threats and greater regulatory challenges keep emerging. they intensify the regulatory burden for achieving financial stability. our current regulatory and risk management systems are designed to retrospectively identify at what point in time a thief stole your money, not to alert you when he is actually stealing it. they are expected to change soon with the bank ’ s risk - based supervision approach. regulation and supervision of financial institutions is fast moving to a state of things where you might possibly beat the system but not the house. it does not necessarily go to say that the bank will be regulating for zero failures. such an approach would of course stifle financial innovation. human nature. i come back to an important element in hyman minsky ’ s financial instability hypothesis. the longer people make money by taking risk, the more imprudent they become in risk - taking. it ’ s self - fulfilling when the going is good. if everybody is simultaneously becoming increasingly more risk - seeking, the value of things like, say, privately issued cryptocurrencies, goes up. this increases the ability to lever and the game keeps going. human nature is inherently pro - cyclical. human beings are not inherently given to equilibrium ; they ’ re inherently given to manic depression. once the process of financial sector liberalization was over, the bank of mauritius threw its weight on setting in place the building blocks for financial stability towards the end of the 1990s. the bank came up with a completely new regulatory and supervisory framework for deposittaking institutions. the bank of mauritius has since made relentless efforts to improve the jurisdiction ’ s institutional set up and constantly update its regulatory standards. a successful regulatory authority needs independence in the exercise of its powers. the bank of mauritius was made legally independent in the bank of mauritius act 2004. along with the independence, the act made allowance for the setting up of a monetary policy committee. in the great spirit of responsible central banking, i have done what could possibly be done to maintain the independence of the bank. ladies and gentlemen, on behalf of the board of directors of the bank, myself included, my wife, meera, and the staff of the bank, i wish you all happy holidays and the very best for 2018. thank you. 7 / 7 bis central bankers'speeches

the 12 - month period ended march 2003, it may be observed that the us dollar has weakened significantly on international financial markets. the japanese yen, pound sterling and the euro have appreciated against the us dollar. the rupee depreciated on average by 10. 2 per cent against the euro, 6. 7 per cent against the pound sterling and 1. 7 per cent against the japanese yen but appreciated by 0. 5 per cent against the us dollar. in trade - weighted nominal effective terms, the exchange rate of the rupee depreciated by about 8 per cent. in real effective terms, the rupee recorded a depreciation of about 5 per cent. there is nothing to suggest that the exchange rate of the rupee is in any way responsible for the erosion of international competitiveness. once again concern has recently been expressed about the appreciation of the rupee vis - a - vis the us dollar. in pressing their claim for a higher rate of depreciation of the rupee, some have even leaned on the turkish case. what is not mentioned, however, is that the double digit rate of depreciation of the turkish currency has also been served with a helping of high inflation rate of 27 per cent and high short - term interest rate of 42 per cent. let me say once again that this is far from being a turkish delight! it is more appropriate to view exchange rate developments over a period of time. the more we integrate with international financial markets, the more we have to allow markets work their way through. the exchange rate of the rupee has recently been likened to price determination in a specific market. well, in so far as we are trying to promote a competitive foreign exchange market, the bank of mauritius is quite comfortable with this reference. indeed, we welcome it because the market under reference is the only market in mauritius that is closest to the textbook model of perfect competition. currency appreciation or depreciation cannot be a panacea for all our economic ills. we should not forget that appreciation or depreciation of a currency could be a mixed blessing. in terms of macroeconomic policies, the authorities usually have to make a policy trade - off between the extent of exchange rate adjustment and the inflation rate. it must, however, be emphasized that the way forward for mauritius is for it to become competitive through the achievement of real productivity gains. a deliberate policy to depreciate the rupee can only be a temporary solution and not a permanent