prototypical banking relationship that exists to allocate financing from depositors to projects that produce value. i view proprietary trading as an activity of low or no real economic value that should not be part of any banking model that has an implicit government backstop. nonetheless, the volcker rule, as written by congress, provides limited exemptions to this proprietary trading ban, so activities that would otherwise constitute proprietary trading can be permitted if those activities constitute hedging or market - making and do not threaten the soundness of the bank or the stability of the financial system as a whole. stated in terms of the analogy i have been using here, federally insured financial institutions and their affiliates can operate in narrow circumstances along the lines of a low - road banking model where there are sufficient guard rails in place to protect the integrity of the banking system. these guard rails are those limited exemptions based on safety and soundness and financial stability. the law mandates that the five regulators craft their implementing regulations to reflect the broad prohibition on proprietary trading activities by regulated banks, albeit with exemptions. the regulators then need to carefully examine whether exemptions like market - making or hedging can be conducted by the financial institution within the guard rails of safety and soundness and financial stability and therefore fit within the exemptions as congress intended. i dissented in the vote for approval of the proposed implementation of the volcker rule. let me say a bit about that dissent now. one reason for my vote was my sense that the proposed regulation ’ s guard rails were insufficient. i was concerned that, as proposed, the guard rails were too broad and would allow banks to be able to go too far off the road. further, i was concerned that the guard rails as crafted could be subject to significant abuse – abuse that would be very hard for even the best supervisors to catch. i feel it is very important that the guard rails be strong and be set very close to the road because of the potentially severe dangers of, and costs associated with, proprietary trading by institutions that have access to the federal safety net. in fact, it is not inconceivable to think that the potential costs associated with permitting hedging and market - making within these exemptions still outweigh the benefits we as a society supposedly receive from permitting these capital market activities. the potential compliance, supervisory, and other costs could be so great as to eliminate whatever value may arguably be derived by virtue of these capital market activities. what might such

are more and more stretching regulations to outwit regulators ; and we regulators, need to continuously strive to keep ahead of them. the demands on the bank are becoming more and more exacting by the day. the restructuring of the bank, which i initiated in 2007, is ongoing. our headcounts are among the highest, on a per capita basis, amidst our peers and a more flexible approach is needed to attract new talents. fresh skills have been recruited to complement our pool of talents in new areas of business, for example, reserve management. a review of the salary and conditions of service at the bank was conducted to align them with market trends, attract new talents as well as retain existing ones. the salary review includes a performance management system which will be introduced this year, paving the way for a mechanism that relates work performance and remuneration. these developments should translate into efficiency gains and allow the bank to keep up to the mark when it comes to expected outcomes even if they exert pressure on our overhead expenses. words of appreciation in may 2013, our prime minister, dr the honourable navinchandra ramgoolam, gcsk, frcp, appointed me for a third term of office. i am deeply touched by this mark of continued confidence in my abilities to lead the central bank. i will endeavor to uphold the trust placed in me and i am sincerely indebted to him for the unflinching support he extended to me since the beginning of my tenure of office. i have worked closely with the honourable charles gaetan xavier - luc duval, gcsk, viceprime minister and minister of finance and economic development, and his team during the year. we have often had diverging views on our assessment of the economic situation. indeed it is common for treasuries and central banks to have occasional differences when it comes to economic, financial and monetary policies ‒ which our lively local media, and some interested lobbies, magnified. here, we have different mandates but we both have the economic welfare of the mauritian population at heart. i thank the honourable minister and his team for the cordial working relations between ourselves and between our respective staff, in particular at the level of different regular joint working committees. i have a special word of appreciation for the strong bond of partnership that now exists between the central bank and the banking community. our regular dialogue and frequent consultations have strengthened our collaboration. i therefore thank all stakeholders, in particular