rameswurlall basant roi : cross - border banking and regulatory reforms - implications for africa from international experience opening address by mr rameswurlall basant roi, governor of the bank of mauritius, at the joint imf / bcbs / making finance work for africa conference, imf africa training institute, ebene, 1 february 2017. * * * managing director of the imf, madam christine lagarde chairman of the basel committee on banking supervision fellow governors executive directors and senior officials of the imf distinguished guests ladies and gentlemen good afternoon i am pleased to welcome you all to mauritius. i wish you a pleasant stay with us. i thank the organizers of the joint imf / bcbs / making finance work for africa conference for inviting me to give the opening address today. may i extend my appreciation to the mauritius imf africa training institute for hosting this conference. when i was here recently, i was asked to give a closing address to a house - full audience of course participants. i had shared with them my personal experience as regulator of all deposit taking institutions in mauritius. while narrating to them a number of enlightening anecdotes related to events leading to the revocation of banking licenses, problems associated with crisis resolution and presenting them with the risks and challenges that regulators face in the globalized world, i read in their looks the enthusiasm and the eagerness to take their regulatory and supervisory responsibilities seriously. interestingly, i found out that regulators in africa are keen to have better regulatory structures. understandably, one hampering factor – apart from an acute shortage of highly skilled and seasoned bank examiners – that overwhelms all other considerations is national interests as opposed to the soundness and stability of financial industries at the regional, pan - african or global level. the political will is thus seen to be missing. it ’ s a problem not confined to africa only. i believe that it ’ s in order for me to give a very quick and broad brush - stroke of our experience with the regulation and supervision of banking and cross - border banking activities. mauritius was a regional hub for payments and settlements since the 17th century. traders from the west, the middle east, india and china crossing this part of the world used to regularly meet here in mauritius for purposes of payments and settlements. the piastres, indian rupee, pound sterling, the us dollar, gold and silver used to be the means of payments and settlements. a

board which should stand ready to challenge any key issues as the board bears the ultimate responsibility. corporate governance principles also require the bottom - up flow of information to the board through independent control functions such as the internal audit, compliance and risk management functions. however, the onus remains on the board to ensure receipt of management information as appropriate for the exercise of its oversight responsibilities. we may recall that the global financial crisis revealed weaknesses in corporate governance practices of failed banks where information on the real risks being taken by the institution did not reach the board or even senior levels of management. even if risk management systems are functioning, the absence of transmission of information to the board and senior bis central bankers ’ speeches management would constitute a breakdown of corporate governance principles. approving strategy is not sufficient, suitable metrics must be set to monitor the implementation of strategy and the responsibility for such monitoring falls on the board. internal audit and compliance are two independent assurance functions which constitute the eyes of the board in matters of internal control as well as legislative and regulatory compliance. whilst the banking act 2004 already elevated the internal audit function in the organization by giving it a direct reporting line to the audit committee, the guideline on corporate governance has now enhanced the value and importance of the compliance function by prescribing that it has a direct reporting line to the board or a board committee. this function has the responsibility of ensuring compliance with legislative and regulatory requirements as well as policies and procedures. moreover, a compliance certificate has to be delivered by the board to the central bank on an annual basis as we want to ensure that the board is assuming its compliance oversight responsibilities over the activities of the institution. it would be remiss of me, if, in a talk on corporate governance, i did not mention the role of external auditors. the latter provide an independent opinion on whether the financial statements of the bank are complete, fair and properly drawn up with a true and fair view of its affairs. they will also draw attention on any significant matters identified during the course of their audit work. we view auditors as partners in our quest to have safe and sound institutions and expect the highest standards from them. excessive risk taking by employees and compensation based on short term profitability have often been a serious hit to the banks. weaknesses in these areas contributed to the failures of financial institutions during the crisis where remuneration systems were not related to the strategy and risk appetite of companies and served more the self - interest of bankers rather than the long term