In Support of Digital Banking

The Central Bank governor at his recent statement at the Digital Banking summit stated that he felt like a charlatan when asked to speak about technology. He is right. This is not because, as he attributes it, of his recent acquisition of a smartphone but rather due to his regulatory lack of support for digital innovation. The Central Bank through its regulation of our payment and banking systems continues to pander to powerful financial interests. The Central Bank through its regulatory diktat from upon its fortress in Colombo Fort has chosen to strangle economic activity. Let us just take one situation wherein this is true. One massive instance of the Central Bank shunning a digital innovation.

Money Transfer

Let’s focus on transferring money. The prices as I face it, through Commercial Bank, are given below. As the largest non-state bank, I feel the costs are reflective of a broader truth in the economy.

1.10 Cost of Cheque Books
Per Leaf, Including VAT Rs 15/-
4.8.2 CEFTS (Per Transaction)
Over the counter Rs 100/-
Internet Banking Rs 50/-
Mobile Banking Rs 50/-

Source- http://www.combank.lk/newweb/en/rates-tariffs/general-tariffs#filer-c

According to LankaClear’s website “The Common Electronic Fund Transfer Switch (CEFTS) is an integral part of Sri Lanka’s trusted national payment network.” Our interbank payment network is poor. This is by design. Our antiquated means of transferring money, the large costs incurred in transacting, and the difficulty in transferring money all seek to serve vested interests. Looking at the tariff above you would be inclined to use a cheque book over a digitized transaction. It’s as if the post office has somehow become cheaper than Whatsapp or Email. Now to be fair, we on average may not even be aware of these charges as the Banks we use tend to have amazing transfer mechanisms internal to the bank that are free, intuitive, and feature rich. Most major utility providers have accounts at all major banks and as such are accessible through these internal transfers. The impact of these charges and non-charges has a systemic impact on our economy. Think in terms of net neutrality.

Through the inefficiency of interbank transfers, the regulator is pushing customers and therefore deposits to the banks it chooses. The regulator is also allowing banks to artificially improve CASA ratios by delaying the crediting of payments. As most shareholders will know even if it is that you have instructed the CDS to deposit cheques directly to your account it does not credit as set out by the company. Banks collude with each other to maintain slow realisation of transfers. For instance, my recent dividend cheque from Property Development PLC (subsidiary of Bank of Ceylon) to be credited on the 8th of June was only realised in my account on the 28th of June. The wide usage of cheques in the economy also helps beneficiaries of Central Bank conspiracies to mask payments. To paraphrase Rajitha Senarathne fielding a question on a primary dealer, it is not unusual for a business to write many cheques and it takes a lot of time to trace where payment ended up. Small businesses wishing to automate the receipt of payments are also constrained into either only serving customers within a certain bank or having a costly online credit card payment portal. Sri Lanka’s merchant fees are well above the global average of .99% with smaller merchants having to pay as much as 3.5%. These fees can (and have been in Europe) be capped by the regulator.

Why doesn’t the Central Bank reduce the price of CEFTS and SLIPS and increase the price of CITS and Cheque transfers? Initially because of the high costs and therefore high profits to the banks of cheque returns. More strongly though because of the entrenched interests in a poor payment system highlighted earlier.

Source- Lanka Pay Website

Improved version for publication available at;-

http://www.ft.lk/columns/Money-transfer-and-the-CBSL/4-658243

FT 3.7.2018

 

Independence

Subject: Independence
From: perera_d94@yahoo.com
To: globalmedia@visa.com; lkhelpdesk@bookmyshow.com
Date: Sunday, June 3, 2018, 5:27:41 PM GMT+5:30
This message contains blocked images. Show images or Always show images

Dear Visa and BookMyShow,

I write to you following a failure to place a discounted transaction on your site. As you may know, this month Visa cardholders are entitled to up to 25% off for movie ticket bookings through your site. The error prompt I received instructed me to book more than one ticket to avail the offer. Despite this and my credit card (MasterCard) I decided to go through with a Visa Debit card payment. This was for two reasons; One I couldn’t find the more than one ticket in the terms and conditions, and two I believe it’s in everyone’s interest to support the individual endeavor. This email is about more than a discount. This email is not a mere complaint. This email is about independence.

By choosing to prevent anyone from doing anything alone you are forcing that person to an activity he or she may not choose. Your actions are not that regulatory but rather help bring about stigma around the independent venture. People doing things alone are already at a price disadvantage as restaurants and venues tend to price for two or more. Sometimes you aren’t even allowed in if you are alone. This is saddening as groups of people tend to be both insular and aggressive. Independent people are on average more interesting and trustworthy.

To quote Gustav Le Bon, the father of crowd psychology, “In crowds it is stupidity and not mother wit that is accumulated.”

I put forth these ideas from my visits to the Lionel Wendt. In my observations I find that people as part of larger groups are not the ideal customer. They on average pay less. They collectivise transactions preventing usage of both website and payment card. They are less interested in the play. They are quite insecure with many wearing more make up than those on stage. They are disruptive and communal in their behaviour. They have a symbiotic relationship to each other preventing natural movement to and from exits. They become less attractive proportional to their size. Due to the difficulty of convincing every member they are less likely to try something new or do something unplanned. Let us do away with them.

I have attached all documents to this email. I hope to hear from you soon.

Kind Regards

Dinesh Perera

Visa Card Offer – Get Up to 25% Off on Movie Tickets – BookMyShowError Message.png

A License Raj

Sri Lankan Banking and Finance can be categorised as a license raj. This is not because institutions are regulated by the central bank but rather that the capacity to conduct business is contingent on one obtaining a license. For the NBFI sector, usually understood as the Finance companies, are heavily constrained by this licensing structure. We live in a context where an insolvent company like ETI Finance is more likely to be involved in lending and deposit taking than a cash rich company like Overseas Realty PLC.

This is partly due to a long running conspiracy by the central bank and partly due to the love of financial intermediation by the current governor. The conspiracy is a simple one. They give licenses and limit the capacity to operate to these licenses. The licenses subsequently become of significant value. Therefore, the chronological distribution of licenses is so heavily skewed towards the early 2000s. Insiders knew of the Central Banks policy and obtained licenses which they would sell on to people who honestly wanted to operate as a financial institution in a latter period. Therefore, it is very common for listed NBFI tickers to differ from the existing companies name. Changing names frequently like con artists. It would be in the public interest to rather hand out license to companies that had the honest capacity to operate as financial institutions and take away licenses far more proactively from ones that did not. The CB Governor as an economist has a bias towards the importance of his own profession. The Governor has consistently put forth policy that would require banks to make large computations and prevent smaller players from operating in the market. Take his current stance that Banking corporate debt be limited to institutional players. The debt market sans bank debt is choked of activity as they will not allow online access to the trading system. Large computations can also be very wrong and given the banking concentration the governor wishes to see would pose significant systemic risk.

I agree with the CB Governor that there are too many finance companies in a certain sense that brings about a need for consolidation. I further think that they should not operate as pseudo banks but rather as specialist lending institutions. Banks in my opinion should be more involved in project financing and have very low risk tolerance. Deposit taking activity of NBFIs on the other hand should have more risk bearing on the part of the depositor with return being contingent on the repayment of the borrower. Finance companies currently do handle large sums of cash with little scope for AML, treasury operations, FX hedging, and portfolio diversification. His policy however of forced consolidation thinly veiled as capital requirements is misguided.

The new license freeze might be in part due to the existence of insolvent NBFIs. The CB and Treasury might be hoping to sell the license in lieu of liquidating these companies and settling depositors from their own cashflows. However, the rescue of these companies has been very slow and fraught with suspicious activity. The ETI group owned Swarnavahini which was too important a media institution to be handed over to any investor. The legal minefield that plagues insolvent NBFIs compounded by the legal minutiae that is our law are heavy obstacles to any potential revival. It is unfair and unwise to expect foreign financiers concerned with operating financial institutions to take such risks. Acting swiftly to liquidate these companies will improve the stability of the system.

When I say there are too many finance companies I don’t mean that there is too much competition. There is a lack of competition. Banking tariffs have become more regressive under Indrajit’s tenure. What I mean is that there are too many companies with common ownership. Starting with the government which owns multiple finance companies and banks through proxy which are very poorly run that should come under common management. LOLC, Vallibel, and the major banks all own too many institutions. Given an incentive to amalgamate and taking away the value of holding a license will result in a much less superficially dense sector. This would make regulation easier.

If our financial institutions were better regulated and policy was enacted in the public interest, we would have better economic outcomes. Our payment system is incredibly expensive and inefficient. The intent of policy is usually seen through outcomes. It is sad that we currently live in a world wherein the markets are gambling on which firm will consume the other to meet minimum capital requirements. Shareholder wealth is being wasted and firms are being told to operate at scales that are in some instances twice their current operations. How is this more stable Indrajit?

Dinesh Anthony Perera

Also available at

http://www.ft.lk/columns/A-License-Raj/4-656211

A License Raj _ FT Online

 

A Lack of a Right of reply to “Right of reply – Rotarian replies to Muttukumaru”

http://www.dailymirror.lk/149962/Right-of-reply-Rotarian-replies-to-Muttukumaru

“Editor’s Note: This correspondence is now closed.”

Amrit Muttukumaru, a self-defined public activist who makes it a point to stick it to those who are in power, is prominent within the local papers. He makes allegations. The allegation relevant to this piece of work is that against K.R. Ravindran. Muttukumara alleges that K. R. Ravindran was involved in some form of fraud while at Rotary. Rotary for those who are not familiar is a sinfully boring organization filled with the most incompetent people on the planet. Members however tend to be wealthy.
On my internet search I find that K.R. Ravindran was able to take Muttukumuaru to court and make him retract some of his statements. This however means nothing in our country wherein power decides judicial outcomes. I can’t find any official response by K. R. Ravindran. If K.R Ravindran with all his money cannot respond to Muttukumaru’s allegations in a manner both outside and within court then I understand why he was made head of Rotary.

I am not standing by Muttukumaru’s allegations or even suggesting that we overturn the societal presumption of innocence. What I am suggesting is that it is plausible that there was some impropriety with regards to Tsunami aid. Helping Hambantota comes to mind. Working under the assumption that Rotary’s funds are held in the public interest and that Muttukumaru’s work is at the very least prominent, it makes sense for a public response.

K R Ravindran should as an office bearer of Rotary be obliged to respond.

Banking in Sri Lanka

“A bank is a place that will lend you money if you can prove that you don’t need it.” – Bob Hope

Banking in Sri Lanka is lending to a person only if it results in that person being worse off.

I recently got rejected for a loan, for the purchase of a government security, and for the collateralizing of my equity/debt. These are things that banks exist to do.

I was rejected for a loan and I quote because arranging a loan as an individual for liquidity purposes/increase OD facility is not a proper purpose for a loan. I didn’t want it immediately and arranging for a loan as a precautionary measure is not allowed.

I was rejected from purchasing a government security in my opinion because I did not want to hold a repurchase agreement but rather hold thesecurity itself.

I was rejected from collateralizing my equity/debt not because the bank wanted to separate its investment banking from its other operations but rather because my portfolio was too small.

Other than giving them a low cost of capital (which they then pass on to the already wealthy) what can I, a normal person, do with a bank?

Is it utopian to think banks provide liquidity and savings?

Dinesh Anthony Perera

Reply to misleading article published in Daily FT

This is a response I wrote to an article on the implications on the anti tobacco policies of the government.

Subject: Implications of the proposed ban of the sale of loose cigarettes in Sri Lanka. From: perera_d94@yahoo.com To: sripathitishani@gmail.com; Contact_CTC@bat.com; editor@ft.lk Date: Tuesday, April 17, 2018, 2:09:25 PM GMT+5:30

Dear Ms Tishani Sripathi,

I write to you following reading your article in the Daily FT. First let me congratulate you on being published within a widely read newspaper. Your article is very well written. I however must take point with three issues.
Firstly, you state that the recent past has seen a drastic increase in the taxation on cigarettes. This is a dishonest framing of the tax increase. As articulated by the health minister and the finance minister this increase in tax was to keep in line with the long-term growth in income of the general population. Cigarette taxation had not changed under the previous regime due to undue influence by Ceylon Tobacco. From a long-term perspective, the increase in taxation though sudden was justified. The tax increase was also not so drastic as to create a huge illicit industry as you suggest. The fines and enforcement on illegal tobacco have increased commendably over the same period.

Secondly you state that the latest proposal was to ban the sale of cigarettes near schools. This is false as the most recent publicly known proposal regarding tobacco is the ban of sale to people under the age of 21. The proposal was made to curb people from beginning smoking when they enter university. This has been mentioned in the general press.

The third and final issue is with regards to your statement of self-control. You make the unsubstantiated claim that people purchase cigarettes on an individual basis to control consumption. There is no evidence for this claim. It is outlandish to even suggest it.

The public must remain opposed to the consumption of tobacco as it is a serious health concern. Smokers should have to purchase a license to smoke and this should increase their costs of insurance and limit their access to public services. Ceylon Tobacco is known to promote articles like yours in the general press and it is shameless that you would decide to write on their behalf. The ministry of health has stood firm against a powerful multinational.

Due to the seriousness of the points raised I believe you and the Daily FT should immediately retract the given article.

Kind Regards
Dinesh Anthony Perera
A concerned citizen

Article available at time of posting at

http://www.ft.lk/opinion/Implications-of-the-imposed-ban-on-the-sale-of-loose-cigarettes-in-Sri-Lanka/14-653319

Implications of the imposed ban on the sale of loose cigarettes in Sri Lanka _ FT Online

Response published in the Daily FT on the 20th of April

http://www.ft.lk/opinion/Implications-of-proposed-ban-on-sale-of-loose-cigarettes-in-Sri-Lanka–A-response/14-653566

I am not the Patriarchy and you are not the Victim.

While going through Kottu.org I stumbled across a blog aligned to the Bakamoono movement. Within the use of conflation, emotional manipulation, and exaggeration I found this line that I found to be quite worrisome. This line worried me because it was more than just unionized rhetoric but rather socially divisive. “Patriarchy has done its job so well that those who are oppressed by it can count themselves among its greatest champions. Stockholm syndrome at its finest. “Why is conspiracy so integral to harmful unionization?

Unions are about power. They band together people with common interests to be able to lobby for the protection of said interests. Unions as we see in Sri Lanka with the GMOA are blind to the interests of nonmembers. Unions thrive on being systemically important. They are majoritarian and have very steep and undemocratic power structures. It is rare in Sri Lanka at least to see unions being polled before any form of action. Dissenting views within a union are also uncommon as it is rare for members to undermine union power and thereby undermine their collective interest. For instance, GMOA doctors like that the union protects the car permit scheme. The GMOA would however find it hard to advocate for the cutting of resources to those studying Mathematics.

Conspiracy is integral to a union as it allows the members to commit harm to nonmembers. Unions may be blind to nonmember interests, but it takes conspiratorial thinking to push forward action that would be detrimental to nonmembers. This is because it is unusual for a human to want over a prolonged period to commit harm to another human being. Armed soldiers in combat for instance are known to aim to miss rival forces. This human passivity is however overridden when it is that they are being attacked. This is where conspiracy comes in. The writer’s proclivity to obscure argument makes the reader believe as though they are being attacked. This then brings about the defensive instincts that allow a union to do something that is otherwise societally not well received.

The logic is as follows. The GMOA is being attacked by SAITM. The government was trying to reform the vehicle permit scheme. The GMOA’s interests are at stake. The GMOA can now attack the government. The GMOA calls on nationwide boycotts of education. Students at university do not study mathematics.

Someone should also explore the unions capacity to bring about acts like self-immolation. The title of this post is to draw light to the pernicious banding together of issues in a bid to consolidate power. I would think that I am broadly supportive of some of the initiatives branded as gender issues. I however do not see the need to unionize within everything that identifies as a feminist group. I do not agree with the mistrust of the male gender. Society can be pushed to act on individual issues using open discourse. Two wrongs do not make a right and being part of a harmful union is not an ethical solution to your problems.

Dinesh Anthony Perera

http://sharanya-sekaram.blogspot.com/2018/04/womens-bodies-are-not-public-property.html

Women_s Bodies are Not Public Property – Are They_