The Central Bank of Sri Lanka (CBSL) has said there is no evidence that any other regulated financial institution has suffered losses linked to the Rs. 13.2 billion fraud disclosed at National Development Bank PLC (NDB), and has urged the public “not to be misled by any statements to the contrary made in various fora.”
In its third public statement on the scandal, issued Friday, the banking regulator said NDB was finalising arrangements with a leading international firm to conduct a comprehensive forensic audit that will report directly to the CBSL. The first two CBSL statements on the case were issued on 6 April and 10 April.
“The scope of this audit will, apart from matters directly related to the commission of this fraud, also fully address and assess any failures on compliance with regulatory requirements on control, oversight, and governance during the period in which the fraudulent transactions took place,” the CBSL said.
The audit will involve overseas experts and is expected to begin shortly. Interim findings and the final report will go directly to the CBSL, which will engage the auditors during the investigation as needed.
The Central Bank has also directed NDB to take immediate measures to strengthen internal controls and governance, and to commission an independent third-party review of its policies, procedures, systems and controls. NDB continues to meet all regulatory requirements on capital and liquidity, the statement said.
The CBSL statement addresses public allegations — including in Parliament — that the fraud may have extended to other banks and non-bank financial institutions. Opposition MP Ravi Karunanayake earlier claimed the losses could affect five to seven other banks and up to nine NBFIs. The regulator has now formally rejected any systemic contagion finding.
Fitch Ratings has already downgraded NDB to ‘A-(lka)’ over the fraud and the CBSL has previously assured depositors that their accounts remain safe. The CBSL’s earlier order for the forensic audit is now being operationalised.
