yandraduth googoolye : implementation of basel ii in mauritius address by mr yandraduth googoolye, first deputy governor of the bank of mauritius, at the special banking committee on the implementation of basel ii in mauritius, port louis, 21 september 2007. * * * chairman chairman of the mauritius bankers association chief executive of the mauritius bankers association chief executives of banks representatives of banks dear colleagues it gives me great pleasure to address you on the implementation of basel ii. as we all know, basel ii is a major challenge for small economies like ours. however, we must take pride in the fact that all our banks, regardless of their size, are committed to the implementation of basel ii. right at the outset, the bank of mauritius has favoured a consultative approach to the implementation of basel ii. since the setting up of the main committee, i must say that considerable work has been achieved. we take pride in the fact that we are having recourse to our in - house expertise and as we move forward we are creating synergies for nurturing our local jurisdiction. as you are well aware, the implementation of basel ii is a daunting and challenging task for all regulators the world over. it is also the case for mauritius. much progress has been made by our in - house staff and the representatives of banks, at the level of the working groups. despite uncertainties at some stage, we are confident that the project has regained momentum and that we will reach the march 2008 target for the parallel run. the bank has set up a new basel ii unit, the members of which are present here today. may i seize the opportunity to extend our appreciation to the dedicated representatives of banks that have relentlessly put in efforts to reach where we are today. we look forward to their ongoing collaboration. basel ii framework today, i would like to briefly touch upon the evolution of the revised framework, its broad structure and the preparatory measures taken by the bank for implementing this framework, and the challenges facing the industry in its migrating to basel ii. we must bear in mind that the basel ii framework allows for flexibility and we, at the bank of mauritius, will exercise our discretion to adapt the new framework to the specificities of our jurisdiction. the need to achieve greater financial inclusion and to provide an efficient credit delivery mechanism remains our overriding consideration. the basel i accord dates back to 1988 when the basel committee on banking supervision released a framework for capital adequacy. mauritius

food items. the pattern for pulses appears to conform to perceptions about sensitivity to monsoons. at least in the most recent months, the inflation rate for pulses has dropped significantly – in fact, below the overall rate of food inflation. however, the inflation rates for the other two items continue to be above the overall food inflation rate. the rate for eggs, meat and fish has dropped a bit, but the rate for milk appears to have its own dynamic. slide 2 inflation rates of proteins of course, this is not sufficient to draw any inferences about the structural nature of protein price inflation. slide 3 presents the results of the decomposition of the three price level series. the red lines capture the structural components and the picture is unmistakable ; the prices of all three protein sources are on a strong upward trajectory, which, is occasionally offset by favourable cyclical factors, particularly in the case of pulses, given the direct impact of monsoon performance on pulse production. slide 3 structural components demand drivers the 61st round ( 2004 – 05 ) of the national sample survey is the most recent large sample data available for consumer expenditure. though dated, it provides a basis for analyzing the relationship between household affluence and expenditure on various items. in the course of this project, we have estimated price and income elasticities for a variety of food products, including the three categories on which this presentation is focused, at several levels of disaggregation – by item, by state and by income fractile. the results will eventually be published in a detailed report, but given the occasion and time constraints, i would just like to convey a sense of what we are attempting to do. essentially, it is the analysis of inflection points : what is the threshold level of income ( or, in this case, household expenditure ) at which the composition of the diet changes significantly. a national aggregate is not a very precise way of doing this, given the enormous variations in factors that drive consumer behavior across the country, but it serves to illustrate the approach. slide 4 presents the relationship between monthly per capita expenditure ( mpce ), which is of course a proxy for household affluence and the level of spending on the three protein sources that we are discussing. interestingly, the expenditure on milk and milk products is higher than that on pulses in all expenditure fractiles of the urban population, while it begins to dominate pulses at a fairly low fractile in the rural population. eggs, meat and