risk - based supervisory framework becomes fully operational, banks posing higher risks to the system will be subject to more intensive supervision. we have also introduced a framework for domestic – systemically important banks since july 2014. all banks which have been identified as being systemically important are required to hold a capital surcharge in the range of 1 % to 2. 5 %. mauritius, as a highly open economy, has a few large corporates that dominate economic activity. these corporates require a close monitoring. a large exposure limit is in place to curtail the exposure of any borrower or group of borrowers. the basis for computing the large exposure limit was recently enhanced from capital base to tier 1 capital. further, in our framework for domestic – systemically important banks, exposure to large groups is a supplementary indicator. these large groups have been defined as having an exposure of at least rs2 billion to the banking sector. another topic that warrants attention is climate change and the reduction of global carbon emissions. the financial services industry has an important role to play in that area. i know that some central banks are already at an advanced stage in their work and that much work has already been done on that subject at the level of the fsb. in sub - saharan africa, central banks have not focused extensively on climate change. we are eager to know more about the work that has been carried out by the fsb. climate change related measures could also, perhaps, be on the agenda for future meetings. an area on which we must also focus is that of the application of technology in finance. the emergence of fintech represents an opportunity for africa. advances in areas of finance - related technology, such as blockchain, mobile payments and artificial intelligence are opening up new possibilities for financial service firms. this is an area where regional cooperation will be of paramount importance. the setting up of the fintech association will give the impetus to position mauritius as a regional hub for that industry. ladies and gentlemen, our common ambition is to transform africa into an innovative and technologically - enabled continent. however, as regulators, we have an important role to play in fostering innovation. it is our responsibility to ensure that banks operate safely and comply with applicable laws. this is why we must ensure that our regulatory and supervisory structures remain effective by constantly adapting them to changing technologies and business models. since 2017, banks are allowed to have recourse to cloud - based services subject to the fulfilment of certain

monetary policy let me now turn to the development of credit derivatives from a monetary policy perspective. empirical evidence and theoretical reasoning on this subject are admittedly still limited. however, there is growing consensus that credit derivatives have implications for the conduct of monetary policy. the question i will try to address is : do credit derivatives affect the monetary policy transmission mechanism? let me first say that the precise impact is difficult to estimate at this stage, given the scarcity of reliable data. it could be argued that there may be changes in the nature of the credit channel of monetary policy, which can be divided into a “ bank lending ” and a “ borrower balance sheet ” channel. the nature of the traditional bank lending channel is probably changing progressively owing to technological innovations, which have significantly enhanced the ability of banks to grant credit. however, it is still too early to assess in what way this channel may be affected. the so - called borrower balance sheet channel focuses, instead, on the impact which changes in the policy rate have on the premium between external and internal finance. this channel traditionally worked because monetary policy decisions typically drive changes in bank lending spreads and, more recently have also affected corporate bond spreads. 1 nowadays rates on credit default swaps may also play a crucial role. indeed, some empirical evidence shows that credit derivatives ’ premia respond more to changes in the availability and cost of financing compared with corporate bond spreads. 2 credit derivatives could therefore make the economy, and thus monetary policy, increasingly sensitive to credit market movements. at the same time, credit derivatives ’ activity increases the information on borrowers ’ default risk and may contribute to compressing the external finance premium. in fact, three structural implications emanating from the use of credit derivatives might have affected the monetary policy transmission mechanism. first, credit derivatives and structured credit markets affect banks ’ decision - making processes when granting credit. 3 just consider in this regard the enhanced capability to manage both pricing and liquidity risks. price discovery in the credit derivatives market reduces the risk of mispricing loans. moreover, securitisation, which is another credit risk transfer instrument, offers the possibility of managing more effectively the liquidity risk of traditionally illiquid loans in the balance sheet. second, credit derivatives and structured credit markets are transforming the way banks operate in the market. credit portfolio management practices have indeed profound implications for the banking business model. banks are moving from the traditional “ buy - and - hold ” model to the “ originate - anddistri