Banking Regulation 2024 Comparisons

The banking sector in Mauritius is primarily regulated by the Bank of Mauritius Act 2004, the Banking Act 2004 and regulations/guidelines issued by the Bank of Mauritius (BoM) under those Acts.  

The Bank of Mauritius Act 2004 establishes the BoM as the central bank of Mauritius and provides for its objects, powers and functions.  

The Banking Act 2004 sets out the framework for the licensing, operation, regulation and supervision of banks and other financial institutions (non-bank deposit taking institutions and cash dealers). Under this Act, the BoM has a wide discretion and powers to issue instructions or guidelines or impose requirements relating to the operations, activities and standards to be maintained by the banks and other financial institutions. To date, there have been several guidelines issued, which are regularly updated covering various topics, such as licensing conditions and description of business activities, use of cloud services, governance, ESG, capital adequacy, outsourcing, liquidity risk management and other prudential measures, application of Basel III, AML/CFT, amongst others.  

The banking sector is also subject to other legislation, which is described as “banking laws” under The Banking Act and is related to AML/CFT under the supervision of the BoM, namely the Convention for the Suppression of Financing of Terrorism Act, the Financial Intelligence and Anti-Money Laundering Act, the Prevention of Terrorism Act, the Prevention of Terrorism (International Obligations) Act and the United Nations (Financial Prohibitions, Arms Embargo and Travel Ban) Sanctions Act 2019 as well as the regulations and guidelines made thereunder.  

In addition to the general pieces of legislation such as the Companies Act, the Insolvency Act, Income Tax, other legislation is also relevant to the banking section as set out below.  

• The National Payment Systems Act 2018. This Act regulates and puts under the supervision of the BoM, the national payment systems and payment systems being operated in Mauritius, primarily for the purpose of ensuring their safe, secure, efficient and effective operation and accessibility to the public.  
• The Public Debt Management Act, pursuant to which the BoM can issue and manage loans issued by the government.  
• The Mauritius Deposit Insurance Scheme Act, which provides for a scheme to (i) protect insured depositors of a bank or non-bank deposit taking institution by providing insurance against the loss of insured deposits; and (ii) contribute to the stability of the financial system in Mauritius by ensuring that depositors have prompt access to their insured deposits, in the event of failure by a bank or non-bank deposit taking institution.  
• The Financial Services Act 2018, which provides for the establishment of the Office of the Ombudsperson for Financial Services to receive and deal with complaints from consumers of financial services against financial institutions. 
• The recently proclaimed Virtual Asset and Initial Token Offering Services Act 2021, which provides a comprehensive legislative framework to regulate the business activities of virtual assets service providers and initial token offerings.  

In Mauritius, “banking business” (as defined below) is a regulated activity and an entity intending to conduct such business activities must be licensed to do so by the BoM.    

An applicant may engage in either banking business, Islamic banking business, digital banking business or private banking business.    

Banking business means: “(i) the business of accepting sums of money, in the form of deposits or other funds, whether or not such deposits or funds involve the issue of securities or other obligations howsoever described, withdrawable or repayable on demand or after a fixed period or after notice; and  

(ii) the use of such deposits or funds, either in whole or in part, for: –  

(A) loans, advances or investments, on the own account and at the risk of the person carrying on such business;  

(B) the business of acquiring, under an agreement with a person, an asset from a supplier for the purpose of letting out the asset to the person, subject to payment of instalments together with an option to retain ownership of the asset at the end of the contractual period;   

(iii) paying and collecting cheques drawn by or paid in by customers and making other payment instruments available to customers; and includes such services as are incidental and necessary to banking.”    

Islamic banking business means any financial business, the aims and operations of which are, in addition to the conventional good governance and risk management rules, in consonance with the ethos and value system of Islam.  

Digital banking business is defined under the Act as “banking business carried on exclusively through digital means or electronically”.  

Private banking business means the business of offering banking and financial services and products to high net worth customers including, but not limited to, an all-inclusive money-management relationship.  

A bank licensed to carry on exclusively private banking business or exclusively Islamic banking business may apply to the BoM to conduct its licensed activities solely through digital means or through electronic delivery channels.   

Accordingly, an applicant may be granted with either:   

• a banking licence;  
• an Islamic banking licence;  
• a digital banking licence; or  
• a private banking licence.   

Application Process   

An applicant for a banking licence must be a body corporate and, in this context, it may take different form. The applicant may be a stand-alone entity or a branch or a subsidiary of a foreign bank. Depending on the form it wishes to take, the BoM may specify additional requirements to, or exemptions from, the legal, regulatory and supervisory framework applicable to that applicant.  

Every application for a banking licence, irrespective of the category, is made by submitting a duly filled and prescribed application form to the BoM together with a non-refundable processing fee or MUR250,000.   

The application will be reviewed and be approved by the BoM. It is therefore recommended that the applicant engages with the BoM in order to ensure that it is provided with all the information it requires.   

The BoM has also wide discretionary powers to request any information it deems necessary to determine whether the applicant is eligible to a banking licence and it would normally include extensive information about the applicant’s ability and expertise to meet the applicable licensing criteria. Amongst others, an applicant must provide a business plan giving the nature of the planned business, organisational structure and internal control, projected financial statements, including projected cash flow statements.  

In terms of administration, the applicant must demonstrate that it has at least ten suitably qualified full-time officers, including the CEO, the deputy CEO and key functional heads. The applicant must also have a principal place of business in Mauritius and its annual operating costs should not be less than MUR25,000,000.   

A successful applicant will have to demonstrate that it has the required policies, procedures and control in place to meet its licensing criteria, including the prescribed the minimum capital and liquidity ratio and other regulatory, statutory and prudential requirements as may be prescribed by the BoM.   

Pending the final determination of the application, the BoM may grant an in-principle approval, subject to such terms and conditions as it may determine. However, an in-principle approval must not be construed by the applicant as an authorisation to conduct banking business or create any legitimate expectation for a positive final determination of the application. The in-principle approval will automatically lapse if the applicant does not satisfy the terms and conditions attached to such approval.  

Under Section 31 of the Banking Act 2004, any person intending to acquire or increase their control over a bank which causes that person to acquire (directly or indirectly) a “significant interest” must seek the BoM’s prior approval.   

In this context, significant interest means:  

• owning, directly or indirectly, alone or together with a related party, or otherwise having a beneficial interest amounting to, 10% or more of the capital or of the voting rights of a financial institution;   
• having the ability, directly or indirectly, alone or together with a related party or the power, to appoint 20% or more of the members of the board of a financial institution; or   
• directly or indirectly exercising a significant influence over the management of a financial institution as the BoM may determine.   

Any person proposing to acquire a significant interest over a bank, must give 30 days prior notice to the BoM, and such notice must contain, amongst other things:   

• the name, personal history, business background and experience of that person and any other person by whom or on whose behalf the acquisition is to be made and it must also be accompanied with a certificate of good conduct issued by a competent authority (or an affidavit duly sworn stating any convictions for crimes and any past or present involvement in a managerial function in a body corporate subject to insolvency proceedings or having declared personal bankruptcy, in respect of each of the persons);  
• the financial position of that person and any other person by whom or on whose behalf the acquisition is to be made;   
• the terms and conditions of the proposed acquisition;   
• the identity, source and amount of the funds or other consideration used or to be used in making the acquisition; and  
• any plans or proposals which any acquiring party making the acquisition may have to liquidate the financial institution, to sell its assets or merge it with any company or to make any other major change in its business, corporate structure or management.  

The BoM has also a discretionary power to request such further information it deems necessary.   

Before approving a proposed acquisition, the BoM must consider various factors, including whether:   

• the proposed acquisition would give rise to undue influence or would result in a monopoly or substantially lessen competition;   
• the financial condition of any acquiring person might jeopardise the financial stability of the financial institution or prejudice the interests of its depositors;   
• the competence, experience or integrity of any acquiring person, or of any proposed director, chief executive officer or other senior officer, indicates that it would not be in the interest of the depositors of the financial institution or in the interest of the public to permit such person to acquire significant interest in the financial institution;   
• the proposed acquisition will not be conducive to the convenience and needs of the community or market to be served; or   
• any acquiring person fails to furnish the BoM with all the information that it requires.   

There are no restrictions on foreign shareholders in Mauritius.  

Any acquisition in contravention of Section 31 of the Banking Act will be deemed null and void and not entitled to any voting rights or payment of dividends.  

The Banking Act 2004 contains general provisions relating, amongst other things, to supervision, establishment of committees, board of directors, audit, remuneration, senior officers, and disclosure of interests. The BoM in its supervisory role, issued a Guideline on Corporate Governance, lastly updated in 2017 (“the Guideline”), to provide further guidance on the implementation provisions set in the Banking Act. The Guideline provides for principles and related requirements which aim at placing reliance on an institution’s internal processes and controls by an effective board of directors’ oversight, strong risk management, directors’ relationship with the senior management, effective internal and external controls, transparency, and compliance.   

The Guideline provides for some exemptions applicable to banks which are subsidiaries or branches of foreign banks, these exemptions have not been listed in this guide.    

The main features of the Guideline are as follows.   

Board of Directors 

The board of directors has a central role in the proper governance as it is responsible for the safety and soundness of the bank; it oversees the business strategy, organisation and governance structure, risk management, compliance and key officers. Some of the salient requirements are set out below.  

Composition  

• As a matter of principle, a board must collectively possess the necessary qualification and background for a balance of expertise, skills, adequate knowledge of its business/structure and strengths of the industry as well as the regulatory framework.   
• The board should consist of at least five natural persons, 40% of which must be independent directors (the Guideline defines the term “independent director”). If the chairperson is non-executive director, the board must be composed of 50% of independent directors.  
• Except with the prior approval of the BoM, a non-executive director may serve of a maximum of six years.   
• The chairperson shall be an independent director or a non-executive director.   
• The CEO must be a board member but must not be the chairperson.  

Responsibilities (non-exhaustive list)  

• The board is responsible for the bank’s corporate plan on short- and long-term and related strategy of the bank (in respect of its business objective, policies, risk management, capital adequacy, liquidity, compliance, controls, communication, staff compensation policies, operation budget) and the related supervision.  
• It is also responsible for the appointment, monitoring and assessment of the CEO, senior management/sub-committees/individual directors in their performance to achieve the corporate objects.  
• It ensures that policies, practices, controls and systems are in place, effective, reviewed and assessed periodically to: (i) achieve prudential balance between risk and return to shareholders, and (ii) be compliant with the regulatory framework.   
• It should be independent from the management with a clear demarcation of or responsibilities.  
• It implements policies and procedures to identify, redress and for ultimate decision-taking in respect of conflict-of-interest situation at all levels of the organisation.  
• It protects the interest of the bank and ensures that decisions of holding company or head office are not detrimental to the sound and prudent management of the bank, the financial health and legal interests of its stakeholders.  

Board sub-committees  

The Banking Act 2004 requires the board of directors of banks to establish committees to effectively discharge its responsibilities. The mandates of each committee must be clearly set out and be publicly available. Proceedings of the sub-committees must be reported periodically to the board. The committees should cover at least the following areas:

• audit;
• conduct review;
• risk management; and
• and nomination and remuneration.   

Senior Management  

TheCEO is responsible for day-to-day operations and the implementation of the corporate objectives approved by the board of directors through the senior management. The board sets criteria for measuring the CEO’s performance in achieving the approved objectives on an annual basis. The CEO is in turn responsible for implementing a performance and accountability regime for senior management.  

The senior management should implement business strategies, risk management systems, risk culture, processes and controls for managing the risks to which the financial institution is exposed and concerning which it is responsible for complying with laws, regulations and internal policies. This includes comprehensive and independent risk management, compliance and audit functions as well as an effective overall system of internal controls. Senior management should recognise and respect the independent duties of the risk management, compliance and internal audit functions and should not interfere in their exercise of such duties.  

Senior management is responsible for delegating duties to staff. It should establish a management structure that promotes accountability and transparency throughout the financial institution.  

Compliance  

While the board has the ultimate responsibility of ensuring compliance, the management must establish the parameters of compliance policy and its modus operandi. This would include identification of compliance risks and how these have to be managed throughout the organisation. The compliance function must be independent from the management to avoid any undue influence or obstruction. To be effective, the compliance function must have adequate authority, resources, independence and importance in the organisation. The compliance function should report directly to the board of directors or to a committee of the board.  

Internal Audit  

Every financial institution shall set out the mandate of internal audit. The purpose of the internal audit is to provide independent assurance to the board and senior management on whether (i) the internal control system is effective and adequately mitigate the risks, and (ii) the organisational goals are met and corporate governance processes are efficient. The head of internal audit department shall not be responsible for any other function within the bank.   

External Auditors  

Banks must appoint a firm of auditors (approved by the BoM) at each annual meeting. The firm of auditors must be independent, experienced in the audit of financial institution and have the adequate resources to carry out its duties. A firm of auditors cannot be responsible for the audit of a bank for more than five continuous years. The firm of auditors must prepare an annual report. The board of directors shall ensure that the external auditors: 

• maintain high standards of professional conduct; 
• have complete independence from the management with no possible influence; 
• have no conflicts of interest with the bank or a related party; and 
• bring to their attention any matters which require urgent action.  

Transparency  

Governance practices must be adequately transparent to shareholders, depositors and other market participants. They need complete and timely information on significant activities to hold a financial institution’s board and senior management accountable for the trust placed in them to achieve corporate objectives. The level of disclosure will vary depending on the size, structure, complexity of operations, economic significance and risk profile of a financial institution. However, as a minimum, a financial institution must disclose the board selection process, including the skills, background and experience essential to guide the financial institution’s affairs and to protect the interests of shareholders. It should also disclose the financial institution’s management infrastructure, including the board committees and their mandates and the number of times they have met. Other information for disclosure includes a description of a financial institution’s objectives, governance structure and policies, major shareholdings and voting rights, related-party transactions, remuneration and compensation policy, including criteria for performance measurement, remuneration/fees of directors, senior executives and key employees.   

The BoMGuideline on Public Disclosure of Information further provides that a financial institution shall disclose its approach to corporate governance in accordance with the requirements of the Guideline on Corporate Governance in its annual report. The financial institution shall outline the processes in place for receiving shareholder feedback on its activities and for dealing with shareholder concerns.  

Voluntary Codes and Other Initiatives 

National Code of Corporate Governance 2016  

The new National Code of Corporate Governance 2016 (the “Code”), issued by the Ministry of Financial Services, Good Governance and Institutional Reforms, is another tool that reinforces Mauritius’ commitment to uphold its standards and ranking in respect of corporate governance across the African continent. The Code has been designed to guide boards of directors to comply with governance practices. Compliance with concepts of accountability, fairness, transparency and reporting, amongst others, helps to minimise risks within companies. It also gives an indication of the company’s reputation and reassures stakeholders. The Code applies to public interest entities, which include banks and non-banking financial institutions, and is in line with the requirements of the BoM’s Guideline. The Code provides for eight principles and guidance which can be uniformly applied and adapted by each and every origination concerned. As opposed to the check box approach used by the previous code, the new methodology used allows for more flexibility and enables corporations to adapt each of the principles to their business model and internal structure.  

Code of Ethics and Code of Banking Practice  

The Code of Ethics and Code of Banking Practice is issued by the Mauritius Bankers Association (MBA), the association regrouping all banks registered in Mauritius. The professional codes which have been issued by the MBA aim at more transparency, respectively by:  

• setting out a common set of universally acclaimed principles pertinent to all banks, over and above those that they subscribe to as part of their internal Code of Ethics, with a view to further develop the commitment of the banking industry towards its customers and the community at large through best ethical standards and with the aim of continuing to improve bank-customer relationships; and 
• fostering good banking practices and enhancing the relationship and communication between banks and customers.  

The Codes include a statement of adherence by all members of the MBA to the underlying principles relating to corporate governance in line with the Code of Corporate Governance for Mauritius and the BoM Guidelines.  

The Banking Act 2004 provides for the requirements applicable to the appointment and supervision of directors and of senior officers of banks and to their disqualification. Senior officers include the CEO, deputy CEO, chief operating offer, chief financial officer, secretary, treasurer, chief of internal auditor, managers of a significant business unit of the bank or person with similar position and responsibility.  

The Banking Act 2004 sets the principles of fit and proper person, which the BoM must be satisfied of at the time of approving the appointment and reappointment of directors and senior officers. BoM must be notified and its approval requested at least 20 days before the date of appointment or re-appointment of the person. The notice must be accompanied by a certificate of good conduct and the BoM must be satisfied of the fitness and probity of the proposed candidate.  

The BoM issued a Guideline detailing the fit and proper criteria for the assessment of the fitness and probity of directors, senior officers and shareholders holding a significant interest. The Guideline contains a questionnaire, which will have to be completed by any applicant and submitted to the BoM for its assessment prior to obtaining the approval.   

According to the Guideline, a fit and proper person is a person who, when subjected to the criteria of the Guideline together with any other criteria prescribed by the board of directors, presents the likelihood of their being in a position to discharge their responsibilities in a competent, honest and correct manner in the best interests of the institution.  

The key criteria which (are further detailed in the Guideline) should apply and be demonstrated over time to the BoM are:  

• competence and capability;  
• honesty, integrity, diligence, fairness, reputation and good character; and  
• financial soundness   

The criteria outlined in the Guideline are to be applied individually, but it is their cumulative effect which will determine whether a person meets the test. A failure to meet one criterion will not, of its own, necessarily mean failure to meet the fit and proper person test. The process will involve a good measure of judgment, which must be exercised in a fair and judicious manner, always in the best interests of the institution and the sound conduct of its business.  

The application of fitness and probity tests may vary depending on the degree of a person’s influence and on the person’s responsibilities in the affairs of the financial institution.   

The Banking Act and the fit and proper criteria contained in the Guideline further set the responsibilities of the board, the CEO, the persons subject to the tests and external auditors.  

• The board of directors must establish a fit and proper person policy and implementation processes in line with the Guideline, apply the policy to directors, senior officers, and shareholders that are in a position to exercise significant influence on the institution. The board’s further responsibilities are to ensure that nominations, initiated by the board, of persons for election to the board of directors/senior officer must meet the test of fit and proper person set out in the Guideline before such nominations are placed before the shareholders’ meeting or the board of directors. In the event of the acquisition of shares by persons who are likely to be in a position to exercise significant influence on the financial institution, they must meet the test of fit and proper persons before their shares are registered in the register of shareholders, and the BoM must be advised if events have occurred that put into question their ability to meet the test. Providing the requirements of the Banking Act 2004 are complied with, including those with respect to prior notice to the Central Bank for the appointment of a senior officer, the notice shall be accompanied by a completed questionnaire outlined annexed to the Guideline and complete information on any objections or contrary views expressed by any director. It remains the board’s responsibility to keep the fitness and probity of all persons covered under the Guideline under constant review. The board shall, on a priority basis, take a decision in the case and initiate whatever action is necessary. The board’s proceedings shall be properly documented. The board shall advise the BoM of the matter and its decision.  
• The chief executive officer applies the fit and proper person test to other management positions below the senior officer level and reports to the board periodically on the result achieved.  
• It is the individual responsibility of senior officers, directors, and shareholders with significant influence to demonstrate that they are fit and proper persons. They must, accordingly, complete the fit and proper person questionnaire and provide any additional information that the board of directors may require to complete its investigation. They are further obliged to notify the board of any events or circumstances that have occurred subsequent to their initial fit and proper person assessment that might change the assessment or at least have a material bearing on it. The board shall investigate the information, on a priority basis, and decide on the individual’s fit and proper person status.  
• Should the external auditors become aware of information that points to non-compliance or potential noncompliance by a person with the fit and proper person requirements of the Guideline, they shall forthwith advise the board of directors of the matter and provide all relevant information. 

Section 18 of Banking Act states that no financial institution shall employ any person whose remuneration is linked to the income of the financial institution or to the level of activities on customers’ accounts.   

Except for those financial institutions that have been granted a dispensation from the BoM, every financial institution must appoint a Nomination and Remuneration Committee, consisting of a majority of non-executive directors. Their role will consist of:  

• recommending to the board candidates for board positions, including the chair of the board and chairs of the board committees;  
• recommending criteria for the selection of board members and criteria for the evaluation of their performance;  
• preparing, for the approval of the board, the remuneration and compensation package for directors, senior managers, and other key personnel, taking into account the soundness of risk taking and risk outcomes as well as any relevant information available on industry norms;  
• recommending to the board an incentive package, as necessary, to enhance staff performance, while ensuring that incentives embedded within remuneration structures do not incentivise staff to take excessive risk;  
• recommending nominees for board committees; and  
• commenting on the contribution of individual directors to the achievement of corporate objectives as well as on the regularity of their attendance at the board and committee meetings.  

Financial institutions are encouraged to consider the use of contractual provisions to allow them to reclaim incentive components of remuneration from executive directors and key management personnel in exceptional circumstances of misstatement of financial results or of misconduct resulting in financial loss to the financial institution.   

In a view of promoting transparency towards shareholders, depositors and other market participants, the board of directors of a financial institution is recommended to disclose the remuneration/fees of directors, senior executives and key employees and the disclosure should be timely, accurate, clear and easily understandable to inform all stakeholders effectively.  

Mauritius is a founding member of the Eastern and Southern Africa Anti-Money Laundering Group, which is an associate member of the Financial Action Task Force (FATF). Mauritius has also ratified and acceded to numerous international conventions, protocols and treaties to express its commitment towards the international community to combat money laundering and terrorist financing (ML/TF).  

Mauritius AML/CFT framework is spread across several pieces of legislations, namely:   

• the Financial Intelligence and Anti-Money Laundering Act 2002;  
• the Financial Intelligence & Anti-Money Laundering Regulations 2018;  
• the United Nations (Financial Prohibitions, Arms Embargo and Travel Ban) Sanctions Act 2019;  
• the Prevention of Terrorism Act 2002;   
• the Convention for Suppression of the Financing Terrorism Act 2003;  
• the Financial Services Act 2007; and  
• Part VIIIA of the Banking Act.  

The BoM is the designated AML/CFT supervisory authority of the financial institutions under its purview and is required to supervise financial institutions with respect to the AML/CFT requirements set out under the banking laws.  

To provide guidance and assist banks in complying with their AML/CFT requirements, the BoM has issued a Guideline on “Anti-Money Laundering and Combating the Financing of Terrorism and Proliferation” (the “BOM Guideline”).  

The Guideline sets out the broad parameters within which financial institutions (including their branches and subsidiaries), members of their board of directors, management and employees should operate in order to ward off ML/TF.  

The BOM Guideline stresses that financial institutions and their senior management are required to design and implement their own policies, procedures and controls in order to meet the relevant AML/CFT statutory and regulatory requirements.   

To mention a few, banks are required to conduct risk assessments, and apply a risk-based approach to their customer due diligence protocols, controls and procedures in order to mitigate and effectively manage the risks of ML/TF.   

The nature and extent of any assessment of ML/TF risks must be appropriate to the nature and size of the business of the bank, the type of transaction or product offered, and take into account all other relevant risk factors such as the nature, scale and location of the customer.   

Banks are also required report any transactions which give rise to a reasonable suspicion of ML/TF to the Financial Intelligence Unit (established under FIAMLA).   

In terms of corporate governance, banks are also statutorily required to appoint a compliance officer and a money laundering reporting officer (MLRO). The BOM Guideline recommends that the compliance officer and the MLRO to be two distinct persons. However, it is left to the financial institutions to decide whether the compliance officer may also assume the functions of the MLRO.  

Non-compliance with the BOM Guideline is punishable, on conviction, to a fine not exceeding MUR1 million and, if not remedied, a further fine of MUR100,000 for every day or part of a day during which the offence continues.  

The Mauritius Deposit Insurance Scheme was established under the Mauritius Deposit Insurance Scheme Act 2019 (the “Act”) to provide protection, up to a certain level, to depositors in the event one of licensed banks or non-bank deposit taking institutions fails.  

The scheme is administered and managed by the Mauritius Deposit Insurance Corporation Ltd, which is known as the agency. The agency’s powers and functions include, amongst others, the control and management of funds deposited into the deposit insurance fund, collecting premium contributions, making payments of compensation in respect of insured deposits or otherwise providing depositors with access to their insured deposits.   

In terms of scope, the depositor protection scheme extends to any individual who is a resident of Mauritius and who is eligible to compensation for an insured deposit in the event of failure of a deposit taking institution.    

Both local and foreign currencies deposits are eligible, up to a certain level, to protection under the scheme. They must, however, fall under the following categories:  

• deposits in savings accounts in both Mauritian currency and foreign currencies;  
• deposits in a current account in both Mauritian currency and foreign currencies;  
• time deposits in both Mauritian currency and foreign currencies; and  
• such other deposits or amounts as the board of the agency may determine.  

Deposits which are not granted protection under the scheme are:  

• where there is a contractual set-off agreement between a deposit taking institution and a depositor, any deposit up to the amount of any debt owing by a depositor to the deposit taking institution if such debt is matured or past due, or the maximum amount that would otherwise be eligible for compensation, whichever is lower; 
• any deposit of a related party;  
• any deposit which is frozen by a court order; and  
• such other deposits or amounts as the board may determine.   

The coverage limit per insured depositor is MUR300,000 or such other amount as may be prescribed. If sufficient funds are recovered following the sale of the failing deposit taking institution’s assets, the insured depositor may recover deposits in excess of the coverage limited/insured amount.  

Payments of insured deposits in foreign currency are made in Mauritian currency and the rate of exchange is determined by the agency.  

The scheme is primarily funded by the premium contributions paid by banks and non-bank deposit taking institutions. These financial institutions are required to pay into the fund a premium of 20 cents per 100 rupees on its insurable deposits or such premium amount as may be prescribed. It also derives funding from interests or other income derived through investments made out of the fund. Any investment made out of the fund must fall into the scheme’s investment policy, which is approved by the agency’s board. The investment policy strictly prohibits investments in deposit taking institutions and high-risk instruments. 

In Mauritius, bank secrecy is governed by common law and regulated by specific legislation. A recent judgment by the Judicial Committee of the Privy Council (JCPC), delivered on 10 October 2023, has provided clarity on the duty of confidentiality for banks in Mauritius. 

The JCPC agreed that in Mauritius there is:  

• a strict duty of confidentiality prohibiting banks from disclosing any information relating to the banking transactions of any of its clients; 
• an explicit and special legal framework for the permissible disclosure of information to third parties by a bank ‒ this is dictated essentially by the compelling public interest to safeguard the integrity of the national and international financial systems; 
• a legal framework, which precludes banks from making any disclosure except by compulsion of law or following a court order; and 
• a comprehensive and specific legislative framework, which sets out the conditions in which confidential information relating to a customer’s banking affairs may be disclosed to any of the designated authorities. 

In terms of legislation, Section 64 of the Banking Act imposes a strict duty of confidentiality and non-disclosure of any information that is held by the bank about the customer. Under Section 64(1) and (2) of the Banking Act, this duty extends to every person, including any service provider, such as accountants or external auditors, who, in the course of their professional relationship with the bank, has access to information regarding a customer. Section 64(1) further creates an obligation upon banking officers to be bound by an oath of confidentiality in a form prescribed in the schedules of the Banking Act.   

The JCPC clarified that Section 64 of the Banking Act imposes confidentiality obligations on individuals, not on the banks themselves. However, this does not mean that banks in Mauritius have no duty of confidentiality. In fact, banks have a duty of confidentiality under common law, which is influenced by English and French common law principles. In essence, it is understood that banks are contractually obligated not to disclose any information about a customer’s account or transactions to a third party. 

The JCPC clarified that Section 64 of the Banking Act imposes confidentiality obligations on natural persons only, not on the banks themselves. However, this does not mean that banks in Mauritius have no duty of confidentiality. In fact, banks have a duty of confidentiality under common law. 

The common law principles are heavily inspired by English and French common law duty of confidentiality. In a nutshell, the jurisprudence provides that it is an implied term of a contract between a bank and its customer that the bank will not disclose any information relating to that customer’s account or any of their transactions with the bank to a third party.  

The bank’s duty of secrecy to its customer is qualified – there are specific instances which may permit a bank to disclose information regarding its customer. Information may be disclosed by the bank if the customer has provided their express or implied consent, if there is a public duty to disclose, if the disclosure would protect the bank’s interests or if the bank is compelled by law or court order to do so.    

Additional legislation has been passed to empower other regulators to compel a bank, upon an order from the court, to disclose confidential information when there are reasonable grounds for suspicions of serious crime, tax evasion, money laundering, fraud, corruption and terrorist financing. These regulators include, amongst others, the director-general under the Prevention of Corruption Act 2002, the chief executive of the Financial Services Commission established under the Financial Services Act 2007, the commissioner of police, the director-general of the Mauritius Revenue Authority established under the Mauritius Revenue Authority Act and the Enforcement Authority under the Asset Recovery Act 2011.  

When these statutory bodies are entitled to obtain disclosure of information from a bank, they are in turn bound by a duty of confidentiality in the exercise of their statutory duties. Any prohibited disclosure of such information to a third party may amount to an offence which carries severe penalties.   

Breaches of banking secrecy are punishable both under the Banking Act and the Mauritian Criminal Code. Under the Banking Act, a breach of Section 64, constitutes an offence which is punishable by a fine not exceeding MUR1 million and a term of imprisonment not exceeding five years. Under the Criminal Code, the breach may result in a fine not exceeding MUR100,000 and a term of imprisonment not exceeding two years. 

In Mauritius, the Basel III implementation has been a gradual process. Prior to July 2014, the year Basel III was introduced, banks in Mauritius had to maintain a 10% minimum capital adequacy ratio consisting of a ratio of 5% Tier 1 capital and a similar ratio of 5% Tier 2 capital to risk-weighted assets.  

The BoM implemented Basel III in June 2014 through the publication of the Guideline on the scope of application of Basel III and eligible capital. The migration to Basel III capital requirements did not prove challenging as around 90% of the banks’ capital base was already in the form of Tier 1 capital. In addition to the capital adequacy ratio, the BoM introduced a capital conservation buffer of 2.5%, with its implementation staggered over a four-year period. A first tranche of 0.625% became effective on 1 January 2017 and, thereafter, on every 1 January, the capital conservation buffer would increase by a tranche of 0.625% until it reached 2.5% on 1 January 2020.  

In lieu of the counter-cyclical capital buffer, the BoM introduced macro-prudential measures to limit the build-up of risks in three key economic sectors which had witnessed unprecedented growth rates. These measures took the form of additional portfolio provision and higher risk weights for specific categories of exposures as well as debt-to-income ratio and loan-to-value ratio (LTVs were removed as from 6 July 2018).  

The Guideline was last revised in June 2021. All banks licensed under the Banking Act 2001 are required to abide by the Guideline in accordance with Section 100 of the Banking Act 2004.  

Risk Management Rules  

The board of directors of all banks licensed in Mauritius have the ultimate responsibility for the safety and soundness of their respective banks. The board of directors has the responsibility to approve and execute the strategy relating to risk management, capital adequacy, liquidity, risk appetite and internal controls. Section 18(6) of the Banking Act 2004 requires directors to establish such committees as the board deems necessary to discharge its responsibilities effectively. This includes, amongst others, a risk management committee, whose mandate must be clearly set out and available publicly.   

The responsibility of the risk management committee is to advise the board on the bank’s overall current and future risk appetite, overseeing senior management’s implementation of the risk appetite framework and reporting on the state of risk culture in the bank. Risk management is identified by the BoM as being critical to corporate governance. Risks may arise from direct exposures of a bank or through exposures of its subsidiaries, affiliates or counterparties. Each bank should be in a position to identify risks, assess their potential impact and have policies and controls in place to manage risks effectively. A bank must have a board-approved risk appetite framework, which is well understood throughout the organisation. All corporate, operational and financial policies should support the framework, which should be forward-looking and consistent with the financial institution’s short term and long-term strategic plan. The framework should set benchmarks as to the acceptable risk limits, taking into account relevant financial, operational and macroeconomic factors.   

With the exception of the CEO, the committee members should be non-executive persons and a reasonable number should have an adequate familiarity with risk management of the bank. The committee should have a clear mandate from the board. The chairperson of the board may be a member of the committee but not its chairperson. The chairperson of the committee shall ideally be an independent director, or, in the case of a subsidiary of a foreign bank, a non-executive director.  

The major tasks of the risk management committee include:  

• identification of principal risks, including those relating to credit, market, liquidity, operational, compliance, and reputation of the institution, and actions to mitigate the risks;   
• appointment of a chief risk officer who, among other things, shall provide assurance that the oversight of risk management is independent from operational management and is adequately resourced with proper visibility and status in the organisation;   
• ensuring independence of the chief risk officer from operational management without any requirement to generate revenues;   
• requirement of the chief risk officer to provide regular reports to the committee, senior management and the board on their activities and findings relating to the institution’s risk appetite framework;   
• receiving periodic reports on risk exposures and activities to manage risks from senior officers; and   
• formulating and making recommendations to the board on risk management issues.  

Quantity and Quality of Capital Requirements, Including Rules on Capital Buffers 

Banks licensed in Mauritius must comply with the minimum capital ratio requirements set out in the BoM Guideline on the scope of application of Basel III and eligible capital at two levels:  

• the bank standalone (“solo”) level capital adequacy ratio requirements, which measure the capital adequacy of the bank based on its standalone capital strength and risk profile; and  
• the consolidated (“group”) level capital adequacy ratio requirements, which measure the capital adequacy of the bank based on its capital strength and risk profile after consolidating the assets and liabilities of its subsidiary entities that are engaged in financial activities, except for entities involved in insurance and non-financial (commercial) activities. 

The framework will also apply, on a fully consolidated basis, to any holding company that is the parent entity within a banking group to ensure that it captures the risk of the whole banking group.  

For the purpose of determining the capital adequacy of a bank, the capital base of that bank shall be the sum of Tier 1 and Tier 2 capital net of regulatory adjustments applied. Tier 1 capital comprises of common equity Tier 1 and additional Tier 1 capital. These elements are subject to the following restrictions (exclusive of the capital conservation buffer):  

• common equity Tier 1 must be at least 6.5% of risk-weighted assets;  
• Tier 1 capital must be at least 8% of risk-weighted assets; and  
• total capital (Tier 1 capital plus Tier 2 capital) must be at least 10% of risk-weighted assets.  

In addition to complying with the minimum ratios relating to their capital base, all banks operating in Mauritius are required to maintain a capital conservation buffer of 2.5% comprising of common equity Tier 1 capital. The capital conservation buffer aims at promoting the conservation of capital and the build-up of adequate buffers above the minimum during normal times (ie, outside periods of stress), which can be drawn down as losses are incurred during a stressed period. Outside the period of stress, banks should hold buffers of capital above the regulatory minimum.  

A bank’s common equity Tier 1 capital shall first be used to meet the minimum capital ratios for the capital base before the remainder can count towards its capital conservation buffer. Where a bank’s capital conservation buffer falls below the capital buffer level, that bank will not be permitted to carry out any distributions but will be able to continue to conduct its business as normal. The BoM therefore imposes constrains on the distributions only and not on the operations of banks. Items subject to the restrictions on distributions include dividends, share buybacks, discretionary payments on additional Tier 1 capital and discretionary bonus payments to staff.  

Liquidity Requirements  

All banks licensed by the BoM are required to comply with its Guideline on liquidity risk management. The Guideline requires that banks in Mauritius maintain a liquidity coverage ratio (LCR), which is designed to ensure that banks have adequate inventory of unencumbered high quality liquid assets (HQLA) that consist of cash or assets convertible into cash at little or no loss of value in market in order to meet their liquidity requirements for a 30 days’ liquidity stress period, by which time, banks and the BoM will be able to take appropriate corrective action to resolve the stress situation in an orderly manner. The liquidity coverage ratio has two components:  

• the value of the stock of HQLA in stressed conditions; and  
• total net outflows, calculated according to the scenario parameters outlined in the guideline.  

During a period of financial stress, a bank may need to liquidate part of its stock of HQLA to cover cash outflows, as a consequence of which the LCR may fall below the minimum requirement of 100%. In such instances, the bank must notify the BoM in writing of its intent to utilise its stock of HQLA within one business day after the utilisation of the liquid assets and:  

• provide its justification for the utilisation of the HQLA;  
• set out the cause of the liquidity stress situation with supporting documents, as necessary; and  
• detail the steps which it has taken and/or is going to take to resolve the liquidity stress situation.  

The LCR should be used on an ongoing basis to help monitor and control liquidity risk. The LCR should be reported to the BoM on a bimonthly basis, as at the 15th and the end of every month, not later than 10 working days after the 15th and the end of every month, respectively. The LCR should be reported in such form and manner prescribed by the BoM. A bank should, however, have the operational capacity to increase the frequency to weekly or even daily in stressed situations.  

The Guideline compels Mauritian banks to report to the maturity mismatch profile of assets and liabilities in a prescribed format to the BoM. This disclosure must be made in accordance with the rules outlined in the Guideline.  

In addition, the Guideline requires that banks regularly report their liquidity data either in their published financial reports, via a direct and prominent link on their website or in publicly available regulatory reports.  

The disclosure of quantitative information about the LCR should follow the common template set out in the annex to the Guideline. The LCR information must be calculated on a consolidated basis and presented in a single currency. Data must be presented as simple averages of bimonthly observations over the quarter (ie, the average is calculated over a period of typically three months). Moreover, banks must publish the number of data points used in calculating the average figures in the template. Further, banks must publish the simple average of their daily HQLA over the quarter. In addition to the common template, banks should provide sufficient qualitative discussion around the LCR to facilitate understanding of the results and data provided.  

Systemically Important Banks  

The Domestic-Systemically Important Banks (D-SIBs) framework issued by the BCBS focuses on the impact that the distress or failure of banks will have on the domestic economy. The D-SIB framework is based on the assessment conducted by national authorities. These authorities have discretion in the identification of D-SIBs and in determining the additional loss absorbency requirements applicable to these financial institutions. In Mauritius, the BoM has issued the Guideline for dealing with Domestic-Systemically Important Banks in June 2014. The Guideline sets out the assessment methodology to be applied by the BoM for classifying an institution as being systemically important. The BoM applies an indicator-based measurement approach to determine whether a bank is considered as a D-SIB. The four indicators recommended by the BCBS have been retained, namely, size, interconnectedness, substitutability/financial institutions infrastructure and complexity. Moreover, given the specific characteristics of the Mauritian economy where banks have high exposures to large groups, a new category “exposure to large groups” has been included as a fifth indicator. In addition, the BoM only assesses banks whose Segment A assets represent at least 3.5% of GDP. In line with the recommendations of the BCBS, the additional loss absorbency requirement of D-SIBs must be met with common equity Tier 1. This additional capital takes the form of a surcharge for D-SIBs. The level of capital surcharge applicable to each D-SIB is then calibrated depending on the category in which that D-SIB is placed. The BoM periodically reviews the list of banks which are determined to be systemically important for Mauritius, with the last review being undertaken in June 2021.   

Mauritius has not yet implemented the Financial Stability Board Key Attributes of Effective Resolution Regimes.   

Under the current legal regime, conservatorship is the principal means of resolving a failing, or a likely to fail, bank.   

Conservatorship  

Under Section 65 of the Banking Act, the BoM may, in order to protect the assets of a financial institution for the benefit of its customers and other creditors, appoint a conservator, if it has reasonable cause to suspect that:  

• the capital of the bank is impaired or there is threat of such impairment;  
• the financial institution has or its directors have engaged in practices detrimental to the interest of its depositors or that the financial institution or its senior management officers have violated any provision of the banking laws, AML/CFT obligations or guidelines; and  
• the assets of the financial institution are not sufficient to give adequate protection to the bank’s depositors or creditors.   

When a conservator is appointed, the latter takes full control of the bank and has all powers necessary to preserve, protect and recover any of the assets of the financial institution, collect all sums of money and debts due to the bank. The conservator has also the power to suspend, in whole or in part, the repayment or withdrawal of any liabilities and pre-existing deposits of the financial institution.  

Unless the BoM determines otherwise, there is a time constraint of 180 days on the conservator to rehabilitate the financial institution.   

Compulsory Liquidation  

The BoM will appoint a receiver to manage and control a bank where it has evidence that the bank’s: 

• capital is impaired or unsound; 
• capital to assets ratio is less than 2%; 
• business is unlawful or unsafe; 
• continuance is detrimental to the interests of its customers; or  
• licence has been revoked.    

Duties of Receiver  

Under Section 77 of the Banking Act, the receiver must commence proceedings leading to the compulsory liquidation of the assets of the financial institution or take such other measures necessary in respect of the financial institution within a period of not more than 30 days or terminate the taking possession.   

Powers of Receiver  

During the receivership period, the receiver has a wide array of powers to manage, control or discontinue the financial institutions’ operation, stop or limit the financial institution’s payment obligations, to initiate, defend and conduct any proceedings, suspend, in whole or in part, the repayment or withdrawal of deposits and other liabilities of the financial institution and suspend or reduce the right of creditors to claim or receive interest on any money owing to them.   

Priority of Claims  

Claims against the assets of a financial institution during compulsory liquidation are settled in the following order of priority:   

• necessary and reasonable costs, charges and expenses incurred by the receiver, including their remuneration;  
• wages and salaries of officers and employees of the financial institution in liquidation for the three-month period preceding the taking possession of the financial institution;  
• taxes, rates and deposits owed to the government of Mauritius;  
• savings and time deposits not exceeding in amount MUR100,000 per account;  
• other deposits; and 
• other liabilities.  

Winding-Up of Financial Institutions 

A financial institution may also be wound up in accordance with the provisions of Sub-Part II of Part III of the Insolvency Act 2009 (Insolvency Act).  

Section 100 of the Insolvency Act states that the winding-up of a company may be:   

• by way of a winding-up order made by the court;  
• by way of a voluntary winding-up commenced by a resolution passed by the company; or  
• by way of a resolution of creditors passed at the watershed meeting.  

Voluntary winding-up may be:  

• a shareholders’ voluntary winding up where the company is solvent and the liquidator is appointed at a shareholders’ meeting; or  
• a creditors’ voluntary winding up where the company is insolvent and the liquidator is appointed by a meeting of creditors.   

With effect from the commencement of a voluntary winding-up, a liquidator is appointed and has custody and control of the financial institution assets.   

Priority of Claims  

Section 91 of the Banking Act provides that, in the event of the winding-up of a financial institution, all assets of financial institution must be made available to meet all deposit liabilities of the financial institution in the following order of priority:   

• deposit liabilities incurred by the financial institution with its customers;  
• deposit liabilities incurred by the financial institution with other financial institutions; and 
• other liabilities of the financial institution.  

In the ever-evolving landscape of global banking, Mauritius has recognised the importance of digital transformation and environmental, social, and governance (ESG) initiatives. In recent years, the parliament, the BoM and the Financial Services Commission have diligently legislated on various aspects of fintech, digital banking, ESG and sustainable finance. Their efforts have aimed to align the banking sector with customer demands, market expectations and international standards. 

To chart the future of banking in Mauritius, the BoM collaborated with the Mauritius Bankers Association and an international consulting firm. Their joint report, titled "Future of Banking in Mauritius", outlines a clear vision for the sector. This vision emphasises the need for: 

• innovative products and services; 
• new technology and business models; 
• compliance with international standards and regulations; 
• ESG; and 
• human capital development.  

The BoM aims to create a modern and secure ecosystem that positions Mauritius as a leader in banking services. To achieve this, the BoM is willing to think outside the box and explore new opportunities. 

In August 2023, the BoM, along with the government of Mauritius and other stakeholders, launched the Sustainable Finance Framework. This Framework governs the issuance of green, social, sustainability, thematic bonds, and other debt instruments by the Ministry of Finance, Economic Planning and Development, acting on behalf of the Republic of Mauritius. Its objective is to solidify Mauritius’ reputation as an international financial centre in the ESG domain within the region. 

The BoM is also keen to harness the potential of digitalisation. It has explored the idea of introducing a retail Central Bank Digital Currency (CBDC) called the Digital Rupee, intended for use by households and businesses. The pilot rollout of the Digital Rupee is planned for November 2023, with the expectation of encouraging digital payments and reducing reliance on cash. 

Furthermore, the BoM is closely monitoring the evolution of the virtual asset market after the enactment of the Virtual Asset and Initial Token Offering Services Act in 2022. The regulatory and supervisory frameworks for virtual assets are being strengthened, and the finalisation of the BoM Guideline for Virtual Asset-Related Activities is underway following industry consultations. 

The setting up of regional treasury headquarters by multinational corporations in Mauritius is another key initiative of the BoM. The expansion of treasury management offerings is expected to benefit banking operations significantly. 

To ensure compliance with international standards, the Republic of Mauritius is committed to undertaking a National Risk Assessment of money laundering and terrorism financing risks, with support from the World Bank. Legislative amendments to strengthen the existing anti-money laundering and countering the financing of terrorism (AML/CFT) framework are also forthcoming. Additionally, Mauritius plans to introduce the long-awaited Whistleblowing Act to enhance its fight against corruption. 

Overall, Mauritius’ banking sector is embarking on a forward-looking journey of digital innovation, sustainable finance and regulatory enhancement. 

Since early 2020, the BoM has taken several initiatives relating to the financial risks associated with climate change and environmental degradation, including the following.  

• It has joined the Network of Central Bank and Supervisors for Greening the Financial System.  
• In 2021, it released a Guide for the Issue of Sustainable Bonds. This Guide was published to provide an overview of the requirements and process for the issuance of sustainable bonds and the listing of these bonds on exchanges licensed in Mauritius. In the same line, in 2021 the Guidelines for the Issue of Corporate and Green Bonds in Mauritius issued by the Financial Services Commission further supplements the Guide by elaborating on various regulatory requirements to be adopted by the issuers in line with international best practices for the issuance of green bonds.  
• The BoM launched its Climate Change Centre. The Centre is composed of a main committee, under the chairmanship of the second deputy governor, with four task forces. The objectives are:  
1. to integrate climate-related and environmental financial risks into the BoM’s regulatory, supervisory and monetary policy frameworks;  
2. to review the BoM’s internal operations in view of reducing its carbon footprint and becoming a more sustainable organisation;  
3. to look into enhancing disclosures on climate-related and environmental financial risks;  
4. to support the development of sustainable finance;  
5. to build capacity and raise awareness for climate-related and environmental financial risks; and  
6. to bridge data gaps in relation to climate-related and environmental financial risks.  

Guideline on Climate-Related and Environmental Financial Risk Management 

In 2022, the BoM released a Guideline on Climate-Related and Environmental Financial Risk Management, which took into consideration the recommendations of the Network of Central Banks and Supervisors for Greening the Financial System (NGFS) in its Guide for Supervisors, “Integrating climate-related and environmental risks into prudential supervision”, issued in May 2020, as well as other related guidance issued by the NGFS, the Financial Stability Board, the Basel Committee on Banking Supervision and other regulators. The Guideline sets out the expectations of a prudent approach to climate-related and environmental financial risks with a view to enhancing the resilience of the banking sector against these risks. It is intended to assist financial institutions in embedding sound governance and risk management frameworks for climate-related and environmental financial risks within their existing risk management frameworks. Banks will be also in a better position to identify the risks and opportunities arising from the transition to a low-carbon and more circular economy and consider them in their strategy, engagement with their counterparts and other decision-making processes.  

The Guideline further outlines the broad principles which banks may use to develop their climate-related and environmental financial disclosures. The Guideline requirements apply to various areas of the organisation and operation of the banks, namely to business model and strategy, governance, internal control framework and risk management, implementation of scenario analysis and stress testing and disclosure of information on climate-related and environmental financial risks they are exposed to, the potential impact of material risks and their approach to managing these risks. The disclosure requirement will be effective as from financial year ending 31 December 2023.