Regulatory Conflict

June 27, 2012 (LBO) - Sri Lanka's Employment Provident Fund, a central bank managed fund, said it had welcome a detailed statement from Standard & Poor's which warned of risks facing lenders over the fund buying up bank stock. S & P said it warned of regulatory conflict under a standard rules which give higher ratings for countries that had no such risk, even before finding any specific instances where conflicts had occurred.

The full statement by EPF is reproduced below:-

EPF welcomes S&P Clarification re. their recent Banking Industry Country Risk Assessment (BICRA)

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 independe