NDB’s alleged fraud was initially disclosed at Rs 380 million. Four days later it became Rs 13.2 billion – 35 times larger. Now the Chairman of the SEC has revealed that the regulator summoned the bank’s board and questioned what happened. For shareholders, depositors and the market, there is a larger issue: how could something this large remain hidden inside a listed bank?
There are corporate stories that disappear when the share price moves on. This should not be one of them.
National Development Bank’s disclosure earlier this year of an alleged fraud eventually estimated at Rs 13.2 billion was already extraordinary. Fresh comments from Securities and Exchange Commission Chairman Professor Hareendra Dissabandara now provide an unusually revealing account of how the regulator viewed the affair – and why the questions surrounding it remain important.
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According to Dissabandara, NDB’s first announcement to the Colombo Stock Exchange on April 2 put the estimated fraud at approximately Rs 380 million, while warning that the eventual figure could be substantially higher.
Four days later, the number became Rs 13.2 billion.
That is approximately 35 times the original figure.
The SEC Chairman says he suspected immediately that Rs 380 million could not represent the full picture. His reason is perhaps the most interesting part of the story.
He pointed to an unspecified-assets line in NDB’s accounts which, according to his account, had increased from approximately Rs 1.37 billion to Rs 12.7 billion. Someone examining the balance sheet, he said, could see that an amount of that magnitude did not simply appear overnight.
The SEC subsequently summoned NDB’s board. The bank’s auditor was also changed. The regulator’s investigation has continued.
None of that establishes wrongdoing by directors, auditors or any other individual beyond whatever has been established through the bank’s own investigation and subsequent proceedings. Those distinctions matter and should be preserved.
But shareholders are entitled to ask difficult questions.
A listed company is not merely accountable for what eventually appears in an announcement to the stock exchange. Its governance architecture is supposed to identify material financial irregularities before they reach extraordinary proportions.
That architecture includes management controls, internal audit, external audit, the board audit committee, risk management, directors and ultimately the board itself.
If the final amount associated with an alleged fraud reaches Rs 13.2 billion, the question is no longer simply: who allegedly committed it?
The question becomes: which controls failed to detect it earlier?
And then comes an equally important disclosure question.
How did an initial estimate of Rs 380 million become Rs 13.2 billion within four days?
There may be a perfectly defensible explanation. An investigation can uncover additional transactions rapidly. Initial figures can genuinely be provisional. The existence of an initial estimate does not mean management already knew the eventual amount.
But the scale of the revision makes scrutiny unavoidable.
Sri Lanka is trying to deepen its capital market. The Government and regulators want foreign investors to return. The Colombo Stock Exchange wants more listings, greater liquidity and stronger institutional participation.
All of those ambitions depend upon one commodity that cannot be manufactured by regulation alone: trust.
Investors need confidence that when a listed company discloses material information, the information is timely and sufficiently complete to allow the market to price the security intelligently.
That makes the SEC’s wider enforcement record relevant.
The Commission recovered Rs 207 million through enforcement actions in 2025, the highest amount in its 38-year history. The powers available under the Securities and Exchange Commission Act of 2021 are substantially stronger than under the previous law, including administrative sanctions, civil proceedings, asset freezes and settlements.
That is progress.
But enforcement statistics tell only part of the story.
The real test of a modern securities regulator comes when difficult questions involve large, established institutions rather than marginal operators.
NDB is an important Sri Lankan financial institution. Precisely for that reason, asking what happened is not an attack upon the bank. It is part of the accountability expected of a listed financial institution.
The SEC investigation should therefore ultimately answer several straightforward questions.
When did the irregularities begin? When did management first become aware of them? When was the board informed? How did the Rs 380 million initial estimate arise? What explains the subsequent Rs 13.2 billion figure? What weaknesses existed in internal controls? And were shareholders informed as soon as reasonably possible?
There is a final question for the auditing profession too.
If a balance-sheet item had moved from approximately Rs 1.37 billion to Rs 12.7 billion, what audit work was performed around that movement and what conclusions were reached?
Those questions should not be prejudged.
But neither should they disappear.
Because Rs 13.2 billion is not a rounding error.
It is precisely the kind of number for which corporate governance exists.
