, the EPF does not enjoy any
advantage with privileged information from the Bank Supervision Department or any
other Department, and only accesses publicly available information and research,
which other investors too access. Hence, no conflict of interest or unfair practice
arises in the EPF’s investment process.
Further, in terms of Section 5(1)(e) of the EPF Act, the Monetary Board is empowered
to invest the moneys of the Fund in such securities as it considers fit, and sell such
securities as well. Hence, the EPF has clear authority to invest in the share market,
including the banking and finance sector. In this regard, the EPF also wishes to state
that it would be highly prejudicial to the EPF members, if the EPF, as the country’s
biggest Fund, were to refrain from investing in the best performing sector in the
Colombo Stock Exchange, namely, the banking and finance sector.