2 months. let me say a word about exchange rate, a subject of much interest right now. as a matter of policy, the bank allows the free play of market forces to determine the exchange value of the rupee. our intervention in the domestic foreign exchange market is not aimed at offsetting market forces, or at targeting any specific exchange rate. our only objective is to smooth out unwarranted volatility in the rupee exchange rate and improve the functioning of the market. in a brief interview that i gave to the “ business standard ” newspaper in india last week, i said that even if our economy was suffering from a deluge of foreign exchange inflows, most of the foreign exchange operations were confined to the spot market. this is why we want to encourage the development of a vibrant futures and forward market that will help in creating an active foreign exchange market and introduce newer instruments for exporters and entrepreneurs to hedge and trade in the financial services sector. as regards the issue of risk management, it is a correct practice these days to use derivatives to hedge against unwanted volatilities. derivatives can bring substantial benefits to the commercial community, in facilitating hedging and business planning. such instruments enable financial institutions to offer a progressively wider range of services and achieve greater efficiency in the intermediation process. unfortunately, this is one area where mauritius is lagging behind. the market for derivatives has not picked up significantly compared to other emerging market economies. i strongly believe that the domestic financial market is mature enough to engage in derivatives trading under proper regulation. the bank is now considering the necessary measures that need to be implemented to stimulate the development of this market. i know that. in many quarters, derivatives have a murky reputation. we do not believe that derivatives necessarily lead to market manipulation, which would be bad for a small market like ours. rather, we see derivatives as enhancing the efficiency of financial markets and this is why we are determined to put in place in the near future the necessary building blocks for its rapid development. we are conscious that derivatives involve multiple extra policy responsibilities for the bank. derivatives and derivatives - trading have the potential to bring disaster if not properly supervised. therefore one of the areas that the bank will concentrate upon therefore is to ensure that risks are properly identified, and managed, and that downside risks which might threaten systemic stability are avoided. as we move into these new pastures designed to deepen the financial market and broaden the range of financial products and instruments

do not meet supervisory requisites. ifrs 9 is a complex accounting standard relating to financial instruments. the key reform with ifrs 9 is that provisions for loan losses will be based on an expected loss model for credit losses. this is a distinct improvement as it will make it difficult for banks to hide problem assets on their balance sheet. i don ’ t need to dwell at length on this topic knowing that you have just participated in the course. the bank of mauritius has engaged with external auditors and banks as from march 2016 to ensure smooth implementation of irfs 9. banks have been requested to submit the implementation plans to the central bank and are required to make quarterly presentations on progress achieved and roadmap to complete implementation. the bank of mauritius has already conducted a first round of discussion with most banks to better understand their plans and challenges as well as guide them in terms of our expectations. the bank of mauritius is envisaging parallel runs by financial institutions to allow for a good transition as well as provide management and the regulator and external auditors with sufficient time to verify the reliability of the models and the assumptions. in addition, the bank of mauritius has issued several guidelines which would be assisting in ensuring the safety and soundness of the banking sector during the implementation phase. in april 2016, the bank of mauritius added prudential norms for credit classification and provisioning requirements to the existing guideline on impairment measurement and income recognition. this was in response to difficulties in comparing information across banks, given that there could be significant differences on how banks identify and report their asset quality. in addition, as highlighted earlier, the global financial crisis revealed that the existing accounting 2 / 3 bis central bankers'speeches framework resulted in “ too little and too late ” provisions. the guideline impairment measurement and income recognition prescribes rules for valuation of collateral given that that proper valuation of collateral is important for an accurate estimate of expected losses. the bank of mauritius has included provisions for the treatment of restructured loans to address the risk of ‘ cosmetic ’ restructuring to postpone expected losses and the setting aside of adequate provisions. as regards loan loss data, credit profiles currently available on the mauritius credit information bureau, which is hosted by the bank of mauritius, is in the process of being upgraded to provide default history. the new information would then be used in assessing expected losses. the banking act 2004 sets out the duties of external auditors which, among others, requires them to report any breach of regulations and or material issues