BoM Revises Approach to Use of ECAIs by Banks, Extends Loan Moratorium
BoM revised the guideline outlining its approach to the recognition process for external credit assessment institutions (ECAIs) and to the use of eligible ECAIs by banks. The standardized approach to credit risk requires banks to use credit assessments provided by ECAIs that are recognized by national supervisors as eligible for regulatory capital purposes, to determine the risk-weights on their credit exposures. This revised guideline came into effect from November 12, 2020. In a separate statement, BoM announced that the moratorium on loans and Special Relief Amount of MUR 5 billion has been extended to June 30, 2021, to further support businesses and those facing financial constraints as a result of the COVID-19 pandemic. The decision for extension of these measures has been taken in consultation with the Mauritius Bankers Association Limited.
The guideline on recognition and use of ECAIs applies to all banks licensed under the Banking Act 2004. The guideline highlights that ECAIs can be recognized using either direct or indirect recognition method. An eligible ECAI is an entity that has been recognized by BoM to meet the eligibility criteria set out in the guideline. Only the credit assessments of eligible ECAIs shall qualify for the standardized approach to credit risk. The guideline also sets out the minimum requirements for the six eligibility criteria: objectivity, independence, international access/transparency, disclosure, resources, and credibility. BoM shall ensure that, on an ongoing basis, a recognized ECAI meets the six eligibility criteria and that the assigned risk-weights reflect the level of credit risk. BoM shall map eligible ECAI assessments to the supervisory risk-weights under the standardized approach to credit risk using the guidance provided by BCBS. Under Annex 2 of the guideline, BoM provided a list of recognized ECAIs under both the direct and indirect methods, along with the list of relevant assigned supervisory risk-weights.
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Keywords: Middle East and Africa, Mauritius, Banking, COVID-19, Credit Risk, ECAI, Regulatory Capital, Loan Moratorium, Basel, Standardized Approach, Credit Ratings, BOM
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