Yandraduth Googoolye: Mauritius - a regional financial services hub
Address by Mr Yandraduth Googoolye, First Deputy Governor of the Bank of Mauritius, at
the opening ceremony of the symposium on the theme "Mauritius - a regional financial
services hub", organised by the Mauritian Management Association, Pointe aux Piment,
10 October 2012.
* * *
Honourable Anil Kumar Bachoo, GOSK, Vice-Prime Minister, Minister of Public
Infrastructure, National Development Unit, Land Transport & Shipping & Acting Minister of
Foreign Affairs, Regional Integration and International Trade
Dr Rajun Jugurnuth, President, Mauritian Management Association
Mr Marc Hein, Chairman, Financial Services Commission
Ms Madhavi Ramdin, Head of ACCA Mauritius
Chief Executives
Distinguished Guests
Ladies and Gentlemen
Good Morning
I am delighted to be in your midst for the opening of this Symposium. I extend my warm
appreciation to the MMA for this laudable initiative which comes at a very opportune time
when the country, having embarked on a rapid development path, is increasingly in need of
professionals who are pragmatic in their approach but modern in their mind, to say but the
least.
The financial sector is at the core of the economic system, providing a range of services
which are necessary for domestic and trade related industries to function efficiently and
enabling consumers to effectively manage their inter-temporal consumption-savings
requirements. While economic growth tends to induce accompanying financial sector growth,
empirical research demonstrates a well-established causal link from financial sector
development to economic growth. In short, having a financial sector that meets the financing
and investment needs for consumers, businesses and governments as efficiently and
competitively as possible, increases the nation's capacity to grow.
Efficiency and competitiveness are more likely to be evident in an economy that is open to
international competition and world's best practices. Countries that have highly efficient and
competitive financial sectors are also likely to be exporting those services. Mauritius has a
comparative advantage in many parts of its financial sector compared with most other
countries in the region. While we remain a very open trading economy overall, our exports
and imports of financial services as a percentage of GDP are, by international standards,
relatively low. The opportunities for leveraging off our financial services skills and expertise,
in the region and beyond, are potentially enormous.
The financial sector in Mauritius is an important contributor to national output, employment,
economic growth and development. The sector accounts directly for around 10.0 per cent of
GDP, and employs directly around 12,000 people or 4.0 per cent of total employment.
Indirectly, it employs a substantially larger number of people, by way of outsourced legal,
accounting, technology, administration, processing and other services.
In the aftermath of the global financial crisis, the world's focus is increasingly on Africa for its
untapped potential and Asia as a major source of investment, technology and funding. In this
conjuncture, Mauritius has all the attributes to act as a bridge between Africa and Asia.
According to the Global Competitiveness Report 2012-13, Mauritius ranks 13th in terms of
"strength of investor protection". Global investors interested in trading with Africa, for
instance, should increasingly be encouraged to use Mauritius as a platform to set up their
investment holding companies.
Over the years, our country has established strong economic ties with both Asia and Africa.
Mauritius is an active player in key African and regional organizations, including the African
Union (AU), the Southern African Development Community (SADC), the Common Market for
Eastern and Southern Africa (COMESA) and the Indian Ocean Commission Rim Association
for Regional Cooperation (IOR-ARC). Mauritius has established a dozen Double Taxation
Agreements (DTAs) with our African peers and ten, with our Asian counterparts. All these
provide for opportunities which all stakeholders in the country need to tap if we are to service
the region as a Financial Services Hub.
The most important characteristic of a leading financial centre is that it must be stable and
well regulated, and provide a wide range of financing and investment products as efficiently
and competitively as possible.
On the regulatory front, I can assure you, Ladies and Gentlemen, that the Bank of Mauritius
has been and is continuously striving very hard to render the Mauritian Jurisdiction as
credible and transparent as possible. Some ten years back, the financial world was lobbying
for the relaxation of regulation or the implementation of However,
"light touch regulation".
the Bank of Mauritius has always maintained a consistent and prudent approach in its
regulatory oversight, and the recent global financial crisis has proved us right in our
conviction that a properly regulated jurisdiction promotes financial stability and enhances the
level of confidence in the financial system.
The Bank of Mauritius is further working, in collaboration with the banking sector, on the
ringfencing of banking activities with a view to facilitating the monitoring process and mitigating
the risk of regulatory arbitrage. In order to promote the independence of our banks and
enhance the resilience of our banking sector, the Bank of Mauritius encourages international
banking Groups to conduct business in Mauritius through subsidiaries rather than branches.
Emphasis is equally being laid on the oversight of domestic Systemically Important Financial
Institutions (SIFIs) for greater financial stability and compliance with the recommendation of
Basel III.
In terms of regulatory tools, the Bank of Mauritius has issued some thirty Guidelines to
institutions under its purview, which cover crucial and diverse areas such as capital
adequacy, risk management, credit impairment, corporate governance, public disclosure of
information and anti-money laundering, among others. These guidelines are constantly being
updated to take on board evolving risks. New guidelines are also in the pipeline, including
Basel III.
In the field of anti-money laundering, in particular, the Bank of Mauritius has, besides issuing
Guidance Notes on Anti-Money Laundering and Combating the Financing of Terrorism
for Financial Institutions, set up a Committee comprising Compliance Officers of banks and
officials of the Bank of Mauritius to discuss and follow up on all compliance issues. We have
equally signed an MOU with the Financial Intelligence Unit, since 2009, for the exchange of
information and greater cooperation in combating money laundering and the financing of
terrorism.
The concern for a macro-prudential oversight of the banking sector stands as a priority on
the agenda of the Bank of Mauritius. In this connection, we have, at national level, entered
into MOUs with the Mauritius Revenue Authority (MRA), Financial Services Commission
(FSC), Competition Commission of Mauritius (CCM) and Statistics Mauritius.
On the international level, the Bank of Mauritius has equally signed MOUs with some ten
foreign regulators, of which five are from the region, for a better oversight on the activities of
foreign banking institutions operating on our shores and on the regional operations of our
local banks. We are also in the process of finalizing MOUs with a few other central banks in
the region.
Efforts are being deployed in view of the establishment of policies and measures to address
the question of banking crisis resolution in the region. It may be highlighted that one of the
greatest lessons learnt from the global financial crisis is that, in a world of
interconnectedness, regulators must collaborate and exchange information to mitigate the
effect of contagion risk and ensure that prompt actions are taken to prevent any future crises.
We are gearing our efforts towards the establishment of supervisory colleges in the African
Region to foster supervisory cooperation.
I wish to return to the subject of corporate governance which I am sure will be of great
relevance to the audience. We have in August issued a revised Guideline on Corporate
with a view to bringing improvements in the corporate governance framework
Governance
of our financial institutions. The guideline has been aligned to the new recommendations of
the Basel Committee on Banking Supervision and greater emphasis is now being laid on the
independence of directors. We are requiring, amongst others, that the chairperson of a board
in a local bank be an independent director. We have further requested the setting up of local
advisory boards for the branches of foreign-owned banks. Additionally, greater transparency
is being required regarding the role of the board of directors, particularly on ethical standards
and corporate values.
We believe that the soundness and resilience of the banking system, and by extension the
financial system, involves, inter alia, the proper functioning of various mechanisms which
inevitably entail accountability and transparency.
Regarding transparency, the Bank of Mauritius has succeeded with the collaboration of
banks, in disclosing the overall CAMEL rating of individual banks on its website and on a
biannual basis. Mauritius is among the few countries and the first in the Sub-Saharan region to
have gone public with those ratings. I believe that the publication of the CAMEL ratings has
brought in higher market discipline in the banking system and is encouraging banks to
improve their performance. Certain jurisdictions have even embarked on the dissemination of
stress-testing results of their commercial banks.
We have constantly been modernizing our Payments System. The Bank of Mauritius
launched the Bulk Clearing and Cheque Truncation System in September 2011. This system
allows for electronic clearing of cheques as well as low value payments. We are presently
working on a National Switch project.
As you may be aware, the Regional Payment and Settlement System (REPSS) of the
COMESA has become operational effective 3 October 2012. The REPSS is an initiative of
the COMESA Clearing House and is fully endorsed by all COMESA member states. The
Bank of Mauritius is the settlement bank in the REPSS and the status of a settlement bank
for such a huge market, spread over a total area of 12.8 million square kilometres and with a
population of 413 million, is a coveted position and will benefit the country ultimately. The
REPSS opens another opportunity for our country to enhance its role in the region. In fact, an
efficient cross border payment system is a necessity for trade integration and the future of
REPSS is very promising.
Mauritius also inspires confidence among foreign investors on account of its robust legal
framework. As of date, our jurisdiction has made considerable efforts to establish appropriate
legislations whether in the field of banking, financial services, anti-money laundering or
securities market. However a big challenge still awaits the country; we need to be compliant
with The Foreign Account Tax Compliance Act (FATCA) by next year. The sooner this is
achieved, the better it would be for us. We could then start selling our jurisdiction as a
FATCA-compliant one.
To conclude, we need a vision for our financial industry: that is, (a) maintaining a best
practice, principles based regulatory framework, (b) maintaining world class education and
training to ensure the continuous availability of a highly skilled and innovative workforce and
(c) removing barriers to the competitiveness, efficiency and liquidity of domestic financial
markets.
Mauritius has many innate advantages. Our geographic proximity to Africa should provide a
basis for diversification away from traditional markets. Our growing trade integration with the
region provides increasing trade financing and other opportunities for our financial sector.
Ladies and Gentlemen, we need the collaboration of each and every stakeholder to enable
Mauritius to cement its role as a Regional Financial Services hub.
I wish good luck to the MMA for its glorious initiative.
Thank you for your attention.