a desire to exploit regulatory loopholes across borders, banks had increasingly engaged in networks of overlapping contractual claims with other financial institutions domestically or abroad. a poignant reminder of this is the repeal of the glass - steagall act in the us in 1999 that coaxed banks to indulge into non - bank activities, including investment banking and insurance. the incursion of banks into financial market activities, including concocting financially engineered products, constituted one aspect of the new banking order that gave awful headache to regulators. opacity in many of banks ’ activities – including creation of off - balance sheet special purpose vehicles ( spvs ) – and the addition of collateralized obligation terminologies had mushroomed and escaped scrutiny by regulators worldwide. i believe, as bankers, you know as much as i do in this area. the urgency of building international rules as a firewall against banks ’ mounting risk - taking appetite and of developing supervisory capacity to assess, detect, pre - empt, and monitor such behaviour rapidly became the cause for concern to central bankers and regulators. in the years that immediately followed the 2008 financial crisis, concrete actions finally superseded rhetoric and the new basel rules were developed. cross - border expansion and affiliates of holdings in the wake of the fall of barriers between countries, banks have been quick at tapping into the enormous opportunities offered by cross - border banking. as you must be aware, cross - border banking activities within the african continent have intensified. the challenges posed by this development are more daunting than it used to be in the past. the lack of proper regulatory oversight of many bank holding groups on the continent is often inimical to consolidated supervision. while many of cross - border operations take the shape of separately capitalised subsidiaries, the issue of contagious transmission of a crisis from the subsidiary to the parent bank is not completely suppressed. consolidated supervision is important for proper risk assessment of banks expanding across borders, either through subsidiaries or branches. in a world fraught with risks it ’ s imperative to have a framework for ensuring effective coordination with host countries through properly defined memoranda - of - understanding ( mous ). the bank of mauritius has signed mous with seven domestic authorities and with thirteen overseas regulators where local banks conduct business. more than mous, what we need to do 2 / 5 bis central bankers'speeches in africa is to have appropriately designed regional regulatory structures. in my personal opinion, this would be a bold attempt and an effective way forward that

ubiquitous manifestations of a new banking reality have been with us for quite some time now. throughout the world, the banking sector has undergone game - changing transformations, both in coverage and scope. some changes, propelled by the forces of de - regulation in the 1980s, were revolutionary and some are driven by regulatory overhauls triggered by episodic financial meltdowns in some of the world ’ s major economic hotspots. quite some radical innovations have been prompted by the inexorable inroads made by digital and other technological breakthroughs into banking activities. our financial industries in africa have certainly not been impervious to the game - changing transformations. this is an area where africa has conspicuously not played absent. the paradigmatic changes that have swept the world ’ s financial landscape have engendered compelling forces requiring regulatory authorities to construct new regulatory structures and to come up with new regulatory and supervisory toolkits. the transformations have been so fast that even the toolkits have had to be updated again and again as evidenced by the basel i followed by basel ii and further followed by basel iii. central banks that fail to appreciate the importance of adapting their regulatory and supervisory toolkits in line with the new exigencies of the banking business have often been left to repair the financial and reputational damages they 1 / 5 bis central bankers'speeches suffered in the aftermath of some form of financial crisis. topping the list of central banks ’ preoccupations about regulatory and supervisory implications of banking sector transmutations are the following : i. financial engineering and complex risk transfer mechanism, ii. complexity and opacity resulting from banks operating under the aegis of banking groups or conglomerates, iii. the role of financial technology in morphing the nature of the banking business, and iv. enhanced macroeconomic sensitivity of banking activities. each of the aforesaid developments creates opportunities as well as threats to banks. it becomes imperative for discerning central banks to develop the required foresight to protect the banking system with the right suite of toolkits – such as robust risk - based supervisory and stress testing frameworks. before outlining what we, at the bank of mauritius, have been doing in these areas, let me elaborate each of these elements in some finer details. financial engineering and complexity the 2008 financial crisis demonstrated, in no ambivalent terms, that the range and scope of the banking business has become unprecedentedly multi - faceted and highly complex. partly driven by