EPF transparency concerns grow as Verite Research warns Sri Lanka’s largest worker savings fund discloses less than banks and listed firms.
EPF transparency in Sri Lanka has fallen below the disclosure standards applied to listed companies, commercial banks, and unit trusts, Verite Research has warned.
The Colombo-based think tank said the Employees’ Provident Fund, the country’s largest superannuation fund, discloses less information, in less detail, less frequently, and with less timeliness than other entities that also manage pools of public savings.
“This suggests that the Central Bank of Sri Lanka (CBSL), as the manager of the EPF, applies lower transparency standards to the EPF than is applied to other financial entities that are regulated,” Verite Research said.
The concern is significant because private-sector workers are legally required to contribute to the EPF, have no role in managing the fund, and cannot withdraw their savings at will, the think tank noted.
Parliamentarian Ravi Karunanayake has also raised concerns over the recent Rs. 13.2 billion fraud at National Development Bank PLC (NDB) and the bank’s later decision to withhold a dividend.
He pointed out that the EPF was greatly affected because it holds approximately 9.46% to 9.50% of NDB’s total equity, while questioning the CBSL’s lack of oversight.
“The same central bank that handles the EPF is investing in the same NDB Bank,” he said.
Verite Research said adherence to global transparency standards is the only safeguard EPF members have to ensure their future welfare is protected.
The Verite Research statement is reproduced below:
EPF falls behind banks and listed companies on disclosure: Verité Research
The Employees’ Provident Fund, despite being Sri Lanka’s largest financial institution, maintains lower transparency and disclosure standards than other entities that manage funds on behalf of third parties, including Colombo Stock Exchange-listed companies, licensed commercial banks, and unit trusts.
This was revealed in a new Verité Research brief titled “The Employment Provident Fund in Sri Lanka: A Comparative Assessment of the Adequacy of Information Disclosure,” published today.
The brief found that the EPF discloses less information, with less detail, less frequency, and less timeliness than comparable entities that also hold public savings.
Verité Research said this indicates that the Central Bank of Sri Lanka, as manager of the EPF, applies weaker transparency standards to the EPF than those imposed on other regulated financial entities.
The EPF also falls short of international benchmarks for timely, detailed, and accessible public disclosure of fund information, as set out in the OECD’s International Organisation of Pension Supervisors principles and the Global Pension Transparency Benchmark.
These weaknesses are critical because of the unique position of EPF members. Private-sector employees are required by law to contribute, have no control over the fund’s management, and cannot freely access their savings.
As a result, global-standard transparency is the only safeguard available to members to ensure their future welfare is protected.
Verité Research said this concern is further intensified by the EPF’s past exposure to financial malpractice, as revealed in forensic audits published in 2019.
The research brief identifies three short- to medium-term reforms to address these failures.
First, it calls for full compliance with the EPF Act. Second, it recommends adopting international best practices. Third, it urges enactment of the 2024 private member’s bill on EPF disclosure.
Longer-term reform, Verité Research said, should include stronger regulation of the EPF to protect the interests of members and preserve the integrity of the fund.
The full research brief by Verité Research can be accessed under “The Employment Provident Fund in Sri Lanka: A Comparative Assessment of the Adequacy of Information Disclosure.”
