Featured Product

    IMF Publishes Reports on 2019 Article IV Consultation with Mauritius

    April 29, 2019

    IMF published its staff report and selected issues report under 2019 Article IV consultation with Mauritius. The IMF Directors stressed the importance of implementing the outstanding Financial Sector Assessment Program (FSAP) recommendations for further strengthening financial stability. Directors also encouraged the authorities to continue to improve data quality and efforts to contain excess liquidity in the banking system.

    The staff report highlighted that the financial soundness indicators point to continued financial sector stability. Bank capital is well above the regulatory minimum and banks meet enhanced liquidity requirements under Basel III (that is, the new liquidity coverage ratio or LCR). Banks have increased exposure to the region and BOM has strengthened cross-border supervision and cooperation with foreign supervisors. The non-performing loan (NPL) ratio has declined from 7.8% at end-2016 to 6.4% at the end of the third quarter of 2018 and is expected to fall further with the transfer of a majority of state-owned Maubank’s NPLs to a special purpose vehicle and the requirement for banks to accelerate write-offs, in line with previous recommendations. The results of the BOM stress tests, using severe scenarios proposed by staff, suggest that banks’ capital is adequate to absorb sizable shocks to NPLs, while liquidity and market risks also appear manageable. Furthermore, the non-bank financial institutions have been growing by double digits, spurred by pent-up demand for pension and insurance services, and are being monitored for stability risks by the Financial Services Commission (FSC). 

    The staff noted that outstanding issues in the financial supervisory and regulatory frameworks need to be addressed. While several recommendations of the last FSAP have been adopted, other recommendations—including implementation of risk-based and consolidated supervision, adoption of the remaining Basel III instruments, legal changes to upgrade the financial safety net, and establishing a macro-prudential authority—should also be followed. As the loan-to-value ratio was effectively suspended in mid-2018, staff advised close monitoring of credit and property market developments to periodically evaluate the need for its re-introduction. Mauritius aspires to become a regional hub for fintech activities. A regulatory sandbox licensing (RSL) regime for fintech start-ups has already been set up, along with a National RSL Committee to coordinate and assess all fintech-related RSL applications. Within the fintech domain, the authorities are initially focusing on activities relating to digital assets, but a more detailed fintech strategy, including for mobile money and payments, should be informed by an assessment of comparative strengths and limitations.

    The selected issues report discusses about the Financial Conditions Index (FCI) for Mauritius—an instrument to gauge the operational state of the financial sector and predict real economic activity. The report assesses the usefulness of the FCI for informing macro-prudential policy, examining whether an FCI could be used as a trigger in activating the Basel III countercyclical capital buffer (CCyB). The FCI could be used to help inform the setting of CCyB. While it is challenging to give concrete guidance on setting the CCyB based on only one recent episode of mild banking distress, the Mauritian authorities will have to devise a buffer guide if they introduce the CCyB. Given the shorter financial cycles and the experience of a sudden NPL hike in the country, the authorities could opt for an earlier or more accelerated buffer build-up than advised by the BCBS guidance (2010). An important consideration in this regard should be the weakness of the credit gap in timely predicting the past credit boom or bust episodes. An analysis of the credit gap could thus be usefully complemented with the FCI (and possibly other indicators such as development in credit standards and asset prices).

     

    Related Links

    Keywords: Middle East and Africa, Mauritius, Banking, Insurance, Basel III, FSAP, Article IV, Macro-Prudential Policy, NPLs, CCyB, BOM, IMF

    Featured Experts
    Related Articles
    News

    EBA Guide to Monitor Threshold for Intermediate Parent Undertakings

    The European Banking Authority (EBA) published the final guidelines on the monitoring of the threshold and other procedural aspects on the establishment of intermediate parent undertakings in European Union (EU), as laid down in the Capital Requirements Directive (CRD).

    July 28, 2021 WebPage Regulatory News
    News

    PRA Finalizes Approach to Supervision of International Banks

    In a recent Market Notice, the Bank of England (BoE) confirmed that green gilts will have equivalent eligibility to existing gilts in its market operations.

    July 26, 2021 WebPage Regulatory News
    News

    FCA Issues PS21/9 on Implementation of Investment Firms Regime

    The Financial Conduct Authority (FCA) published the policy statement PS21/9 on implementation of the Investment Firms Prudential Regime.

    July 26, 2021 WebPage Regulatory News
    News

    EBA Proposes Regulatory Standards to Identify Shadow Banking Entities

    The European Banking Authority (EBA) proposed regulatory technical standards that set out criteria for identifying shadow banking entities for the purpose of reporting large exposures.

    July 26, 2021 WebPage Regulatory News
    News

    IOSCO Proposes Recommendations on ESG Ratings and Data Providers

    The Board of the International Organization of Securities Commissions (IOSCO) proposed a set of recommendations on the environmental, social, and governance (ESG) ratings and data providers.

    July 26, 2021 WebPage Regulatory News
    News

    ESMA Group Issues Recommendations on RFR Switch in Interdealer Market

    The European Securities and Markets Authority (ESMA) published recommendations from the Working Group on Euro Risk-Free Rates (RFR) on the switch to risk-free rates in the interdealer market.

    July 26, 2021 WebPage Regulatory News
    News

    EC to Defer Application of SFDR Standards Till July 2022

    The European Commission (EC) announced plans to defer the application of 13 regulatory technical standards under the Sustainable Finance Disclosure Regulation (2019/2088) by six months, from January 01, 2022 to July 01, 2022.

    July 23, 2021 WebPage Regulatory News
    News

    EIOPA Consults on Reporting and Disclosures Under Solvency II

    The European Insurance and Occupational Pensions Authority (EIOPA) proposed to amend the supervisory statement on supervision of run-off undertakings that are subject to Solvency II regulation.

    July 23, 2021 WebPage Regulatory News
    News

    BoE Consults on Approach to Setting MREL, Publishes Bail-In Guidance

    The Bank of England (BoE) published a consultation paper on approach to setting minimum requirement for own funds and eligible liabilities (MREL), an operational guide on executing bail-in, and a statement from the Deputy Governor Dave Ramsden.

    July 22, 2021 WebPage Regulatory News
    News

    EBA Seeks Views on Proportionality Assessment Methodology

    The European Banking Authority (EBA) is seeking preliminary input on standardization of the proportionality assessment methodology for credit institutions and investment firms.

    July 22, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7295