Rundheersing Bheenick: "We need to shine the torch of transparency on
everything connected with banking"
Address by Mr Rundheersing Bheenick, Governor of the Bank of Mauritius, at the opening
ceremony of the Bank of Baroda Branch, Rose Belle, 25 July 2012.
* * *
I am delighted to be here with you this morning at the opening of this new branch of the Bank
of Baroda in Rose Belle. This makes it the ninth Bank of Baroda branch in Mauritius and also
the ninth bank branch in Rose Belle. As demonstrated here in Rose Belle, the branch
network of our banking sector continues to expand, thus giving the lie to observers of the
financial scene who have been predicting the end of the brick-and-mortar model of banks.
The Minister will be pleased to know that this now allows Rose Belle (his constituency) to pull
ahead of Triolet (the Prime Minister's constituency)... but it is still one branch behind
Flacq (the Vice Prime Minister's constituency)... and trails behind Curepipe by two branches.
Our banks in Mauritius value close proximity to their clients. Since I took over as Governor in
2007, I have seen the number of branches growing by 30 per cent, to 217. This translates
into some interesting ratios regarding financial access: we have one branch for every
9.4 square kilometre of territory and for every 6,000 inhabitants - among the highest in the
world. This banking model has served us well and I can safely say that it has contributed to
bolster confidence in banking while adding to its resilience.
The Bank of Baroda is, of course, no stranger to proximity. Soon after it set up shop in
Mauritius, and drawing on its experience of more than a century of taking banking services to
Mobile Banking
remote areas of India, the bank introduced in Mauritius. These days when
we speak of "mobile banking", we refer to banking and financial services and payments
enabled by cellular technology. In those days, Baroda's mobile bank was empowered by an
altogether different technology - the internal combustion engine. Bank of Baroda mobile
banking was a bank on wheels. It would go - as it still does - from village to village, bringing
banking to rural and unbanked areas. There are many who can still recollect the flurry of
activity that would greet the van as it arrived in a village. At that time, banking was
concentrated in urban areas. Transport facilities were not as developed and made it difficult
to reach certain localities where population was sparse. The Bank of Baroda mobile thus
contributed to financial access in rural areas. It helped many agricultural labourers, farmers
and entrepreneurs to have access to basic banking services. This was a revolutionary step
for the rural community at the time.
Let me sincerely congratulate the management of Bank of Baroda for their involvement here
and for their contribution to the economic and social development of our country for nearly
half a century now. I understand you will soon be celebrating the golden jubilee of your
presence in Mauritius. The Bank of Mauritius is five years your junior! We owe you some
respect, don't we? Bank of Baroda has a long-standing relationship with our country. It
opened its first branch in Mauritius in 1962, when it became the fourth full-fledged
commercial bank in the country after Mauritius Commercial Bank, Barclays Bank DCO, and
Mercantile Bank of India, and broke a monopoly that had reigned through colonial times.
Since then, Bank of Baroda has pioneered many developments. It was associated with the
development of our offshore sector since the very outset. When offshore banking was
launched in Mauritius in the late 1980's, Bank of Baroda was among the first to establish an
offshore banking unit. Today, this segment has grown into a profitable business. Over the
years, our banking landscape has witnessed the emergence of new players. We now have
21 banks and Bank of Baroda is now solidly in the middle, ranking 10th, with an asset size of
Rs 24 billion.
I am sure this new branch will bring added value to the locality and the surrounding areas
and instil more competition for the benefit of customers. Banking has to become more
customer-centric. The financial crisis has changed the rules of the game. Only two weeks
ago, at the Bank of Mauritius, we have taken very forceful steps to protect bank customers.
We set up a Task Force on unfair terms and conditions in financial contracts, including fees,
charges, commissions and other levies imposed by banks. By now, you should all know what
prompted this initiative of the Bank. At the risk of repeating myself, I have spoken out about
the many grievances spanning a wide range of issues from dissatisfied customers knocking
at the door of the central bank. They complain about practices that are crying out for reform.
Your central bank cannot remain indifferent to such calls from the public.
The global economic downturn is impacting on our exports, on our employment and on our
standard of living. This difficult and delicate situation requires that all stakeholders look
beyond their narrow self-interest and share in the pain of adjusting to the new realities. It is a
matter of continuing surprise to me that in the fifth year of an unprecedented financial and
economic crisis of global proportions, some of our banks are still insolently reporting record
profits.
I am happy however to see that, at least on this score, I am no longer a lone voice in the
desert. Others have recently joined me in denouncing this state of affairs. The Competition
Commission has just completed an exercise on the bundling of insurance products where
some banks were suspected of taking unfair advantage of their customers by selling them
possibly overpriced insurance products from associated suppliers. It is currently investigating
into credit card charges - another area where malpractices are rife, at least internationally.
The government authorities have also stepped in. They set up a second Commission of
Inquiry on the procedures and practices of sales by levy to which banks have recourse when
they foreclose on properties secured as collateral. It started work earlier this month. You may
rest assured that the Bank will take corrective actions to remedy the situation.
It may be appropriate here to point out a growing trend to impose very hefty fines on global
banks in other countries for all manners of misdemeanours and transgressions, ranging from
conspiracy to rate-rigging. Bank CEO's and Chairmen have been seen off the stage for their
failures and violations, including money-laundering offences. These are not just corporate
banking failures; corporates only act through individuals. These are therefore also individual
failures. Criminal prosecution of the individuals responsible is something that we shall be
hearing more about in the weeks and months ahead.
To my mind, this places individual responsibility at the centre of things. The reforms that are
now being envisaged to prevent future crises, will hopefully address this issue.
and those working in them at whatever level - should be held
We feel strongly that banks -
accountable for their actions. Eight months ago, at the Bank's Annual Dinner for economic
operators, I had invited bank executives and directors to reconnect with reality - and not to
do things that would resurrect the image of banksters. I understand some bankers had then
Economist
toyed with the idea of a walk-out. Two weeks ago, the very respectable magazine
- in its UK edition for the week July 7th-13th - had "Banksters" emblazoned on its cover in
large characters, complete with gangster-like cut-outs of bankers in dark-goggles by way of
illustration. The only thing missing from the picture was some machine-guns or AK 47 rifles in
their hands. But who needs these crude weapons when bankers can go around in total
impunity toting the much more powerful "weapons of mass financial destruction" - as Warren
Buffet put it.
Two days ago, the respected Chairman of the British Financial Services Authority, Lord
Turner, used the "bankster" word on Bloomberg. Bankers, the world over, cannot walk out.
- to purge the system of
There is no place to hide! Instead of walk-outs, we need work-outs
crooked practices and crooked individuals. We need to shine the torch of transparency on
everything connected with banking. Corporate governance is key. We, at the Bank, have
examined the matter at length. We are issuing a revised Guideline on Corporate
Governance. Very shortly, we will also issue a consultation document on Basel III. On a
separate note, we are in the final stages of setting up the Deposit Insurance Scheme, which
is a missing link in our financial infrastructure.
Let me say a word on the Special Line of Credit in foreign currency that we have offered to
banks for on-lending to exporters. With this measure, the Bank is using its own balance
sheet in an attempt to resolve issues faced by enterprises at the micro-level. This has a cost
to us. The Bank cannot keep this line of credit open indefinitely. Judging from some press
reports, it would seem that some banks are able to meet the demand at comparable terms
on their own. If that is so, well and good! Let them get on with it. Others claim there is no
demand for such foreign currency loans in the first place as exporters are apparently quite
happy with their foreign currency exposure - and that includes the very real depreciation
risks of their export currencies. Let us bear in mind that micro-economic matters are not the
normal business of the Bank and we have taken extra pain to explain the rationale behind
our unusual move aimed at a very specific segment of our constituency. Rest assured that
we have no difficulty in re-focusing our efforts back on the macroeconomic front, and on the
broader needs of our complex multiple constituency. We will, therefore, soon start
redeploying progressively some of the funds earmarked for this Special Line of Credit, if, for
whatever reason, the demand is not there.
Again, congratulations to the management of Bank of Baroda for adding this ninth branch to
your network. I have no doubt that you will do your utmost to serve the best interest of the
community.
Thank you.