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June 13, 2018

IMF published the technical assistance report on strengthening bank resolution and crisis management framework in Mauritius. The contents of this report constitute technical advice provided by the IMF staff to the authorities of Mauritius, in response to their request for technical assistance.

The report suggests that a new resolution framework is needed to effectively manage failing banks, safeguard financial stability, and limit moral hazard. The authorities should prepare and circulate guidance to banks on requirements for preparing and maintaining up-to-date recovery plans and specifying steps they would take to deal with shocks to their capital and/or liquidity. Moreover, formal plans describing how the resolution authority will manage the failure of individual banks and their groups need to be developed. Annex II of the report also provides status of the 2015 Financial Sector Assessment Program (FSAP) recommendations. The authorities have indicated their interest in formalizing and making the resolution and crisis management framework more efficient.

The key priorities identified by the IMF staff include the following:

  • Formally designate which administrative bodies are to be responsible for the resolution of individual financial institution failures and for various forms of financial and mixed groups
  • Refine the existing legal framework for early intervention and triggering resolution
  • Adopt new legal powers to support timely and effective resolution of systemically important banks
  • Issue guidance to banks to routinely prepare recovery plans for dealing with potential shocks to their capital and/or liquidity and to provide feedback on those plans
  • Prepare resolution plans for banks and their groups
  • Identify and remedy impediments to timely and effective resolution of banks
  • Revise the Deposit Insurance Scheme (DIS) Bill needs to strengthen the financial safety net; the bill needs to be agreed between the Ministry of Finance and Economic Development (MoFED) and the central Bank of Mauritius (BoM) and submitted to the parliament
  • Adopt a formal policy framework for emergency liquidity assistance
  • Specify the role of the Financial Stability Committee (FinStab) in resolution activities
  • Put in place cross-border cooperation arrangements with relevant foreign supervisory and resolution authorities

 

Related Link: Report

Keywords: Middle East and Africa, Mauritius, Banking, FSAP, Resolution Framework, Crisis Management, Recovery Planning, IMF

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