##udential perspective in financial regulation to curb excessive risk on certain sectors. guidelines have been issued for the implementation of macro - prudential policy measures such as caps on loan to value ratio, debt2 / 4 bis central bankers'speeches to - income ratio, higher provisioning and capital requirements for certain sectors. the macroprudential rules have been reviewed from time to time in the light of variations in the vulnerabilities of the system. one among the essential aspects of supervision that are crucial for macro - level monitoring is the efficient exchange of information between supervisors, both at home and abroad. such an exchange provides an essential supervisory tool to support the supervision of banking groups. in this respect, the bank has signed memoranda of understanding ( mous ) with several domestic and foreign regulatory authorities. the banking act 2004 allows the bank to share information with any other central bank, under conditions of confidentiality. we are mindful, at the bank, that exchange of information is crucial with regulators of countries where our banking groups hold a regional presence. the bank has, in this context, held three supervisory colleges since 2013 with its host regulators. in mauritius, a memorandum of understanding ( mou ) was drawn since december 2002 between the two supervisory authorities, namely the bank of mauritius and the financial services commission, on information sharing. over the years, the cooperation and coordination of these two institutions have been enhanced through the setup of a joint coordination committee ( jcc ) and several working groups to coordinate supervisory work on common supervisory areas. the jcc typically meets every two months and reviews areas of interest. in addition, as the first deputy governor of the bank, i have been appointed vice - chairman of the fsc since june 2017. this appointment makes the cooperation between the two institutions more efficient and focused. as part of its reform strategy to reinforce the domestic banking sector, the bank also initiated changes to the corporate structure adopted by the two largest banking groups in mauritius. the separation of banking activities from non - banking activities limits the risk of contagion from nonbanking business to the bank, and allows management to focus on their core business of banking. in line with basel iii requirements, these banks are made to hold higher capital requirements. five domestic banks have been identified as being domestic systemically important banks, and since 1 january 2016, these banks have been required to hold, in a phased manner over a four - year period, an additional capital requirement ranging from 1 to 2. 5 per

thus, the major aim for financial regulation and supervision is to foster the effective functioning of the financial system in order to enhance the ability to absorb shocks and maintain financial stability. financial instability arises as a result of shocks hitting the financial system, which impede with the payment system and, ultimately, affect the smooth running of business and trade. regulators and supervisors across the globe are charged with managing the health of banks and other financial institutions and preserving the stability of the financial system for two basic reasons : consumer protection and maintain financial stability. accordingly, the ultimate objective of any regulator is to ensure that the banking sector attends to its traditional role of a shock absorber to the financial system. the banking sector has to work towards mitigating any risk between the financial sector and the real economy. let me remind you that banks are also the channels through which the central bank transmits monetary policy to the economy. on this count, the central bank is definitely concerned with bank soundness for the effective transmission of monetary policy. in addition, thanks to its role as lender of last resort, the central bank is also compelled to have complete information on the financial soundness of 1 / 4 bis central bankers'speeches any bank that might call for emergency liquidity assistance. the route towards a framework for bank supervision and regulation can be traced back towards the end of 19741, when the then committee of banking regulations and supervisory practices was established by the central bank governors of the group of ten countries in the aftermath of serious disturbances in international currency and banking markets ( notably the failure of bankhaus herstatt in west germany ). the committee, headquartered at the bank for international settlements in basel, was established to improve the quality of banking supervision worldwide, and to serve as a forum for regular cooperation between its member countries on banking supervisory matters. starting with the basel concordat, first issued in 1975 and revised several times since, the committee has established a series of international standards for bank regulation, most notably its landmark publications of the accords on capital adequacy which are commonly known as basel i, basel ii and, most recently, basel iii.. it is surely not my intention to walk you through these various developments. in 1997, the basel committee issued the basel core principles for effective banking supervision, which have since been revised from time to time. these bcps are the very gospel of effective banking supervision as they provide the lifelines for a sound banking sector. bank supervisors naturally have to engage not only in off