r basant roi : regulatory and supervisory infrastructure in mauritius address by mr r basant roi, governor of the bank of mauritius, at the annual meeting of the offshore group of banking supervisors, pointe aux piments, 22 july 2003. * * * honourable minister of economic development, financial services and corporate affairs mr colin powell, chairman of offshore group of banking supervisors distinguished guests ladies and gentlemen good morning i am delighted to welcome you to the annual meeting of the offshore group of banking supervisors in mauritius. it is my privilege to welcome mr colin powell who has been the chairman of the ogbs since 1981. i am pleased to note that a seminar on the new capital accord and corporate governance was held yesterday with the collaboration of the financial stability institute. mauritius is a member of the offshore group of banking supervisors as from the time offshore banking activities started here. i wish to stress right at the outset that the bank of mauritius has been pursuing a selective licensing policy with a view to bringing into our jurisdiction players of international repute. the maintenance of a clean international image has always been an overriding consideration. of late there has been mounting demand for tighter surveillance of offshore centres to guard against money laundering and international financial instability. more than ever it is necessary to enhance supervisory co - operation between banking supervisors in offshore financial centres through the implementation of international standards for cross - border banking supervision. the globalisation of financial services companies, coupled with the development in information technology have greatly facilitated movements of funds from one jurisdiction to another. often funds are moved by a ‘ simple click of the mouse. ’ it is imperative for all jurisdictions to observe acceptable standards of banking supervision. the efforts made in one jurisdiction to combat money laundering can be nullified by the deficiencies and lax regulations existing in other jurisdictions. we fully appreciate the role of the financial action task force ( fatf ) that carried out evaluations of anti - money laundering regimes in different countries. naming and shaming non - cooperative countries does seem to produce the desired results. i wish to express my appreciation of the customer due diligence ( cdd ) document - a joint product of the basel committee on banking supervision and the offshore group of banking supervisors. while the document recognises the cross - border implications of financial transactions, it also favours exchange of information pertaining to customer adoption policies and procedures of financial institutions. the essence of the customer due diligence paper has been included in the revised version of the guidance notes on aml / cft. the bank of

die was already cast. bold measures, as always, need bold political courage. the second oil price shock of 1978 gave yet another blow to the economy. the foreign exchange reserves of the bank of mauritius had dwindled. the situation was desperate. drastic measures could no longer be delayed by having continued recourse to foreign borrowings. in october, 1979, the imf agreed to an economic and financial programme under a stand - by arrangement. on the 23rd october, 1979, the mauritian rupee was devalued by 22. 9 per cent against the sdr basket to foster, inter alia, export - led growth. the devaluation was expected to restore the profitability and external competitiveness of mauritian exports and to encourage import substitutions in the economy. the economic and financial programme was designed to stabilize the economy by bringing about a balance between the demands for and the supply of resources and to correct the balance of payments disequilibrium in the medium term. the measures under the programme included an exchange rate depreciation supported by restrictive budgetary, incomes and credit policies. the objective was to depress the demand for imports by way of the resulting higher rupee import prices. but, against all principles of good economics, the government had decided to grant a massive across - the - board increase in wages and salaries thus mitigating the positive outcome expected of the devaluation of the rupee. a central banker ’ s job, it ’ s often said, is to take away the punch bowl just as the party gets going. way back in 1979, government had decided to keep the bar open. bad politics destroyed good economics. the economy continued to face a number of difficulties which were caused by factors beyond the authorities ’ control. adverse weather conditions which prevailed in early 1980 had led to a heavy shortfall in sugar exports in 1980 – 81. a fall in the rupee price of sugar exports which was due to the weakening of the pound sterling weakened the country ’ s external payments position. a realignment of the external value of the rupee became inevitable and the rupee was devalued once more – not to use the euphemism “ re - adjustment ” – on the 27th september, 1981, by 16. 7 per cent in terms of the sdr. two massive devaluation in six years reflected badly on the fiscal policy performance of the government. but we do have to recognize that the world economy was