BOM issued a guideline that sets out the minimum standards for banks in respect of their cross-border exposure. The guideline provides a risk-based management framework to mitigate the key cross-border banking risks. The guideline, developed in consultation with banks, supplements the existing guidelines in respect of the identification, measurement, management, and mitigation of credit risks. The guideline became applicable immediately on publication—that is, September 04, 2020—to banks licensed under the Banking Act 2004.
Regarding regulatory reporting, the guideline states that where a bank is affected by a material increase in underlying risks, such as credit, legal, or reputational risks, in connection with its cross-border exposure or is approached by foreign authorities regarding such matters, it shall immediately inform BOM. For transitional arrangements, banks shall fully implement the requirements of this guideline within three months from its effective date. The requirements under this guideline will not apply to fully cash collateralized cross-border exposure. However, banks are still expected to carry out a proper risk assessment before engaging in such transactions.
This guideline on cross-border exposure supplements the existing guidelines issued by BOM. These existing guidelines include the guideline on country risk management, the guideline on credit risk management, and the guideline on credit concentration risk.
Keywords: Middle East and Africa, Mauritius, Banking, Credit Risk, Concentration Risk, Cross-Border Exposure, BOM
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