any regulator - nor is it in the interest of society - to give shocks and kill financial institutions ; its primary concern is rather to rescue ailing institutions, help restore their financial soundness and sustain overall financial stability. breaking problems into small pieces and then managing the pieces, more so if the problems stem from the highest level of decisionmaking in a financial institution, is the surest way to a crash. the regulator ’ s responsibility in such cases is to manage the dynamics, not the pieces. no regulator would ever envy the plight of an ambulance crew at the scene of a car crash. i regret having to use metaphors for i am bound by a duty of confidentiality even in respect of the ‘ gentlemen ’ delinquent borrowers. institutional shareholders or any individual shareholder in any enterprise, be it a financial institution or a non - financial enterprise, are expected to be the first and foremost watchdog of its operations. the watchdogs are supposed to look after the best interests of the enterprise rather using their authority to advance their own agendas. as is generally observed the sinews of good behaviour can hardly be reinforced by regulation. financial regulations are not designed to catch deceit but to create markets and promote good corporate habits - habits that are indeed transparent to savers and investors who can vote with their money and why not with their feet, if the need arises. the dissemination of reliable information to the public at large and the ability to trust each other are the pillars of market - based economies. a former professor at harvard rightly observed that trust constitutes a decisive ingredient of a society for it to be a successful capitalist society. people, who do not trust their neighbours, do not trust other groups, do not trust distant people, cannot trade among themselves. the economy is reduced to the level of a bazaar economy. the regulator needs to be trusted. i am absolutely certain that none of us would ever wish our economy to be reduced to a bazaar economy. as i said earlier, we have reached the tail end of the clearing process. we are now in the process of constructing a framework for the implementation of basel ii, taking into account the specificities of our economy. the year 2006 will quite likely be marked by acquisitions in the banking industry. we have had a number of expressions of interest for take - overs from several banks of good reputation. despite a few consequential setbacks beyond our control, business confidence in the economy is not as bad as is being painted. once

mauritius. the history of troubled financial institutions is littered with eventful episodes of “ men biting watchdogs ”. “ watchdogs biting watchdogs ” is however an uncommon happening. i guess you must be familiar with the story of the man who discontentedly wailed, “ we were so poor in our childhood, we could not afford a dog ; we ourselves had to do the barking. ” certain recent remarks against the regulator of the banking industry gave an incorrect perspective of the role of regulators. some smart – pretentiously smart - but not necessarily persons of enviable integrity and probity have attempted to advertise colossal untruths. i refer to them as smart persons, for they are fully conversant with the laws that bind the bank of mauritius with regard to its duty of confidentiality of banking transactions. they are equally aware that the bank of mauritius has certainly no interest in street fighting with “ respected ” delinquent borrowers however provocative the unpleasant and unfair remarks. any form of public retaliation against certain “ law - abiding ” delinquent borrowers is obviously not the business of any regulator. the bank of mauritius wisely chose to take the aspersions leveled against it cool headedly – with an elevated sense of respect to the laws governing the banking industry. they have talked the talk. we have walked the walk. in the last six years the bank of mauritius has been involved in clearing the banking system, through thick and thin, of outdated practices. we are today at the tail end of the clearing process. and we have had a rich experience in tackling problematic banks and ‘ gentlemen ’ delinquents – i mean habitual delinquent borrowers making a good, open and public show of piety of monks in monasteries. it is generally wondered why the bank of mauritius does not aggressively resolve problems that afflict certain financial institutions, whether at the board of directors level or the managerial levels. ailing financial institutions can never be brought back on rail by simply applying mechanical procedures to complex operational problems. it ’ s like a man undergoing several medical procedures simultaneously. one physician is in charge of the head injury, someone else is setting the broken leg, another physician is working on the displaced shoulder and still another one is getting rid of the gallstone. each operation is perfect and is indeed a success. but to the dismay of the physicians the patient dies - dies of shock. it is certainly not in the interest of