1 as the participants are aware, the reserve bank has favored a ccp model for settlement of forex and government securities trade and intend to extend this to otc interest rate swaps and forwards. systemic risk measurement like any other risk category, the first step towards regulating systemic risk is to identify its source and measure it. the most popular measure of risk for individual institutions, the var has been severely tested. like many other financial models, the var model essentially hinges on the estimation of correlations between different assets and risk factors, which have to put it, simply have just broken down. there are already problems with this institution specific framework. how do we go to the next level of “ systemic risk ”? how do we define how much a particular firm contributes to systemic risk? some recent proposals attempt to incorporate systemic risk into the standard var measures. for instance, the geneva report argues for covar, based on the work of adrian and brunnermeier ( 2008 ), where covar is the var of financial institutions conditional on other “ does a central clearing counterparty reduce counterparty risk? ” darrell duffy and haoxiang zhu, stanford university. institutions being in distress. another report by the new york university ( stern school of business ) proposes a systemic capital requirement based on the individual firm ’ s contribution to aggregate tail risk. the problem with such solutions is that they attempt to give clean solutions to complex problems – their simplicity becomes their undoing. besides var, stress testing was another pillar on which the risk management framework at the banks rested. the stress tests were specifically intended to capture the tail risks, which were not captured by the var models. here also, as with other models, the undoing was in the inputting the stress parameters which were conditioned by the prevailing perceptions of future risks and price movements. the more fundamental issue here, i feel, was the absence of a robust correspondence between the results of these stress tests and the response of the institutions thereto. the incentive structures and competitive forces prevented concrete action on adverse findings from the stress tests. therefore such adverse scenarios would need to be captured again under the pillar 2 process, in the capital requirements or the liquidity requirements, which carry huge costs. ideally, the response has to come from within the institutions in the form of realignment of business focus, which i realize is not a feasible model to bank upon given the breakdown of self regulation. the supervisory review processes are meant to address such institution specific issues and still

rundheersing bheenick : the new system for clearing cheques in mauritius remarks by mr rundheersing bheenick, governor of the bank of mauritius, at the pre - launch event of the cheque truncation system, port - louis, 22 july 2011. * * * i am very pleased to welcome you to the pre - launch event of the cheque truncation system ( cts ). we are today launching an awareness campaign on the new modern system for clearing of cheques, the cts, which will soon be implemented in our country. the setting up of the cts is a significant milestone in the mauritian banking sector. it is the fruit of a very close collaboration between the bank of mauritius ( bom ) and the mauritius bankers association ( mba ). i am very happy to have around me the acting chairman and the ceo of the mba, as well as the ceos of banks. as you may be aware, as per the provisions of the bank of mauritius act 2004, the organization of the clearing house is done in conjunction with banks. so this is a bom / mba event. the port louis clearing house following the enactment of the bank of mauritius act 1966, at the suggestion of the bank of mauritius, the mauritius bankers ’ association established, on 19th august 1968, a mauritius clearing house for the five banks which constituted the banking industry of the country at the time. the meeting place was the bank of mauritius. later it became the port - louis clearing house. over the years, the port - louis clearing house went through a process of modernization. first the cheques were standardised with the introduction of the magnetic ink character recognition ( micr ) technology. concurrently, information regarding clearing and settlement of cheques started being exchanged through the mauritius automated clearing and settlement system ( macss ). nonetheless, the port - louis automated clearing house ( plach ), as it was renamed, continues to function on a manual mode, with the exchange of physical cheques. the cts will do away with this manual process which, as you will see, is quite tedious. let me briefly explain the process. the clearing process cheques deposited by clients are collected from all bank branches ( 215 ) and transported to the respective head office. there, the cheques are sorted according to the respective banks, bundled together and transported to the plach twice a day, at 10. 00hrs and 15. 00hrs.