rundheersing bheenick : review of the financial sector in mauritus statement by mr rundheersing bheenick, governor of the bank of mauritius, port louis, 13 october 2013. * * * “ time for us to move on and sharpen our focus on our next destination – a high - income economy … ” looking back over the global landscape in recent years, characterised as it has been, by painful adjustments in financial and economic affairs, it is hard to avoid the conclusion that we have been lurching from crisis to crisis. we have continually seen elusive signs of recovery, buffeting both business confidence and consumer sentiment, and nurturing continued apprehensions about the adverse impact on world markets and on the vulnerable emerging economies in particular. can we now, at long last, expect the global economy to secure itself on a firmer footing? what about the risks still looming on the horizon? i am a strong optimist – had it not been so, i can hardly imagine how i could have stayed on this job. whenever i am asked how we, in mauritius, an isolated, vulnerable, and small open economy turned in such a creditable performance in such an unpromising environment, i reply “ we never allowed ourselves to lose our nerve, or our focus. ” despite global uncertainty, the mauritian economy stood its ground and logged a growth rate of 3. 2 per cent in 2013. this growth was driven by all sectors, except construction. unemployment remained stuck around 8 per cent. we succeeded in anchoring inflation expectations. indeed, since 2009, the annual average rate of inflation has been close to 4 per cent, and its volatility much reduced compared to previous years. we did everything within our statutory powers to achieve a low - inflation environment, hand - in - hand with a stable exchange rate, to ensure a solid basis for sustainable, equitable, and broad - based growth. headline inflation and year - on - year inflation stood at 3. 3 per cent and 4. 0 per cent, respectively, in june 2014. domestic and external imbalances remained contained. we continued with our reforms domestically to secure a sound financial sector through a series of initiatives detailed in the report. we expect our economy to grow by about 3. 5 per cent in 2014, and inflation to remain below 4. 0 percent in 2014. on current trends, we do not expect the international economic environment to improve significantly. it is time for us to move on

in anticipation of the rolling - out of ifrs9 had to enlist the services of statisticians, economists, and econometricians. and the discussion, surprisingly, was not about accounting but about data, databases, and building models – a realm in which economists and econometricians, unlike accountants, generally excel. the rest of my remarks will touch briefly on ifrs9 as a new accounting standard in replacement of ias39, thereafter the initiatives of the bank of mauritius with regard to the implementation of ifrs9 will be reviewed and finally, i ’ ll end with a concluding note. the circumstances which brought about ifrs9 are well known by now. post gfc 2008, at the request of the g20 and the financial stability board, the international accounting standards board ( iasb ) stepped up its work to replace ias39, which had started in the early 2000s, and in july 2014, the iasb released the new accounting standard ifrs9. there are 3 aspects of ifrs9 namely ( 1 ) classification and measurement of financial instruments ; ( 2 ) impairment ; and 1 / 3 bis central bankers'speeches hedge accounting. the main focus of my remarks will be on impairment. loan - loss provisioning under ias39 was deemed to be too little too late as the incurred loss model required objective evidence of impairment, such as an actual loss event occurring, in order for provisions to be booked. the backward - looking incurred loss model was conflicting with the prudential regulation on credit risk management as enunciated in the bcbs core principles for effective supervision. ifrs9 expected loss model is forward - looking and more aligned to prudential regulation with regard to credit risk management. the expected loss model computation will not only use historical loss experience data but also all information available whether current or future, including macroeconomic factors. further, banks will have to start provisioning on the very day the loan is booked based on expected losses over a 12 - month period, i. e. on stage 1. should credit risks increased significantly as a result of macroeconomic or financial factors relative to the initial recognition at stage 1, provisioning would increase accordingly based on lifetime expected losses computation. the move from stage 1 to stage 2 will depend on whether there is a significant change in credit risks. stage 3 is where there is evidence of impairment. deloitte ’ s global ifrs banking surveys have revealed that the expected credit loss model would substantially increase banks