Mauritius Central Bank Statement

Author: | Published: 19 Oct 2018
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With 50 years of independence behind it, Mauritius is poised to regain its significance as the Star and Key of the Indian Ocean. Surfing the crest of a positive macroeconomic climate created by accommodative monetary conditions and upbeat business and consumer confidence, the island nation has initiated a series of bold socio-economic reforms.

A number of major public and private investment projects as well as the appreciable performance of key sectors are spurring sustained domestic growth momentum. Economic and financial policies continue to attract capital inflows and real GDP growth at market prices is forecast at 4.0% in 2018 and 2019. Headline inflation is projected to be around 4.2% for 2018.

The Mauritian finance and banking landscape is more dynamic than ever. Banks are well-capitalised and possess adequate liquidity buffers. Testimony to the high quality of capital within the banking sector is the fact that approximately 90% of the capital base is in the form of Common Equity Tier 1 capital. The jurisdiction migrated to Basel III in July 2014 and the average capital adequacy ratio of the banking sector has consistently hovered around 17%. Mauritius has also implemented the Liquidity Coverage Ratio and as from January 2018, IFRS 9 has become effective with local banks being fully on track.

The exchange rate of the rupee is broadly in line with macroeconomic fundamentals and the broad money supply growth remains expansionary, highlighting the accommodative policy stance. 2018 has seen the Bank adopting a very aggressive open market operations approach in order to optimise the effectiveness of its monetary policy transmission mechanism and to counter the low market interest rates stemming from excess liquidity in the domestic banking across the last few years. This has resulted in a drop in excess liquidity and higher market interest rates.

The Bank has also upgraded its regulatory and supervisory stance. Whilst migrating to a risk-based supervisory framework, the central bank also boasts exacting licensing criteria. Conditions are now more exacting, whereby prospective applicants for a banking licence must demonstrate that they have a full-fledged AML/CFT (anti-money laundering and terrorist financing measures) software for the identification, assessment and monitoring of ML/FT risks. The CAMEL rating has also been revised to be more risk-sensitive and to capture concerns pertaining to ML/CFT.

As a key socio-economic development driver, the Bank is sparing no effort to strengthen and modernise the banking industry. With fintech being the word of the day, the Guideline on Outsourcing by Financial Institutions has been revised to incorporate a specific section on cloud-based services. With a view to being able to proactively formulate the best policies, the Bank is currently working on the elaboration of a strategy that factors all potential risks and challenges, as well as possible regulatory impediments.

Testimony to the will of the Bank of Mauritius to position Mauritius as a forward-looking international financial services centre is the revamping of banking legislation, as well as the current implementation of a series of technology-driven solutions spearheaded by the Bank. Amongst these key game-changing projects are the National Payment Switch and the E-KYC, a national electronic customer data repository that will be hosted and managed by the Bank of Mauritius.