## cr18170

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### Preface — Mission and immediate priorities
- TA mission visited Mauritius during February 27–March 6, 2017 to advise on legal, policy and operational aspects of bank resolution and crisis management.
- Mission meetings: Bank of Mauritius (BoM), Ministry of Finance and Economic Development (MoFED), Financial Services Commission (FSC), Solicitor General, Representatives of Mauritius Commercial Bank (MCB) and SBM Bank (Mauritius) Ltd (SBM).
- Immediate priorities identified:
  - Formally designate administrative bodies responsible for resolution of individual financial institution failures and for various forms of financial and mixed groups.
  - Refine legal framework for early intervention and triggers for resolution.
  - Adopt new legal powers to support timely and effective resolution of systemically important banks.
  - Issue guidance requiring banks to prepare recovery plans and for BoM to review and provide feedback.
  - Prepare resolution plans for banks and their groups and identify/remedy impediments to timely and effective resolution.
  - Submit Deposit Insurance Scheme (DIS) legislation to parliament.
  - Adopt formal policy framework for Emergency Liquidity Assistance (ELA).
  - Specify the role of the Financial Stability Committee (FinStab) in resolution activities.
  - Put in place cross-border cooperation arrangements with relevant foreign supervisory and resolution authorities.

### Executive Summary — Key assessments and needs
- Key assessments of current framework:
  - Current legal framework lacks adequate triggers and powers for timely supervisory action.
  - Law should provide a broader range of corrective tools and clarify triggers and powers to reduce arbitrariness and promote transparency.
- Need for a new resolution framework:
  - Current options limited to: (i) bailout that does not fully allocate losses to shareholders and creditors; and (ii) compulsory liquidation that is ill equipped to restructure failing institutions while preserving value and safeguarding financial stability.
  - New framework must address scope of coverage, objectives, resolution powers and tools, and institutional arrangements among BoM (resolution authority and ELA provider), DIS (to be created), and FSC (Financial Stability Committee).
  - Consider exploring limits to judicial review to allow flexibility and speed while ensuring due process.
- Recovery, resolution planning, and supervisory actions:
  - Issue guidance requiring banks to prepare and maintain up-to-date recovery plans; BoM to review and provide feedback over an iterative multi-year process.
  - Prepare formal resolution plans for banks and groups, identify critical economic and financial functions that cannot be put into receivership under compulsory liquidation.
  - Identify impediments to timely and effective resolution and collaborate to eliminate them.
- Deposit Insurance Scheme (DIS) (high-level):
  - DIS Bill needs revision, MoFED and BoM agreement, and submission to parliament.
  - Revisions to consider: ensure efficient cost structure; reduce time to initiate payout to seven days or less; specify mechanics of insured deposit transfer under P&A; eliminate provision that fund cannot be used for first five years.
- Emergency Liquidity Assistance (ELA):
  - Revise BOMA conditions to limit moral hazard.
  - Adopt formal policy and operational ELA framework clarifying circumstances for use, solvency requirement, eligible collateral, terms, and conditionality.
  - FX reliance challenges: consider swap arrangements with foreign central banks; consider incentives for foreign parent banks to provide liquidity; macroeconomic policy to build FX buffers and prudential/macroprudential measures to reduce potential FX calls.
- Financial Stability Committee (FinStab) and coordination:
  - FinStab mandate should be detailed in a charter; set up permanent secretariat; include contingency plans, information exchange rules, and a “one-voice” crisis communication plan.
- Cross-border cooperation:
  - As host authority, BoM should understand implications of recovery and resolution plans of the two D-SIBs that are subsidiaries of G-SIBs; as home authority, BoM must keep host supervisors and resolution authorities apprised of information relevant to recovery and resolution of Mauritian banks’ foreign subsidiaries and branches.

### Summary of Key Recommendations (high-level, Table 1 highlights)
- Early Intervention
  - Strengthen supervisory regime for early intervention; clarify triggers (quantitative and qualitative); broaden corrective action tools.
  - Timeframe: Near-term. Paragraphs: 10–12. Institutions: MoFED, BoM.
- Bank Resolution Regime
  - Designate BoM as resolution authority for deposit-taking institutions, financial holding companies, and nonregulated related group companies providing essential services.
  - Clarify institutional arrangements: BoM as resolution authority, DIS as paybox plus insurer.
  - Provide clarity for resolution triggers reflecting indicators of nonviability before balance-sheet insolvency; limit scope of judicial review; provide full range of resolution powers and techniques.
  - Timeframe: Near-term. Key paragraphs: 21–23, 26–34. Institutions: MoFED, BoM.
- Recovery and Resolution Planning
  - Require banks to prepare and maintain recovery plans. Timeframe: Near-term. Paragraphs: 39–40. Institution: BoM.
  - Prepare resolution plans for banks engaged in critical functions. Timeframe: Medium-term. Paragraphs: 41–50. Institution: BoM.
- Deposit Insurance Scheme
  - Revise DIS Bill on Board appointment criteria, clarify P&A mechanics, reconcile views with MoFED, resubmit Bill. Timeframe: Near-term. Paragraphs: 51–53. Institutions: BoM, MoFED.
- Resolution Funding
  - Make advance arrangements for quick mobilization of public funds as last resort and establish recoupment of losses from the banking industry. Timeframe: Medium-term. Paragraphs: 36–38. Institutions: MoFED, BoM.
- Emergency Liquidity Assistance
  - Streamline conditions for ELA in BOMA and develop formal policy and operational framework; negotiate swap arrangements for FX access. Timeframes: Near-term and Medium/long-term. Paragraphs: 55–57. Institution: BoM.
- Financial Stability Committee (FinStab)
  - Adopt charter detailing FinStab responsibility for crisis preparedness and management; set up permanent Secretariat. Timeframe: Near-term. Paragraphs: 59–60. Institutions: MoFED, BoM, FSC.
- Cross-Border Issues
  - Understand implications of recovery and resolution plans of the two D-SIBs that are G-SIB subsidiaries; keep host authorities apprised. Timeframes: Near-term and Medium/long-term (Ongoing). Paragraph: 62. Institution: BoM.

### Financial sector structure and soundness (selected statistics)
- System scale and composition:
  - Total financial system assets exceed four times Gross Domestic Product (GDP).
  - Banking sector assets are over three times GDP.
  - MoFED estimates financial sector contributes about 10 percent to GDP, with cross-border banking contributing roughly 3 percent.
  - Of 21 banks: 5 domestically owned (including largest with roughly 40 percent market share of total deposits); 13 subsidiaries of foreign banks; 4 branches of foreign banks; 1 domestic/foreign joint venture.
  - Cross-border business accounts for approximately 60 percent of banking sector assets and income.
  - Foreign currency deposits of cross-border corporate sector and nonresidents represent about two-thirds of banks’ deposits.
  - The five largest banks account for two-thirds of total assets.
- D-SIB designation and group simplification:
  - D-SIB assessment process introduced in 2014; five banks (three domestic and two foreign) designated as D-SIBs. The two foreign D-SIBs are subsidiaries of G-SIBs.
  - Restructuring: two largest D-SIBs now wholly owned subsidiaries of Intermediate Holding Companies (IHCs) under stock-exchange listed Ultimate Holding Companies (UHCs); aims to enhance resolvability.
- Soundness indicators (selected)
  - Capital adequacy ratio (CAR): 17.5 percent at end-June 2016 (regulatory minimum 10 percent).
  - Nonperforming loans (NPLs): 8.2 percent in June 2016, up from 5.7 percent a year earlier.
  - Liquidity ratios remained adequate; sector profitable despite asset quality deterioration.
  - No sign of deposit flight from cross-border global business companies after 2016 DTAA renegotiation with India.

### Supervisory weaknesses and recent legal changes (Annex II summary)
- Systemic weaknesses: consolidated supervision, supervision of mixed conglomerates, absence of formal contingency planning framework for resolution and crisis management, absence of formal macroprudential institutional framework.
- Recent legal/regulatory actions:
  - Parliament adopted amendments to Bank of Mauritius Act 2004 (BOMA) and Banking Act 2004 (BA) to reinforce BoM’s powers over bank holding companies and intra-group/related-party transactions.
  - New guidelines on corporate governance, credit impairment measurement and income, and use of external credit assessment institutions.
  - Progress on risk-based supervision approach implementation.
- Contingency planning and crisis preparedness:
  - Five banks identified as D-SIBs subject to capital surcharge ranging from 1 percent to 2.5 percent phased from January 1, 2016 to be fully effective January 1, 2019.
  - Capital conservation buffer of 2.5 percent effective January 1, 2017 phased to be fully effective January 1, 2020.
  - Enhanced cross-border supervisory collaboration and practice of requesting commitment letters/letters of comfort from foreign parents.
  - DIS draft Bill issued February 2016 under review by MoFED.
  - BoM developed stress testing model; stress testing results to indicate supervisory focus areas.
- Outstanding gaps vis-à-vis Key Attributes:
  - No guidance requiring banks to prepare and regularly update recovery plans.
  - No designated administrative resolution authority or clear mandates/coordination among authorities.
  - Some extraordinary resolution powers in the KAs are not present in current legislation.
  - Resolution planning for systemically important institutions not initiated; DIS legislation not yet agreed with MoFED; FinStab role in resolution not defined.

### Early intervention, conservatorship, and receivership — deficiencies and recommended improvements
- Early intervention problems:
  - Legal triggers for intervention occur too late and include volition elements (“knowingly or negligently permitted”) that constrain supervisor action and may lead to regulatory forbearance.
  - Post-trigger legal range of actions is limited and uncertain; appointment of an “advisor” may lack necessary control powers.
- Recommended early intervention improvements:
  - Incorporate clear qualitative and quantitative triggers in law (examples: qualitative — failure to operate in “safe and sound manner”; quantitative — failure to comply with capital/liquidity requirements).
  - Provide a wider, transparent, proportionate range of powers when triggers activated (examples: require recovery action implementation; require restructuring free from S. 32A creditor agreement; require capital injections within specified time; restrict dividends/payouts; prohibit particular lines of business).
  - Include an express catchall provision enabling BoM to “take any other action it deems necessary and appropriate.”
- Conservatorship limitations:
  - Conservator may take control, suspend rights of Board and management, proceed with rehabilitation; reorganization process has procedural weaknesses (notice/hearing requirements, no time limit on conservatorship, uncertainty over conservator’s ability to perform transactions requiring shareholder approval).
  - Section 67 objective of returning institution to management may provide undue windfall to shareholders.
  - Recommendation: use temporary public management sparingly and briefly; reconsider and specify advisor/conservator powers to avoid postponing resolution of nonviable entities.
- Receivership limitations:
  - Receivership (Part XI BA) leads to compulsory liquidation; quantitative triggers activate too late (e.g., capital to assets ratio less than 2 percent).
  - Limited tools focused on liquidation/asset transfer; does not enable use of full range of resolution tools for going-concern failures.
  - Interaction with Bankruptcy Court and duration of liquidation may impede access to critical deposits.
  - DIS coherence required: priority of claims Section 86 should be modified to recognize subrogation of DIS; nonresident depositors have lower priority and are not covered by DIS.

### Designing a resolution framework — scope, authority, and powers
- Legal underpinnings and scope:
  - Trigger resolution when a bank is no longer viable or likely to be no longer viable, and before balance-sheet insolvency.
  - Cover banks, branches of foreign banks, nonbank deposit-taking institutions; include holding companies insofar as necessary to resolve a bank or financial group.
  - Alternatives for mixed activity holding companies: include or exclude depending on nonfinancial activity materiality; BoM could require establishment of financial holding companies and include IHCs while excluding UHCs.
- Designation and governance of resolution authority:
  - Resolution authority should have operational independence, transparent processes, adequate resources, rigorous evaluation and accountability.
  - BoM satisfies such governance requirements; designation of BoM as resolution authority seen as reasonable.
  - Allocate roles within BoM and between BoM and other crisis institutions; consider a Unit/Department for Resolution with permanent staff, single reporting line to Board, oversight by deputy governor who should not share prudential supervision responsibilities.
- Resolution powers recommended (paragraph 33 and 34):
  - Recapitalization via unilateral debt restructuring or write-downs and issuance of new shares.
  - Mergers and acquisitions without shareholder consent.
  - Transfer assets/liabilities to other institutions including bridge bank without consent.
  - Authority to provide bridge-financing; temporary public ownership once shareholders and unsecured creditors have absorbed necessary losses.
  - Auxiliary powers: impose stay on creditor actions; ensure continuity of services/functions within group; impose temporary stay on contractual acceleration/termination under financial contracts; recover monies from responsible persons including claw-back of variable remuneration; terminate contracts.
- Safeguards:
  - Respect hierarchy of creditor claims (Section 86).
  - Allow departures from pari passu only when necessary to protect financial stability or maximize firm value.
  - Provide “no creditor worse off” compensation framework with independent valuation where appropriate.

### Funding for resolution and public financial support
- Loss allocation principles:
  - Losses should first be borne by shareholders and unsecured creditors.
  - Temporary public funds may be needed for systemic banks; law should state such support is a fiscal responsibility.
  - Any state loss should be recouped ex-post from the industry.
- Practical recommendations:
  - Explore mechanisms for prompt public financial support including standing budgetary authorization with ex post transparency to legislature.
  - Analyze constraints posed by public-sector debt ceiling and Public Debt Management Act on issuance of guarantees and bonds.
- Scope of public funding:
  - Public funding limited to systemic banks or situations per FSB Key Attributes; non-systemic failing banks: P&A or liquidation preferable.

### Recovery and resolution planning (detailed)
- Recovery planning:
  - Draft guidance initiated in 2015 remains incomplete and should be finalized; BoM to define expectations especially for large- and medium-sized banks and NBDTIs.
  - BoM must establish supervisory review procedures; iterative multi-year process expected.
- Resolution planning:
  - No progress to date; prepare resolution plans for banks and likely bank IHCs if MoFED designates BoM as resolution authority for banks, NBDTIs, and bank IHCs.
  - Resolution planning involves bank-by-bank systemic importance assessment to determine which banks can be liquidated without systemic consequences and which require extraordinary powers.
  - Plans should address how BoM will apply legal powers to resolve failure without disrupting critical functions and at least cost, including potential taxpayer costs.
  - Fundamental guidance set out in KA 11.6 of the Key Attributes.

### Appendix I, Annex 4 — Resolution planning and DIS specifics
- Resolution planning and execution (highlights):
  - First step in resolution: impose losses on shareholders and creditors; shareholders’ equity should be written down to absorb losses (including to zero); subordinated debt should bear full loss in principle; some liabilities could be converted to equity to recapitalize the bank.
  - Consider requiring banks to issue subordinated debt to parent holding company to be written off if needed — but this may cause parent failure and requires coordination with FSC.
  - Assess critical functions for segregation and transfer to third-party acquirer or bridge bank; residual assets/liabilities to receivership and liquidation.
  - Government temporary ownership to be last resort after losses absorbed.
  - Resolution plans must define execution details and eliminate identified impediments (legal, structural, operational, financial); legal entity restructuring of two largest domestic banks cited as example to improve resolvability.
  - BoM needs capacity to assess home authority resolution plans for Mauritian subsidiaries/branches; unresolved concerns may require fallback plans.
- DIS draft Bill (tabled early 2016; BoM/MoFED):
  - Governance: BoM subsidiary governed by six-member Board; at least one full-time CEO appointed by Board; other staff could be seconded from BoM; DIS funds held in BoM account; “paybox plus” mandate.
  - Coverage/timing: protect local and foreign currency deposits in Mauritius of natural-person residents; exclusions: legal persons (except sole proprietors SMEs), natural-person depositors in overseas branches of Mauritian banks, nonresident depositors in Mauritius not eligible; payouts in local currency; initiate within 20 days and complete within 60 days; Bill provides P&A power but silent on mechanics.
  - Funding/premiums: initial annual premium of 30 bps charged against insurable deposits; premium subject to annual review and minister’s approval; BoM authorized to lend to DIS; provision that no payment can be made during first five years; no power to charge extraordinary premium or specify target fund balance.
  - Recommended modifications:
    - Deputy governor accountable for resolution function should be Board member.
    - Reconsider restriction limiting two Board members to NGO representatives.
    - Minimize DIS overhead costs; CEO could be part-time; use BoM staff for functions.
    - Reduce 20-day initiation period to seven days at most.
    - Drop provision that no payment can be made during first five years.
    - Require BoM lending to DIS to be fully collateralized, with any required loss backstop provided by MoFED.
    - Introduce DIS Bill only after, or with, establishment of new bank resolution framework.
  - Preliminary analysis suggested coverage level of Rs 300,000, roughly equivalent to US$8,500 or 90 percent of per capita GDP.

### Emergency Liquidity Assistance (ELA) — legal and operational guidance
- Statutory concerns:
  - Sections 6(1)(o) and 6(1)(p) too broad; Section 6(1)(o) conflates ELA to solvent but illiquid banks with solvency support to actually/potentially insolvent banks; risks quasi-fiscal activity and governmental interference.
- Good-practice elements recommended:
  - ELA provided in exceptional circumstances to solvent, viable institutions; at BoM’s absolute discretion; against collateral satisfactory to BoM; at penalty interest rates; for limited periods; conditioned on remedial program if bank-specific.
- Solvency support and resolution funding:
  - Ideally provided by fiscal authorities; if BoM retains role, require governmental decision that lending necessary for financial stability and automatic explicit governmental guarantee if BoM suffers losses; approval by BoM competent decision-making body.
- Operational policy recommendations:
  - Adopt formal policy and operational ELA framework defining limited eligible circumstances (including resolution operations and last-resort), solvency/viability assessment, collateral policy (create registry of collateral), penalty terms, oversight and conditionality, exceptions for systemic cases tied to credible resolution scheme and government guarantee, and distinction from monetary policy liquidity.
- FX liquidity challenges and mitigants:
  - Heavy reliance on foreign exchange funding poses FX liquidity stress challenges.
  - Consider swap arrangements with international authorities and other central banks; revise reserve requirement framework for foreign currency deposits; explore commitment letters to incentivize foreign parents to support subsidiaries; use prudential and macroprudential tools to reduce FX demand risks.

### Coordinating arrangements (FinStab) and permanent secretariat
- FinStab status and composition:
  - Exists under BOMA Section 55A; chaired by Minister of Finance and Economic Development; members include Minister for Financial Services, governor of BoM, CEO of FSC, Director of Financial Intelligence Unit, and Financial Secretary.
  - FinStab largely inoperative; met once November 2016.
- Recommended MoU and charter:
  - Define objectives: prevent, manage, resolve financial crises at minimum cost and minimize moral hazard; explicitly exclude “preventing bank failures” as objective.
  - Share responsibilities for crisis preparation and management; continuous collaboration on information exchange, analysis of threats, contingency planning, stress testing, crisis simulation, and communications.
  - FinStab meet at least quarterly; enable involvement of other domestic/foreign authorities.
- Permanent secretariat duties:
  - Provide logistical and technical support; organize information exchange; prepare agendas; follow up on actions; coordinate contingency plan development by BoM and FSC.
  - Contingency plans to identify key responsibilities/personnel, rules on public support, coordination with foreign supervisors, legal bases for measures, and public communication methods.

### Cross-border arrangements — status and recommended steps
- Current status:
  - No cross-border arrangements for recovery/resolution planning or coordinated implementation.
  - Two of five D-SIBs are subsidiaries of G-SIBs; BoM as host has not participated in CMG recovery/resolution planning.
  - No legal impediment for BoM to enter into cross-border agreements.
- Recommended steps:
  - Engage with relevant home and host authorities in recovery and resolution planning.
  - As host, priority to understand implications of home resolution plans of two D-SIBs that are G-SIB subsidiaries.
  - Obtain information on banks’ recovery/resolution plans initially through local subsidiaries and follow up with home authorities and/or CMGs.
  - Use FSB guidance to pursue engagement; as home authority, keep relevant host authorities apprised.
  - Effectiveness of resolving Mauritian banks with overseas operations depends on cooperation with host authorities.

### Annex I — Financial soundness indicators (selected series, December 2012–2016)
- Capital Adequacy (selected series values)
  - Regulatory capital to risk-weighted assets: 2012: 17.1; 2013: 17.3; 2014: 17.1; 2015 (June): 17.6; 2015 (Dec.): 18.4; 2016: 17.6
  - Regulatory Tier I capital to risk-weighted assets: 2012: 15.5; 2013: 15.1; 2014: 15.1; 2015 (June): 15.2; 2015 (Dec.): 17.0; 2016: 15.9
  - Capital to total assets: 2012: 8.5; 2013: 8.8; 2014: 9.3; 2015 (June): 10.3; 2015 (Dec.): 10.5; 2016: 10.0
- Asset quality and composition
  - Nonperforming loans (NPLs) to total gross loans: 2012: 3.6; 2013: 4.2; 2014: 4.9; 2015 (June): 5.7; 2015 (Dec.): 7.2; 2016: 8.2
  - NPLs net of provisions to capital: 2012: 12.4; 2013: 12.7; 2014: 16.4; 2015 (June): 17.4; 2015 (Dec.): 19.1; 2016: 18.6
- Earnings and liquidity metrics
  - Return on assets: 2012: 1.4; 2013: 1.3; 2014: 1.4; 2015 (June): 1.1; 2015 (Dec.): 1.2; 2016: 1.3
  - Return on equity: 2012: 18.1; 2013: 15.3; 2014: 15.2; 2015 (June): 11.4; 2015 (Dec.): 12.1; 2016: 13.4
  - Liquid assets to total assets: 2012: 19.1; 2013: 22.5; 2014: 24.1; 2015 (June): 25.1; 2015 (Dec.): 27.1; 2016: 28.7
  - Foreign-currency-denominated loans to total loans: 2012: 56.5; 2013: 55.9; 2014: 58.8; 2015 (June): 58.2; 2015 (Dec.): 55.9; 2016: 60.3
  - Customer deposits to total (noninterbank) loans: 2012: 128.7; 2013: 137.0; 2014: 133.2; 2015 (June): 142.3; 2015 (Dec.): 146.8; 2016: 155.3

*Source: Preface, Executive Summary, and Introduction sections of cr18170.*

### Preface ................................................................................................................

### Preface

### Mission and engagement
- A technical assistance (TA) mission visited Mauritius during the period February 27–March 6, 2017 to advise on legal, policy and operational aspects of bank resolution and crisis management.
- The mission met with officials of the Bank of Mauritius (BoM), the Ministry of Finance and Economic Development (MoFED), the Financial Services Commission (FSC), the Solicitor General, and Representatives of the Mauritius Commercial Bank (MCB), and SBM Bank (Mauritius) Ltd (SBM).
- The mission expressed appreciation to Governor Rameswurlall Basant Roi, G.C.S.K.; and to the staff of the BoM for cooperation and arrangements.

### Immediate priorities identified
- Formally designate administrative bodies responsible for resolution of individual financial institution failures and for various forms of financial and mixed groups.
- Refine the existing legal framework for early intervention and triggers for resolution.
- Adopt new legal powers to support timely and effective resolution of systemically important banks.
- Issue guidance to banks to routinely prepare recovery plans and for the BoM to review and provide feedback.
- Prepare resolution plans for banks and their groups.
- Identify and remedy impediments to timely and effective resolution of banks.
- Submit Deposit Insurance Scheme (DIS) legislation to parliament.
- Adopt a formal policy framework for Emergency Liquidity Assistance (ELA).
- Specify the role of the Financial Stability Committee (FinStab) in resolution activities.
- Put in place cross-border cooperation arrangements with relevant foreign supervisory and resolution authorities.

---

### Executive Summary

### Key assessments of the current framework
- The current legal framework does not provide the supervisor with adequate triggers and powers to mitigate risks at a sufficiently early stage.
- The law should provide for a broader range of corrective tools and clarify triggers and powers to reduce arbitrariness and promote transparency.

### Need for a new resolution framework
- Current options are limited to: (i) a bailout that does not fully allocate losses to shareholders and creditors; and (ii) compulsory liquidation that is ill equipped to restructure failing institutions while preserving value and safeguarding financial stability.
- The new resolution framework must address:
  - scope of institutions covered;
  - objectives of the framework;
  - resolution powers and tools;
  - institutional arrangements among the BoM (resolution authority and ELA provider), the DIS (to be created), and the FSC (Financial Stability Committee).
- Consider exploring limits to judicial review to allow supervisory and resolution authorities adequate flexibility and speed, while ensuring due process.

### Recovery, resolution planning, and supervisory actions
- Issue guidance requiring banks to prepare and maintain up-to-date recovery plans specifying steps to deal with shocks to capital and/or liquidity.
- BoM will need to review plans and provide feedback; this will be iterative over several years.
- Prepare formal resolution plans for banks and groups, identifying critical economic and financial functions that cannot be put into receivership under compulsory liquidation and must be resolved using strong legal powers.
- In developing plans, identify impediments to timely and effective resolution and collaborate to eliminate them.

### Deposit Insurance Scheme (DIS)
- DIS Bill needs revision, MoFED and BoM agreement, and submission to parliament.
- Revisions to consider:
  - ensure an efficient cost structure for the DIS;
  - reduce time to initiate payout to seven days or less;
  - specify mechanics of an insured deposit transfer under a purchase and assumption (P&A) transaction;
  - eliminate the provision that the fund cannot be used for the first five years.

### Emergency Liquidity Assistance (ELA)
- Conditions for providing ELA in the Bank of Mauritius Act (BOMA) must be revised to limit moral hazard.
- Adopt a formal policy and operational ELA framework clarifying circumstances for use, solvency requirement, eligible collateral, terms, and conditionality.
- The local sector’s reliance on foreign currency (FX) funding poses challenges for securing FX liquidity in stress.
  - Consider entering into swap arrangements with foreign central banks.
  - Consider incentives for foreign parent banks to provide liquidity to their subsidiaries.
  - Macroeconomic policy should aim at building adequate FX buffers, and prudential and macroprudential measures to reduce potential FX calls.

### Financial Stability Committee (FinStab) and coordination
- FinStab mandate should be detailed in a charter; set up a permanent secretariat for logistical and technical support.
- Charter should include contingency plans, information exchange rules, and a “one-voice” crisis communication plan.
- Permanent secretariat should coordinate development of contingency plans prepared by BoM and FSC staff.

### Cross-border cooperation
- As host authority, BoM should understand implications of recovery and resolution plans of the two D-SIBs that are subsidiaries of G-SIBs, relying on FSB guidance.
- As home authority, BoM must keep relevant host supervisory and resolution authorities apprised of information relevant to recovery and resolution of Mauritian banks’ foreign subsidiaries and branches.
- Effectiveness of resolving a Mauritian bank with overseas operations depends on cooperation with host authorities.

---

### Summary of Key Recommendations (Table 1 highlights)

- Early Intervention
  - Strengthen supervisory regime for early intervention; clarify triggers (quantitative and qualitative) for graduated powers and broaden corrective action tools available to the supervisor.
  - Timeframe: Near-term. Paragraphs: 10–12. Institutions: MoFED, BoM.

- Bank Resolution Regime
  - Designate the BoM as resolution authority for deposit-taking institutions, financial holding companies, and nonregulated related group companies that provide essential services.
  - Clarify institutional arrangements: BoM as resolution authority, DIS as paybox plus insurer.
  - Provide clarity for resolution triggers reflecting indicators of nonviability before balance-sheet insolvency.
  - Limit scope of judicial review to avoid courts varying, suspending, or reversing resolution actions.
  - Provide full range of resolution powers and techniques including forcing mergers/recapitalizations, transfers to healthy banks or bridge banks, transfer of bad assets to asset management companies, debt haircuts/conversions, license revocation, and receivership.
  - Timeframe: Near-term. Key paragraphs: 21–23, 26–34. Institutions: MoFED, BoM.

- Recovery and Resolution Planning
  - Issue guidance requiring banks to prepare and maintain up-to-date recovery plans. Timeframe: Near-term. Paragraphs: 39–40. Institution: BoM.
  - Prepare resolution plans for banks engaged in critical economic and financial functions. Timeframe: Medium-term. Paragraphs: 41–50. Institution: BoM.

- Deposit Insurance Scheme
  - Revise DIS Bill on Board appointment criteria, clarify P&A mechanics, reconcile views with MoFED, resubmit Bill. Timeframe: Near-term. Paragraphs: 51–53. Institutions: BoM, MoFED.

- Resolution Funding
  - Make advance arrangements for quick mobilization of public funds as a last resort and establish recoupment of losses from the banking industry. Timeframe: Medium-term. Paragraphs: 36–38. Institutions: MoFED, BoM.

- Emergency Liquidity Assistance
  - Streamline conditions for ELA in BOMA and develop formal policy and operational framework. Negotiate swap arrangements for FX access. Timeframes: Near-term and Medium/long-term. Paragraphs: 55–57. Institution: BoM.

- Financial Stability Committee (FinStab)
  - Adopt charter detailing FinStab responsibility for crisis preparedness and management; set up permanent Secretariat. Timeframe: Near-term. Paragraphs: 59–60. Institutions: MoFED, BoM, FSC.

- Cross-Border Issues
  - Understand implications of recovery and resolution plans of the two D-SIBs that are G-SIB subsidiaries; keep host authorities apprised. Timeframes: Near-term and Medium/long-term (Ongoing). Paragraph: 62. Institution: BoM.

---

### I. Introduction — Overview of the Financial Sector and Implementation Status

### Financial sector structure and exposures
- Total financial system assets exceed four times Gross Domestic Product (GDP) and banking sector assets are over three times GDP.
- MoFED estimates overall financial sector contributes about 10 percent to GDP, with cross-border banking contributing roughly 3 percent.
- Of 21 banks:
  - 5 are domestically owned (including the largest bank with a roughly 40 percent market share of total deposits);
  - 13 are subsidiaries of foreign banks;
  - 4 are branches of foreign banks;
  - 1 is a domestic/foreign joint venture.
- Cross-border business accounts for approximately 60 percent of banking sector assets and income.
- Foreign currency deposits of cross-border corporate sector and nonresidents represent about two-thirds of banks’ deposits.
- The five largest banks account for two-thirds of total assets.
- Many banks are part of financial or mixed conglomerates that include other financial services firms, but none include insurance companies.

### D-SIB designation and group simplification
- BoM introduced a domestic systemically important bank (D-SIB) designation assessment process in 2014 to assign a D-SIB capital surcharge, following BCBS methodology modified for Mauritius.
- Assessment is based only on banks’ domestic (onshore) operations and updated annually.
- Currently, five banks (three domestic and two foreign) are designated as D-SIBs. The two foreign D-SIBs are subsidiaries of G-SIBs.
- To improve supervision, BoM required large bank groups to simplify legal structures:
  - The two largest D-SIBs are now wholly owned subsidiaries of Intermediate Holding Companies (IHCs), which are wholly owned subsidiaries of stock-exchange listed Ultimate Holding Companies (UHCs).
  - Under the UHC structure, group banking operations are subsidiaries of a single banking IHC, all other financial businesses are subsidiaries of a separate nonbanking IHC, and non-financial companies are subsidiaries of a third group IHC.
  - The restructuring enhances resolvability of the two largest domestic D-SIBs.
  - The smaller domestic D-SIB was not required to restructure and remains parent of a number of other financial subsidiaries.

### Soundness indicators
- The capital adequacy ratio (CAR) of the banking system stood at 17.5 percent at end-June 2016, above the regulatory minimum of 10 percent.
- Nonperforming loans (NPLs) were 8.2 percent in June 2016, up from 5.7 percent a year earlier.
- Liquidity ratios of the banking sector as a whole remained adequate.
- The sector continues to be profitable despite deterioration in asset quality.
- There is no sign of deposit flight from cross-border global business companies (GBCs) following the 2016 renegotiation of the Double Taxation Avoidance Agreement (DTAA) with India.

---

*Source: Preface, Executive Summary, and Introduction sections of cr18170.*

### Annex II)

### Annex II)

### Supervisory weaknesses and recent legal changes
- Noted systemic weaknesses: consolidated supervision, supervision of mixed conglomerates, absence of a formal framework for contingency planning for bank resolution and crisis management, and absence of a formal institutional framework for macroprudential policy.
- Implementation of MCM previous recommendations has been slow largely due to change in the management of the BoM.
- Recent legal and regulatory actions:
  - Parliament adopted amendments to the Bank of Mauritius Act 2004 (BOMA) and the Banking Act 2004 (BA) to reinforce BoM’s powers to regulate and supervise bank holding companies and monitor intra-group transactions and related-party transactions.
  - New guidelines issued on corporate governance, credit impairment, measurement and income, and the use of external credit assessment institutions.
  - Progress in adopting a risk-based approach to supervision.

### Contingency planning and crisis preparedness — steps taken
- BoM framework for D-SIBs:
  - Five banks identified as systemically important are subject to a capital surcharge (ranging from 1 percent to 2.5 percent) for their systemic importance with effect from January 1, 2016, in a phased manner to become fully effective from January 1, 2019.
  - A capital conservation buffer of 2.5 percent, effective January 1, 2017, has been applied to all banks in a phased manner to become fully effective from January 1, 2020.
- Cross-border supervisory collaboration:
  - Enhanced collaboration with host supervisors of the two largest domestic banks with cross-border operations; onsite examination findings shared at exit meetings; joint inspections carried out with the home supervisor of two foreign-owned banks in October 2016.
  - Established practice of requesting commitment letters/letters of comfort from foreign parent banks.
- Deposit Insurance Scheme (DIS):
  - Work underway to set up a DIS to better protect small, financially unsophisticated depositors and prevent contagion and deposit runs.
  - BoM issued in February 2016 a draft DIS Bill for public consultation; draft DIS Bill is under review by the MoFED.
- Resolution planning and stress testing:
  - BoM considering discussions with subsidiaries of international banks on their resolution plans.
  - BoM developed a stress testing model to assess the ability of the banking industry to withstand shocks; stress testing results to indicate areas of supervisory focus.

### Outstanding gaps relative to Key Attributes (KAs) and other deficiencies
- Principal elements of the Key Attributes for Effective Resolution Regimes for Financial Institutions (KAs) relevant for Mauritius have yet to be implemented.
- Specific gaps:
  - Guidance requiring banks to prepare and regularly update recovery plans has not been issued by the BoM.
  - A designated administrative authority (or authorities) as a “resolution authority” and clear mandates/coordination among multiple resolution authorities have not been established.
  - Some extraordinary resolution powers in the KAs are not present in current legislation and remain to be drafted and included in law.
  - Resolution planning for systemically important financial institutions has not been initiated.
  - Deposit insurance legislation drafted by the BoM has not yet been agreed with MoFED.
  - The role of FinStab in systemic bank resolution and crisis management has not been defined.

### Early intervention — current problems
- Legal triggers for intervention are inadequate and occur too late to halt deterioration:
  - BoM may only take enforcement action when a bank or its directors/senior officers have engaged in unsafe and unsound practices or have “knowingly or negligently permitted” violations of the BA or related legal acts — the volition elements (“knowingly or negligently permitted”) constrain supervisor action and may lead to regulatory forbearance.
  - Specific triggers tied to severe outcomes (e.g., inability to cover liabilities or serious impairment of capital) are too late and should open resolution procedures instead of being the first enforcement trigger.
- Range of post-trigger actions is not clearly defined in law:
  - Current BA-authorized measures (Section 45) include: (i) appoint a person to advise the financial institution and fix their remuneration; (ii) issue a cease-and-desist order; (iii) suspend temporarily or permanently from office any director, senior officer or employee; and (iv) with court approval, freeze assets in case of commission or likely commission of an offence.
  - Authorities interpret the BA (Sections 10, 16, 17, and 45) as enabling BoM to take any action “it deems necessary,” including revocation of license, though these powers are not specifically enumerated.
  - Concerns:
    - Legal uncertainty whether more intrusive actions beyond those enumerated would withstand legal challenges.
    - Appointment of an “advisor” may be ineffective if the advisor lacks control or administration powers; authorities should reconsider the “advisor” role and specify powers if retained.

### Early intervention — recommended improvements
- Strengthen regime by:
  - Incorporating clear qualitative and quantitative triggers in banking law for early intervention (examples given: qualitative — failure to operate in a “safe and sound manner” or to have “adequate risk management and internal controls”; quantitative — failure to comply with capital requirements, liquidity requirements, risk concentration limits).
  - Explicitly providing for a wider, transparent, and proportionate range of powers when triggers are activated.
  - Broadening enumerated powers to include (non-exhaustive examples listed in the BA commentary):
    - Require implementation of recovery actions set out in the bank’s recovery plan.
    - Require restructuring (free from S. 32A creditor agreement procedure).
    - Require additional liquidity levels, limit compensation of directors and senior executives, require capital injections by shareholders within a specified limit of time.
    - Restrict dividends and other discretionary payouts, require specific provisioning policy, prohibit particular lines of business, restrict new loans/investments/refinancing, restrict acquisition or sale of assets, require reduction in operating expenses, restrict increase of capital.
  - Include an express catchall provision enabling BoM to “take any other action it deems necessary and appropriate” to provide a transparent legal basis and reduce legal risk for supervisors.

### Bank resolution regime — conservatorship and receivership limitations
- Conservatorship (Part IX of BA):
  - Can be imposed when: (i) capital is impaired or threatened; (ii) bank or directors engaged in practices detrimental to depositors; (iii) violations of banking laws, AML/CFT enactments, guidelines or instructions, or such violations are about to occur; or (iv) assets are insufficient to give adequate protection to depositors or creditors.
  - Conservator takes control, suspends rights and powers of Board and senior management, and proceeds with rehabilitation or reorganization.
  - Procedural weaknesses:
    - Reorganization under conservatorship requires notifying depositors and creditors who would not receive full repayment, conducting a hearing, and the plan is approved by BoM Board unless rejected in writing within 30 days by one-third of the aggregate amount of deposits and one-third of creditors (other than subordinated creditors).
    - No time limit in BA on duration of conservatorship.
    - Reorganization measures seem applied under the Companies Act; conservator does not fully replace shareholders, leaving uncertainty over ability to perform transactions requiring shareholders’ approval (e.g., transfer of substantially all assets and liabilities, merger, sale of shares, recapitalization, debt-to-equity conversions).
    - Section 67 frames conservatorship aim to return institution to management and restore shareholders’ rights, which may provide undue windfall to original shareholders responsible for bank distress.
  - Recommendation: temporary public management should be used very limitedly and for a very short period; conservatorship features useful for criminal/fraud cases but safeguards needed to avoid using the tool to postpone resolution actions against nonviable entities.
- Receivership:
  - Receivership is the default wind-up mechanism for insolvent institutions.
  - Triggers include: (i) capital impaired or condition unsound; (ii) capital to assets ratio less than 2 percent; (iii) business conducted in unlawful, unsafe or unsound manner; (iv) continuation detrimental to depositors; and (v) license revoked.

*Source: cr18170 - Annex II)*

### Part XI of the BA, once a receiver is appointed by the BoM, he assumes legal control of the

### Part XI of the BA, once a receiver is appointed by the BoM, he assumes legal control of the bank’s estate (Section 76 and 78)

### Receivership under Part XI — powers and process
- Once a receiver is appointed by the BoM, he assumes legal control of the bank’s estate (Section 76 and 78) and commences proceedings leading to compulsory liquidation, such as collecting and realizing its assets, and distributing the proceeds to creditors in full or partial satisfaction of their claims, with the surveillance of the Bankruptcy Court (Section 85), and in accordance with the principle of equal treatment of similarly situated creditors and the applicable hierarchy of claims (Section 86).
- Under subsection 5, the conservator may repudiate or disaffirm financial contracts that, in their opinion, are fraudulent.
- Under Section 85 of the BA, the receiver is required to file with the Bankruptcy Court a schedule of steps to be taken during liquidation and submit for approval the newspaper for publication of claims not allowed in full. The Bankruptcy Court may mandate the modification of the schedule if an objection is sustained.

### Deficiencies in the current legal framework that may result in disorderly closures
- Resolution funding by the BoM:
  - The BoM is authorized to purchase any assets of the bank in liquidation or assume any of its liabilities and to make loans to any other financial institution and any other investors for merging or purchasing assets of the bank under liquidation.
  - This provision is inconsistent with good practices, hampers the BoM’s financial autonomy, and should be eliminated.
  - Any official financing assistance for resolution measures should be the government’s responsibility and be granted under strict rules that ensure market discipline and preserve the interest of the public purse.
- Triggers for receivership:
  - Qualitative triggers overlap with enforcement measures and conservatorship (e.g., violation of the BA or other secondary legislation, unlawful activities, unsafe and unsound practice, threat to depositors).
  - Quantitative triggers for receivership are activated late — only when the bank is already insolvent (impaired capital, assets/capital ratio less than 2 percent).
  - Interaction among enforcement, conservatorship, and receivership phases is unclear.
- Limited range of tools:
  - Framework provides mainly for compulsory liquidation and transfer of assets and liabilities, including use of a bridge bank.
  - Does not allow the Resolution Authority to treat effectively going concern failing banks, increasing systemic spillovers and impeding continuity of essential services in systemic cases.
- Interaction with the Bankruptcy Court:
  - Although minimal, the interaction between the receiver and the Bankruptcy Court should be clarified to avoid lengthy liquidation proceedings that impede access to critical deposits frozen for the duration of the liquidation.
  - Authorities should assess whether the constitutional framework allows the liquidation procedure to be conducted in the administrative sphere only and subject to judicial review.
- Deposit Insurance Scheme (DIS) coherence:
  - Once the DIS is created, its legal framework should be reconciled with the BA to avoid discrepancies and allow timely depositors’ payout.
  - Priority of claims in Section 86 of the BA should be modified to recognize subrogation of the DIS in the same hierarchy of creditors as insured deposits.
  - Nonresident depositors in Mauritius will be granted a lower priority of claim, as they are not covered by the DIS.
  - The draft DIS Bill should be revised to ensure coherence in procedure for payment of depositors’ claims and deadlines for disbursements.

### Designing a resolution framework for Mauritius — scope and institutional arrangements
- Legal underpinnings:
  - Resolution should be triggered when a bank is no longer viable or likely to be no longer viable, and before it becomes balance-sheet insolvent.
  - Framework should provide for a broad range of resolution powers available to an identified resolution authority and adequate tools and techniques for orderly exit of nonviable banks.
  - Legal safeguards must balance prompt, effective resolution and protection of shareholders’ and creditors’ rights.
- Personal scope of regime (paragraph 21):
  - Regime could cover banks, branches of foreign banks, and nonbank deposit-taking institutions.
  - Holding companies should be covered insofar as necessary to resolve a bank or financial group as a whole.
  - For mixed activity holding companies alternatives include: (i) include if nonfinancial activities minimal; (ii) exclude if nonfinancial activities do not provide services to banks and failure would not impede resolution; (iii) BoM could require establishment of financial holding companies and include those IHCs while excluding UHCs.
- Designation of lead resolution authority (footnote context):
  - If FSC is designated resolution authority for financial institutions, need to designate which authority (BoM or FSC) is the lead resolution authority for each financial group; options include lead by BoM if group includes a bank, or lead by FSC for groups comprised predominantly of FSC-regulated institutions including an NBDTI, or hybrid approaches.
- Governance of resolution authority:
  - Resolution authority should have sound governance: operational independence, transparent processes, adequate resources, rigorous evaluation and accountability.
  - The BoM satisfies such requirements and designation of the BoM as resolution authority seems reasonable.
  - Allocation of roles and responsibilities within BoM and between BoM and other crisis management institutions should be clarified.
  - Checks and balances to mitigate conflicts from BoM’s expanded mandate: create a Unit or Department for Resolution with permanent personnel, single reporting line to the Board, oversight by a deputy governor who should not share prudential supervision responsibilities; concentration of powers at governor level remains a concern and requires further analysis.
- Inclusion of nonregulated related companies:
  - Recommended that resolution regime apply to nonregulated related companies to the extent they provide essential services or are necessary for continuity of critical functions (e.g., IT, payment systems).
- Interaction with Insurance Act amendments (Sections 110(a) and 110(b)):
  - Newly enacted Section 110(b) permits FSC-authorized administrator to proceed to “transfer of undertakings” of related companies of insurer under administration.
  - Concerns:
    - Could allow FSC to require transfer of assets of a licensed bank to related insurer under official administration to satisfy payout.
    - Subsection 2: transfer not subject to prior approval of shareholders, creditors, or stakeholders of the related company suffering the unilateral transfer; unclear whether BoM approval required.
    - Subsection 3: precludes initiation of competing winding-up proceedings against related company before FSC transfer; may preclude BoM-initiated bank resolution if related insurer already under official administration.
    - Provision enacted as emergency measure for British American Insurance in 2015; no further current cases of banking and insurance in same group.
    - Amendments to Section 3 of the BA (September 2016) reaffirm supremacy of the Insurance Act over the BA; Compulsory Liquidation under the BA does not prevail over Sections 110(a) and 110(b).
  - Recommendation: Revise Insurance Act and Banking Act to clarify resolution in group context; establish carve-out that banking entities cannot be compelled to transfer assets/liabilities without express BoM authorization; clarify lead resolution authority and coordination where multiple regulated entities in a group are resolved.

### Entry into resolution — triggers, tools, and safeguards
- Conditions for entry (paragraphs 27–28):
  - Enable special powers based on: (i) clear triggers permitting action before insolvency and before all equity absorbed; and (ii) adequate checks and balances to protect constitutionally protected shareholders’ and creditors’ property rights.
  - Clear criteria combining qualitative and quantitative indicators should be adopted.
  - Quantitative triggers provide transparency and reduce regulatory forbearance (examples: capital falls below “x” percent of applicable requirements, liquidity ratio breached by more than “x” percent).
  - Qualitative triggers give supervisory judgment flexibility (examples: unsafe and unsound practices, loss of depositor confidence, imminent loss of market access, continuous violations of law).
  - Careful selection of indicators must consider type, size, and business models of supervised entities; deployment at an early juncture is fundamental.
- Constitutional protections and legal remedies:
  - Property rights under Sections 3 and 8 of the Constitution of Mauritius: expropriation must be justified by public interest necessity and grant the right of just and adequate compensation; principle of proportionality applies.
  - Any person with interest in property has right of access to the Supreme Court for determination of interest, legality of taking possession, and amount of compensation.
  - Consideration of a “no creditor worse off” safeguard with adequate compensation framework including independent evaluation, value base, state responsibility for payment, and timeline could satisfy constitutional protection.
- Public interest test approaches (paragraphs 29–30):
  - Jurisdictions differ: (i) implied public interest (financial stability) justification (e.g., Canada, Japan, United States); (ii) case-by-case public interest test considering financial stability, deposit protection; (iii) requirement that exercise of resolution powers be necessary and proportionate, demonstrated by (i) no reasonable private sector solution, (ii) no other supervisory measures can restore viability in reasonable time, or (iii) insolvency proceedings would not satisfy public interest.
  - Recommendation to introduce explicit statutory objectives of resolution to guide decision-making: (i) maintaining financial stability; (ii) protecting and enhancing public confidence in the banking system; (iii) ensuring continuity of critical economic and financial services and functions.
- Legal process and limits on injunctive measures:
  - Legislation should balance public interest and due process; avoid judicial actions that constrain implementation of, or reverse, measures taken by resolution authorities acting within legal powers and in good faith; provide for redress through compensation if justified.
  - Authorities encouraged to analyze whether injunction orders or other precautionary measures available to depositors/creditors could prevent resolution implementation, and consider legal limitations on such measures.
- Resolution powers recommended (paragraph 33):
  - Recapitalize the financial institution by unilaterally restructuring debt or writing down existing capital and issuing new shares.
  - Conclude mergers and acquisitions without shareholder consent.
  - Transfer assets and liabilities to other institutions, including a bridge bank, without need to obtain consent of shareholders or third parties.
  - Activate government authority to provide bridge-financing to facilitate transactions described above.
  - Assume public ownership temporarily once shareholders and unsecured creditors have absorbed necessary losses.
- Auxiliary powers for the BoM as resolution authority (paragraph 34):
  - Power to impose a stay on creditor actions.
  - Power to ensure continuity of services and functions in resolution by an entity of the same financial group.
  - Power to impose a temporary stay on contractual acceleration or early termination rights under financial contracts.
  - Powers to recover monies from responsible persons (shareholders, managers), including claw-back of variable remuneration, terminate contracts, etc.
- Safeguards to protect creditors and shareholders (paragraph 35):
  - Require resolution authority to exercise powers respecting hierarchy of creditor claims under applicable insolvency regime (Section 86 of the BoMA).
  - Resolution authority may depart from pari passu equal treatment only where necessary to (i) protect financial stability by containing systemic impact, or (ii) maximize value of the firm for benefit of all creditors.
  - Compensation should be available to ensure creditors are not worse off than in liquidation (“no creditor worse off” safeguard with adequate compensation).
  - Provide sufficient safeguards to stakeholders by protecting customer property rights, security interests, and financial collateral arrangements (including set-offs and netting rights).

### Funding for resolution
- Legal basis for financing mechanisms:
  - Losses should first be borne by shareholders and unsecured creditors to promote market discipline and preserve public purse.
  - Temporary public funds may be needed to prevent systemic risk in cases where measures other than receivership are needed to preserve financial stability; the law should state this is a fiscal responsibility.
  - Any loss incurred by the state should be fully recouped, ex-post, from the industry.
- Practical mechanisms and recommendations (paragraph 37):
  - Explore possibilities within constitutional and legal framework to establish mechanisms allowing prompt and efficient public financial support.
  - Consider establishing a standing budgetary authorization, with robust ex post transparency requirements toward the legislature to avoid undue delays by MoFED.
  - Analyze limits posed by the public-sector debt ceiling and procedures under the Public Debt Management Act on issuance of government guarantees and government bonds.
- Scope of public funding (paragraph 38):
  - In line with FSB’s Key Attributes, public funding should apply only for systemic banks or situations.
  - For non-systemic failing banks, appropriate options include purchase & assumption (P&A) or liquidation.

### Crisis prevention and management tools — Recovery and Resolution Planning
- Recovery planning:
  - Draft guidance to banks on requirement to prepare recovery plans was initiated by the BoM in 2015 but remains incomplete and should be finalized.
  - International materials and guidance (EBA, UK PRA, Hong Kong MA, MAS, etc.) are available to shape BoM expectations; BoM should define expectations and draft comprehensive guidance, especially for large- and medium-sized banks and NBDTIs.
  - BoM must establish internal procedures for supervisory review and assessment of recovery plans; an iterative multi-year process is anticipated.
- Resolution planning:
  - No progress in resolution planning has been made; work should be initiated as soon as possible.
  - BoM should begin preparing resolution plans for banks and, likely, for bank IHCs (assuming MoFED designates BoM as resolution authority for banks, NBDTIs and bank IHCs).
  - Resolution planning process includes bank-by-bank assessment of systemic importance to determine which banks could be put into compulsory liquidation without systemic consequences and which require extraordinary resolution powers.
  - Resolution plans may need to be developed for a large number of banks, including domestic banks with potential systemic consequences of receivership and foreign bank subsidiaries or branches engaged in critical functions where home authority plans are inadequate.
  - Resolution plans should address how BoM will apply legal powers to resolve a bank failure without disrupting critical functions and at least cost, including potential costs to taxpayers.
  - Fundamental guidance on resolution plans is set out in KA 11.6 of the Key Attributes.

*Source: cr18170 - Part XI of the BA, once a receiver is appointed by the BoM, he assumes legal control of the*

### Appendix I, Annex 4 of the

### Appendix I, Annex 4

### Resolution planning and execution

- The Key Attributes and the Assessment Methodology for the Key Attributes provide guidance and expectations regarding resolution plan requirements and the resolution planning function. The BoM should designate staff to become familiar with this guidance.
- First step in any resolution: imposing losses on shareholders and creditors.
  - "Shareholders’ equity should be written down to the extent necessary to absorb losses in resolution (including to zero). Any remaining losses should be borne by creditors to the extent practical."
  - Resolution planners must contemplate the bank’s liability structure and determine which classes of liabilities could be subject to imposition of losses. "At least, subordinated debt should bear full loss."
  - Note: "In principle, after all losses have been absorbed, some liabilities could be subject to conversion into equity to help recapitalize the bank."
- Group and parent implications:
  - Resolution of parent entities and other financial institutions in groups must be addressed. One advance measure: require the failing bank to issue subordinated debt to its parent holding company (such as its IHC) that could be written off to recapitalize the bank, effectively passing bank losses to the parent.
  - This approach "may, however, cause the failure of the parent, with potential implications for other of its subsidiaries and any parent of the parent (UHCs in the case of IHCs)." These implications must be addressed in bank resolution plans and coordinated with the FSC for group-wide resolution.
- Critical functions and transfers:
  - Resolution planners must assess whether the bank’s critical functions (and associated assets and liabilities) can be segregated and transferred (in advance or at time of resolution) to a third-party acquirer or a bridge bank. Residual assets and liabilities would be placed in receivership and liquidation.
- Government temporary ownership:
  - If other resolution options are not feasible, after imposing losses on shareholders and creditors "to the extent necessary and possible," the government must be prepared to take ownership and recapitalize the bank as a last resort.
- Execution detail and impediments:
  - Resolution plans must define in detail how envisioned resolution actions will be executed, including assessment of potential legal, structural, operational, and financial impediments to execution and use of relevant resolution powers.
  - Identified impediments should be eliminated or alternative resolution plans/work-arounds developed. Example: "The legal entity restructuring imposed on the two largest domestic banks is one example of steps that can be taken to eliminate structural impediments to resolution, and could be considered in the case of the third largest domestic bank, at least."
- Cross-border resolution capacity:
  - The BoM will need capacity to assess resolution plans of home resolution authorities where Mauritian subsidiaries/branches perform critical functions. Concerns with home plans must be addressed with home authorities; unresolved concerns may require BoM fallback plans.
  - Coordination with relevant G-SIB Financial Stability Board-sponsored Crisis Management Groups (CMGs) is relevant where applicable.

### Deposit Insurance Scheme (DIS)

- Draft DIS Bill (tabled by the BoM with MoFED in early 2016):
  - DIS would be a BoM subsidiary governed by a six-member Board, with at least one full-time staff (the Chief Executive Officer (CEO)) appointed by the Board; other staff could be seconded from the BoM. DIS funds would be held in an account in the BoM and invested per an investment policy approved by the Board. The DIS would have a "paybox plus" mandate.
- Coverage and timing:
  - Draft Bill envisions protection of local and foreign currency deposits, in Mauritius, of natural-person residents of Mauritius; level of protection to be set by regulation.
  - Exclusions: legal persons (except sole proprietors (SMEs)), natural-person depositors in overseas branches of Mauritian banks, and nonresident depositors in Mauritius are not eligible.
  - Payouts would be in local currency, must be initiated within 20 days and completed within 60 days. The Bill provides power to conduct purchase and assumption (P&A) transactions but is silent on mechanics.
- Funding and premiums:
  - An initial annual premium of 30 bps would be charged against insurable deposits (i.e., total deposits held by eligible depositors). Premium subject to annual review and potential change by the Board subject to the minister’s approval.
  - Back-stop funding: BoM authorized to lend to the DIS. The Bill includes provision that no payment can be made during the first five years. The draft Bill does not provide power to charge an extraordinary premium and does not specify a target fund balance.
- Assessment and recommended modifications:
  - Draft Bill is largely consistent with MCM TA recommendations and IADI Core Principles and deemed appropriate for the Mauritian context, although certain modifications should be considered.
  - Suggested changes:
    - Specify that the deputy governor accountable for the resolution function should be a Board member (anticipating establishment of resolution authority within BoM).
    - Reconsider the restriction limiting two Board members to representatives of NGOs as unnecessarily restrictive.
    - Ensure DIS overhead costs are minimized; CEO could be part-time and most staff functions undertaken by BoM staff.
    - Reduce the 20-day period to initiate payout to seven days at most.
    - Drop the provision that no payment can be made during the first five years.
    - Require BoM lending to the DIS to be fully collateralized, with any required loss backstop provided by MoFED.
    - Introduce the DIS Bill only after, or in conjunction with, establishment of the new bank resolution framework.
  - Preliminary analysis suggested a level of coverage of Rs 300,000, roughly equivalent to US$8,500 or 90 percent of per capita GDP.

### Emergency Liquidity Assistance (ELA) and solvency support

- Statutory provisions on exceptional financial assistance (Sections 6(1)(o) and 6(1)(p)) could be strengthened.
  - Section 6(1)(o) authorizes BoM "in exceptional circumstances, grant advances to financial institutions and such other entities on such terms and conditions and against such securities as Government or the Bank may issue."
  - Section 6(1)(p) enables BoM to "grant such advances as may be approved by the Board to the receiver, receiver and manager or liquidator of a bank in receivership, or in liquidation, as the case may be."
  - Concerns: Section 6(1)(o) is too broad and conflates ELA to solvent but illiquid banks with solvency support to actually or potentially insolvent banks; provision risks governmental interference with core central bank tasks and insufficient protection when BoM engages in quasi-fiscal activity.
- Good-practice elements recommended for an ELA legal framework:
  - ELA should be provided in exceptional circumstances, to solvent, viable institutions.
  - ELA should be at BoM’s absolute discretion.
  - ELA should be against collateral to the satisfaction of the BoM.
  - ELA should be against prevailing penalty interest rates.
  - ELA should be provided for limited periods of time.
  - If liquidity problems are bank-specific, ELA should be conditioned on a program specifying remedial measures the recipient bank will take to restore or improve liquidity.
  - These conditions should signal that liquidity support is not guaranteed.
- Solvency support and resolution funding:
  - Ideally, exceptional solvency assistance should be provided by fiscal authorities, not the central bank. If the BoM retains this role, statutory conditions should include a governmental decision that such lending is absolutely necessary for financial stability and an automatic explicit governmental guarantee in case the BoM suffers losses. Such lending should also be approved by BoM’s competent decision-making body.
- Operational policy recommendations:
  - Adopt a formal policy and operational framework for ELA that:
    - Defines limited circumstances eligible for ELA (e.g., context of resolution operations and as last-resort).
    - Specifies guidance for assessing solvency and viability, and collateral policy (recommendation: create a registry of collateral usable in emergencies).
    - Designs terms to minimize moral hazard.
    - Imposes oversight and conditionality on ELA recipients, including use of ELA funding.
    - Defines exceptions for systemic cases (ELA to insolvent banks or against insufficient collateral) tied to credible resolution scheme and government guarantee.
    - Clearly distinguishes liquidity provision for monetary policy from financial sector stability purposes.
- FX liquidity challenges:
  - The size and heavy reliance on foreign exchange (FX) funding of the Mauritius financial sector poses challenges in securing FX liquidity in stress.
  - Consider entering into swap arrangements with international authorities and other central banks to access sufficient FX.
  - BoM should revise framework for reserve requirements for foreign currency deposits as recommended by the 2016 Article IV Consultation and explore mechanisms (commitment letters and others) to incentivize foreign parent banks to provide liquidity to subsidiaries and branches.
  - Use prudential and macroprudential tools to reduce risks from large FX demands.

### Coordinating arrangements (FinStab)

- FinStab exists under BOMA Section 55A to facilitate effective crisis action; chaired by Minister of Finance and Economic Development and composed of Minister for Financial Services, governor of BoM, CEO of FSC, Director of the Financial Intelligence Unit, and Financial Secretary. FinStab "regularly review and ensure the soundness and stability of the financial system." FinStab has been largely inoperative and met once in November 2016.
- Recommended MoU among BoM, MoF and FSC to detail FinStab responsibilities and crisis procedures, including:
  - FinStab objectives: prevent, manage, and resolve financial crises at minimum economic and social cost, and minimize moral hazard; explicitly exclude "preventing bank failures" as an objective.
  - Signatories share responsibility for crisis preparation and management through FinStab, relying on existing legal powers and without prejudice to BoM autonomy under BOMA.
  - Commit to continuous collaboration on: (i) information exchange; (ii) analysis of threats to financial stability; (iii) contingency planning via stress testing and crisis simulation; and (iv) communication plans.
  - FinStab enabled to involve other domestic and foreign authorities where relevant.
  - Emphasize primacy of private sector solutions for bank recovery and resolution; public funds considered only as last resort and in systemic situations.
  - FinStab should meet at least quarterly.
  - Crisis communication plans coordinated and shared among members before release.
  - BoM responsibilities supporting FinStab: (i) alert FinStab to potentially systemic threats and provide relevant information; and (ii) adopt corrective actions in accordance with the Banking Act.
- Permanent secretariat:
  - Establish a permanent secretariat to provide logistical and technical support to FinStab.
  - Duties: organize information exchange, prepare meeting agendas, follow up on action items, coordinate contingency plan development by BoM and FSC departments.
  - Contingency plans should identify key responsibilities and personnel in BoM, FSC, and MoFED; define rules on public support; coordinate with foreign supervisors; specify legal basis for measures; and set public communication methods.

### Cross-border arrangements

- Current status:
  - No cross-border arrangements exist to address recovery and resolution planning or coordinated implementation of resolution schemes.
  - Two of the five D-SIBs are subsidiaries of G-SIBs; local operations are small relative to global business. BoM, as host authority, has not participated in recovery and resolution planning work undertaken by Financial Stability Board-sponsored Crisis Management Groups (CMGs).
  - BoM has not yet initiated recovery or resolution planning and therefore has not engaged relevant host jurisdictions as supervisory or resolution authority. There is currently no legal impediment for BoM to enter into cross-border agreements with foreign authorities.
- Recommended steps:
  - BoM should engage with relevant home and host authorities in recovery and resolution planning.
  - As host authority, priority should be to understand implications of recovery and resolution plans of the two D-SIBs that are G-SIB subsidiaries.
  - Obtain information on banks’ recovery plans (and perhaps resolution plans) initially through local subsidiaries, with follow-up with home authorities and/or CMGs as appropriate.
  - Information on resolution plans and implications for Mauritian subsidiaries should, in principle, be obtained from the CMGs.
  - BoM can rely on relevant FSB guidance to pursue engagement.
  - As home authority, BoM should keep relevant host supervisory and resolution authorities apprised of information relevant to recovery and resolution of Mauritian banks’ foreign subsidiaries and branches.
  - Effectiveness of BoM’s ability to resolve failures of Mauritian banks with overseas operations depends on good cooperation with relevant host authorities.

*Source: cr18170 - Appendix I, Annex 4 of the*

### Section 64 of the BA.

### Section 64 of the BA

### ANNEX I. FINANCIAL SOUNDNESS INDICATORS — Banking Sector (December 2012–2016)
- Coverage: Banking sector refers to deposit corporations, including nonbank deposit-taking institutions.
- Capital Adequacy
  - Regulatory capital to risk-weighted assets: 2012: 17.1; 2013: 17.3; 2014: 17.1; 2015 (June): 17.6; 2015 (Dec.): 18.4; 2016: 17.6
  - Regulatory Tier I capital to risk-weighted assets: 2012: 15.5; 2013: 15.1; 2014: 15.1; 2015 (June): 15.2; 2015 (Dec.): 17.0; 2016: 15.9
  - Capital to total assets: 2012: 8.5; 2013: 8.8; 2014: 9.3; 2015 (June): 10.3; 2015 (Dec.): 10.5; 2016: 10.0
- Asset composition and quality
  - Sectoral distribution of loans to total loans — Residents: 2012: 54.0; 2013: 57.8; 2014: 54.6; 2015 (June): 56.6; 2015 (Dec.): 59.4; 2016: 56.5
  - Sectoral distribution of loans to total loans — Nonresidents: 2012: 46.0; 2013: 42.2; 2014: 45.4; 2015 (June): 43.4; 2015 (Dec.): 40.6; 2016: 43.5
  - Other-domestic sectors: 2012: 19.7; 2013: 21.6; 2014: 19.2; 2015 (June): 20.2; 2015 (Dec.): 21.0; 2016: 15.2
  - Other financial corporations: 2012: 1.2; 2013: 1.2; 2014: 1.5; 2015 (June): 1.5; 2015 (Dec.): 1.5; 2016: 1.7
  - Nonfinancial corporations: 2012: 32.9; 2013: 34.7; 2014: 33.6; 2015 (June): 34.8; 2015 (Dec.): 36.8; 2016: 39.4
- Geographic distribution of loans to total loans
  - Domestic economy: 2012: 54.0; 2013: 55.6; 2014: 52.1; 2015 (June): 52.3; 2015 (Dec.): 55.0; 2016: 50.1
  - Advanced economies, excluding China: 2012: 5.9; 2013: 4.6; 2014: 4.9; 2015 (June): 5.9; 2015 (Dec.): 5.9; 2016: 8.1
  - Loans to other emerging market & developing countries, incl. China: 2012: 40.1; 2013: 39.9; 2014: 43.0; 2015 (June): 41.8; 2015 (Dec.): 39.1; 2016: 41.9
- Real Estate Markets
  - Residential real estate loans to total loans: 2012: 7.9; 2013: 8.7; 2014: 6.2; 2015 (June): 8.7; 2015 (Dec.): 9.1; 2016: 10.4
  - Commercial real estate loans to total loans: 2012: 7.4; 2013: 6.9; 2014: 5.0; 2015 (June): 5.6; 2015 (Dec.): 5.8; 2016: 6.1
- Asset quality metrics
  - Nonperforming loans (NPLs) to total gross loans: 2012: 3.6; 2013: 4.2; 2014: 4.9; 2015 (June): 5.7; 2015 (Dec.): 7.2; 2016: 8.2
  - NPLs net of provisions to capital: 2012: 12.4; 2013: 12.7; 2014: 16.4; 2015 (June): 17.4; 2015 (Dec.): 19.1; 2016: 18.6
- Earnings and Profitability
  - Return on assets: 2012: 1.4; 2013: 1.3; 2014: 1.4; 2015 (June): 1.1; 2015 (Dec.): 1.2; 2016: 1.3
  - Return on equity: 2012: 18.1; 2013: 15.3; 2014: 15.2; 2015 (June): 11.4; 2015 (Dec.): 12.1; 2016: 13.4
  - Interest margin to gross income: 2012: 74.0; 2013: 66.8; 2014: 49.0; 2015 (June): 62.0; 2015 (Dec.): 68.5; 2016: 67.0
  - Noninterest expenses to gross income: 2012: 48.5; 2013: 44.8; 2014: 36.9; 2015 (June): 40.6; 2015 (Dec.): 44.3; 2016: 41.9
  - Personnel expenses to noninterest expenses: 2012: 49.6; 2013: 51.5; 2014: 40.8; 2015 (June): 48.5; 2015 (Dec.): 50.5; 2016: 54.0
  - Trading income to total income: 2012: -0.6; 2013: 14.1; 2014: 35.4; 2015 (June): 15.0; 2015 (Dec.): 10.0; 2016: 8.7
- Liquidity
  - Liquid assets to total assets: 2012: 19.1; 2013: 22.5; 2014: 24.1; 2015 (June): 25.1; 2015 (Dec.): 27.1; 2016: 28.7
  - Liquid asset to total short-term liabilities: 2012: 27.5; 2013: 31.0; 2014: 30.2; 2015 (June): 31.7; 2015 (Dec.): 34.5; 2016: 35.1
  - Foreign-currency-denominated loans to total loans: 2012: 56.5; 2013: 55.9; 2014: 58.8; 2015 (June): 58.2; 2015 (Dec.): 55.9; 2016: 60.3
  - Foreign-currency-denominated liabilities to total liabilities: 2012: 52.4; 2013: 53.1; 2014: 54.5; 2015 (June): 53.8; 2015 (Dec.): 52.7; 2016: 54.2
  - Customer deposits to total (noninterbank) loans: 2012: 128.7; 2013: 137.0; 2014: 133.2; 2015 (June): 142.3; 2015 (Dec.): 146.8; 2016: 155.3
- Sensitivity to market risk
  - Net open positions in foreign exchange to capital: 2012: 2.1; 2013: 2.1; 2014: 2.4; 2015 (June): 2.8; 2015 (Dec.): 3.0; 2016: 3.1
- Note on regulatory capital definition: Total of Tier 1 and Tier 2 less investments in subsidiaries and associates.
- Source: Mauritian authorities.

### ANNEX II. STATUS OF 2015 FSAP RECOMMENDATIONS
- Structure: Recommendations grouped under A. Banking Supervision and Regulation; B. BOM initiatives in the Pipeline; C. Macroprudential Oversight; D. Banking Resolution and Crisis Prevention and Management. Each entry lists the recommendation, status, and an indicated implementation timeframe where provided.

- A. Banking Supervision and Regulation
  - 1 Establish framework for conglomerate supervision.
    - Recommendation: Institute, for each mixed/financial conglomerate, a lead/group supervisor; robust corporate governance framework; comprehensive risk management framework.
    - Status: A framework for consolidated and conglomerate supervision has been discussed at the level of the Joint Coordination Committee between the Bank of Mauritius (Bank) and the FSC. The lead/group supervisor has not yet been identified.
    - Deadline for implementation: Medium term
  - 2 Review and revise the framework for consolidated supervision.
    - Recommendation: To fully use the authority to undertake on-site examinations at banks’ affiliates, both locally and cross-border (Section 42 and 44 of BA 2004). Hold Supervisory Colleges for two local systemically important banks.
    - Status: Executive Summary of Onsite Examinations by the Bank have been exchanged with the FSC. Joint Examinations of some entities regulated by both the Bank and the FSC have been carried out. Hold Supervisory Colleges for two of our local systemically important banks.
    - Deadline: Near term
  - 3 Improve supervisory reporting requirements and analyses.
    - Recommendation: Clearer view of banks’ organizational structures, intra-group transactions and group entities’ risk profiles.
    - Status: Banking Act 2004 amended to make it more explicit for obtaining information from group entities; law amended to allow consolidated supervision of financial groups which have an interest in a banking entity such that the bank can issue guidelines and instructions to the bank’s intermediate and ultimate holding company. XBRL and BI portal planned.
    - Deadline: Medium term
  - 4 Develop a more intensive supervisory framework for D-SIBs.
    - Status: Guideline on D-SIBs issued since June 2014; capital surcharge applicable in a phased manner starting January 2016. A risk-based supervision framework is in process; will involve heightened oversight of D-SIB.
    - Deadline: Medium term
  - 5 Develop a more comprehensive remedial action program.
    - Recommendation: Link with triggers based on CAMEL rating and capital level benchmarks; additional enforcement tools (early warning signals; formal communication to the bank’s board; eliminate procedural delays; review Bank’s Guide on Intervention; publish remedial actions in BOM annual report).
    - Status: Early Warning Signals currently in progress within the framework for risk-based supervision. Triggers will be identified accordingly. CAMEL framework being reviewed as part of the risk-based supervision framework.
    - Deadline: Medium term
  - 6 Revise the CAMEL rating framework to make it more risk-sensitive.
    - Recommendation: Increase linkages in supervisory actions; increase benchmarks; make rating more proactive by identifying trends; incorporate trigger points for supervisory action.
    - Status: CAMEL framework is being reviewed as part of the risk-based supervision framework.
    - Deadline: Near term
  - 7 Amend Law(s) to facilitate conglomerate and consolidated supervision and strengthen corrective actions toolkit; extend definition of ‘control’ to related non-financial institutions.
    - Status: BOM Act 2004 and BA 2004 amended in September 2016 to facilitate conglomerate supervision and improve consolidated supervision. Regarding definition of ‘control,’ no amendment has yet been made.
    - Deadline: Medium term
  - 8 Revise prudential norms for large exposures (alignment with Basel norms).
    - Recommendation: Definition of ‘large exposure’ and ‘connected counterparties’; prudential limits; prudential limit exemptions alignment.
    - Status: Guideline on Credit Concentration Risk reviewed but not finalized. Reviewed by Supervision Dept.; changes made: definition of large exposure and connected counterparties aligned with BCBS norms; prudential limit being reviewed such that limit is based on tier 1 capital.
    - Deadline: Near term
  - 9 Revise prudential norms for related party transactions.
    - Recommendation: Definition of ‘related party’ and ‘transactions with related parties’; prudential limits and exemptions; review banks’ related party exposures at both gross and net levels.
    - Status: Guideline on Related Party Transactions being reviewed and not yet finalized.
    - Deadline: Near term
  - 10 Revise regulatory and supervisory framework for liquidity risk.
    - Recommendation: Focus on flow perspective with maturity mismatches; focus on significant individual currencies; revise/introduce prudential requirements and supervisory benchmarks.
    - Status: Guideline on Liquidity Risk Management reviewed; incorporates Liquidity Coverage Ratio (LCR). Draft Guideline sent to industry for comments.
    - Deadline: Near term
  - 11 BOM cooperation and coordination with the FSC.
    - Recommendation: Two-way sharing of supervisory information for consolidated and conglomerate supervision.
    - Status: Joint Coordination Committee between BOM and FSC reinforced. Various subcommittees set up, including "Working Group on Financial Stability and Financial Conglomerates." Work in progress.
  - 12 Introduce supervisory stress tests for banks.
    - Recommendation: Undertake periodic supervisory stress testing; extend scope to market risk, country and transfer risk, and operational risk.
    - Status: A consultant appointed to train staff to develop stress test models. Not yet implemented. Will be done in a phased manner. Currently focus is on credit risk.
  - 13 Enhance risk analysis.
    - Recommendation: Blend of onsite and offsite analysis; include stress test results; improve data collection and granularity of cross-border exposure; verify regulatory reports onsite; increase meetings with bank management; monitor rapid growth-related risks, management and risk management deficiencies, and banks reporting higher yield on loans/deposit interest than peers.
    - Status: Process could be enhanced through implementation of a Risk-Based Supervision framework. Returns being reviewed to capture granular information.

- B. BOM initiatives in the Pipeline
  - 1 Expanding scope of financial information collected through regulatory reporting and implementing analysis software.
    - Status: XBRL and BI portal. Returns will be extended to entities within the group for capture of more information.
  - 2 Increased use of targeted inspections to address risks identified through offsite analyses.
    - Status: Special Examinations are normally conducted for that purpose. Framework would be improved on implementation of Risk-Based Supervision.
  - 3 Update of examination procedures and report of examination process.
    - Status: Will be updated when Risk Based Supervision is implemented.
  - 4 Review of existing guidelines to update, rationalize and address uncovered risks.
    - Status: Guidelines on Information Technology Risk Management and LCR issued to industry for comments. Guideline on Recovery Planning in process of finalization.
  - 5 New/separate laws for Deposit Insurance Scheme.
    - Status: DIS Bill prepared and sent to Ministry of Finance for enactment.

- C. Macroprudential Oversight
  - 1 Strengthen Financial Stability Unit of BOM and make FinStab fully operational.
    - Status: Financial Stability Division restructured. FinStab has met a few times.
  - 2 Establishment of a Macro-Prudential Policy (MaPP) authority covering the entire financial system with prominent BOM role.
    - Status: Not yet implemented.
  - 3 Global Business sector requires close scrutiny and strengthened oversight due to role in providing liquidity to the banking system.
    - Status: More granular information will be requested from banks in this respect.
    - Priority: Priority
  - 4 Amplified and better quality supervisory data and information should be collected from banks for enhanced analysis.
    - Status: XBRL and BI portal.

- D. Banking Resolution and Crisis Prevention and Management
  - 1 Modify BA 2004 to introduce an effective resolution framework for financial institutions with precise triggers; clear resolution powers; specific exceptional actions for systemic cases; strictly regulated temporary liquidity assistance from the BOM (in collaboration with MOFED).
    - Status: Technical assistance sought from the IMF on this matter.
    - Deadline: Near term
  - 2 Design receivership as an efficient resolution tool; avoid using it to sell assets and liabilities to the central bank or create bridge banks financed by the central bank except in clearly-determined systemic cases.
    - Status: Technical assistance sought for review of the Banking Act.
    - Deadline: Near term
  - 3 Ensure Courts cannot revoke resolution actions taken by the regulatory authority.
    - Status: Suitable proposals for legislative amendments were proposed to the Ministry of Finance but were not taken on board. The matter is to be taken on board with the TA for amendment of the Banking Act.
    - Deadline: Near term
  - 4 Introduce an industry funded DIS with powers to facilitate resolution.
    - Status: DIS Bill has been prepared.
    - Deadline: Medium term
  - 5 Introduce through legal and regulatory changes a complete framework for crisis prevention and management; a duly designed FinStab; a crisis prevention and managing strategy; recovery and resolution plans for DSIFIs; arrangements with foreign regulators for cross-border resolution (in collaboration with MOFED).
    - Status: Technical assistance sought from the IMF on this matter.
    - Deadline: Medium term
  - 6 Create a registry of collateral and include a range of securities that could become eligible collateral in crisis situations.
    - Status: Not yet implemented.
    - Deadline: Near term
  - 7 Seek commitment letters from parent banks to provide sufficient liquidity to their Mauritian operations.
    - Status: Procedure already in place at licensing stage.
    - Deadline: Near term

*Source: Section 64 of the BA (Annex I and Annex II) — Mauritian authorities and FSAP recommendations status.*

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_Source: https://www.imf.org/-/media/files/publications/cr/2018/cr18170.pdf_