market. by re - engineering its monetary policy framework, the bank of mauritius is endeavouring to adapt its management of the macro economy to the changing economic environment. the bank of mauritius is striving towards enhancing the attainment of its ultimate statutory objective which is to maintain price stability and to promote orderly and balanced economic development. the financial services sector, including the banking sector, fulfils an important function as financial intermediary in an economy. mauritius has one of the oldest and most sophisticated financial systems in africa, with the banking system currently representing around 6 per cent of gdp. robust economic performance has strongly contributed to the expansion of the sector. strong regulatory and monetary policy frameworks have contributed towards maintaining macroeconomic and financial stability. at the same time, the soundness and degree of sophistication of the financial system is facilitating diversification of the economy, thus establishing a virtuous cycle in which the financial sector and the other productive sectors of the economy are strengthening in parallel. the bank of mauritius views that the stability of the financial system depends on every institution involved and thus it diverts sizeable resources in ensuring the soundness and stability of each and every financial institution under its purview. given the complexity and the dynamic nature of the industry, the supervision of an institution is becoming an increasingly challenging task. in this respect, the bank of mauritius has gradually adopted a risk - based approach towards regulation and supervision. a series of prudential guidelines – seventeen in total – have been issued to financial institutions so far. adherence to the guidelines is monitored through both on - site and off - site inspections. capital regulation is viewed as an important component of regulation of financial institutions. basel ii will soon supersede basel i, which was established in 1988. banking risks are far greater today and mindful of the potential benefits that basel ii may bring, the bank of mauritius embarked on and is committed towards implementing basel ii in mauritius by early 2008. given the intricacies of adopting a capital standard in mauritius, a consultative and participative approach has been adopted with banks. the committee for the implementation of basel ii was therefore established to act as a steering committee for implementing the new capital adequacy framework. this is rightly an occasion for me to reiterate some reflections i always share with fellow students. acquiring a diploma or a university degree is indeed a license to learn. learning starts after academic achievements and should be a continuous process. anyone who refuses to learn

fail. an international agreement on a cross - border resolution mechanism for internationally - active banks is not likely to be reached in the near future. we are waiting with bated breath for more rapid progress with the banking union at the level of the european union. we cannot wait for all the lessons to be learned and new institutions to be forged, before we, as regulator, reflect on how these lessons can be applied to our own banking system. our problem is somewhat smaller, and certainly less intractable – provided we have an open mind about it. someone has said : “ more powerful than the will to win is the courage to begin. ” in the case of barclays, we have amply demonstrated the courage to begin the process of restructuring. our banking sector is made up of 21 banks, of which five operate as branches of foreign banks. of these, we consider a few to be domestic systemically important banks ( dsibs ), in view of their size and complex structures. the global crisis highlighted two sources of vulnerability that the bank needs to address to ensure the stability of the domestic financial system. the first is the need to protect affiliates of cross - border banks operating in technically, it is a surrender of licence under section 11 ( 7 ) of the banking act 2004. bis central bankers ’ speeches our jurisdiction from any potential problem affecting their parents in their home country. the second vulnerability stems from the fact that the failure of a dsib could not only impair the provision of key financial services but also have knock - on effects on other parts of the domestic economy. these issues have been exercising my mind for quite some time. this is why i have been encouraging branches of foreign banks operating in mauritius to convert into locally - incorporated subsidiaries, and urging our dsibs to reduce the complexity of their structures by resorting to what is now labelled as “ ring - fencing. ” we have been setting the stage for some time. that is where barclays enters the scene, in pursuit of its “ one africa strategy ”. it is seeking to align the legal structure of its mauritius branch business with the rest of barclays africa entities. barclays sought our approval to become a wholly - owned subsidiary of barclays bank plc. barclays was the first of the targeted banks to do so. just as it had also been the first to set up a local advisory board for its branch operation in february 2012, well before we enshrined this in the revised guideline on corporate governance in