Public Statement

IMF / = World Bank FSAP Report gives boost = to Financial Sector development<= b> in Mauritius= .

The IMF/World Bank FSAP Mission - which completed its assessment of the Mauritius financial sector at= the beginning of the year - praised the Government of Mauritius' reform program= me. The report of the Mission was made public last week at a Seminar held= by the Ministry of Financial Services to disseminate the findings of the repor= t to the public and to private sector financial institutions.<= /p>

“Overall, the Mauritian finan= cial sector is currently in good health, and the short-term stability risks are modest” the Report concludes. The Report went on to highlight the relatively large and well-developed domestic financial system= and the growing offshore sector. Importantly, the Report noted a high lev= el of compliance with internationally accepted norms and best practices.

The Report gives support to the Government’s programme to diversify the financial sector. The Government of Mauritius invited the IMF/World Bank to undertake the FSAP re= view at its first opportunity. The objective was to demonstrate the significance attached to transparency and to seek guidance in respect of the reform measures that are being implemented currently.

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<= i>Sectoral<= /span> Assessment

Reforms pertaining to the non-banking fin= ancial sector were initiated two years ago - when the regulation and supervision of various non-banking financial businesses were brought under the sole regula= tory ambit of the Financial Services Commission. Since then, the FSC has implemented a number of reforms concerning the development, regulation and supervision of the non-banking financial sector. These reflect the recommendations proposed by the Report.

With regards to the specific sub-sectors = of the non-banking financial sector, the Report commends the domestic insurance industry which it says is “well developed". = It also states that "the large and medium sized companies are effic= ient and financially strong. Despite the high level of concentration, the insurance industry appears competitive, efficient, and reasonably profitabl= e”. The Report recommends the promotion of further consolidation in the industr= y - to ensure sound competition and greater safety by raising the level of mini= mum capital and introducing risk-based capital requirements.<= /p>

The Report identified a sophisticated set= tlement and payment system in place in Mauritius but considers the financial and capital markets to be relatively underdeveloped. It is recommended that the authorities address a numb= er of issues identified in the Treasury Bill auction process and pursue efforts to stimulate more efficient money and foreign exchange markets. The Report also recommends the harmonisation of tax treatment of interest income on financial instruments as a means to develop= the longer-term government and corporate bond markets.

As far as the pension sector is concerned= , the Report states that the multi-pillar pension system in Mauritius is well balanced and that the National Pension Fund is well run by the standar= ds of most developing countries. The Report views the occupational pensi= on funds as generally sound with most pension schemes appearing to be well man= aged with diversified assets, good investment returns and low operating costs.

Concerning the Global Business sector, the Report says that the sector does not represent a systemic risk for the dome= stic economy. However, it naturally gives rise to rep= utational risks associated with money laundering and terrorist financing. The Report recognises that the authorities in <= st1:place w:st=3D"on">Mauritius have taken steps to mitigate those risks by the vigorous legislative and institutional AML/CFT framework put in place over the year.

Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT)

The Report states that the legal and institutional framework on AML/CFT in Mauritius is broadly in line = with the FATF 40+8 Recommendations and that the Mauritian authorities have demonstrated strong political will and commitment to meeting international standards. It is noted that significant progress has been made over t= he past years in establishing a comprehensive AML/CFT regime. The prompt action of the authorities in addressing certain deficiencies is also noted = in the Report. It is recommended that further work be undertaken to impr= ove the coordination of law enforcement efforts and to expand the scope and foc= us of AML/CFT reviews during on-site inspections. To this end, the FSC w= as proactive in issuing Guidance Notes for certain regulated businesses, namely Insurance Companies, Investment Businesses and Management Companies.=

Financial Sector Regulation & Supervi= sion

The Report states that the Governme= nt has adopted a prudent and phased approach to integrated regulation and supervis= ion of the financial sector.

The FSC has begun to implement a risk-assessment approach to the regulation of all financial service provide= rs under its remit - which approach integrates and simplifies different models adopted in the past. The new approach seeks to identify and focus regulatory attention on institutions and activities that are likely to pose greatest risk to market well-being and confidence; and to act upon them in = an integrated manner so as to avoid any spill over effects in the event of fai= lure or collapse of any firm..

The FSC has already initiated a number of projects relating to the implementation of sound prudential and market cond= uct standards and policies for the various components of the non-banking financ= ial services sector.

Concerning specific sector regulation, the Report commends the work undertaken so far by the FSC in the insurance sect= or since its creation two years ago. It states that the regulatory frame= work in place has many strong elements, including reliance on solvency monitorin= g, prudent asset diversification, and international accounting and actuarial s= tandards. However, it also states that further strengthening is required especially in relation to risk management. The new draft insurance legislation will address these deficiencies. The Report recommends the enactment of comprehensive legislation on occupational pensions - which will enhance the security of retirement benefits and fill existing gaps relating to safe cus= tody of assets and adequate asset diversification. The FSC is finalising d= raft pensions legislation. Concerning the securities industry, the Report considers that regulation and supervision of the sector should be strengthened. The legislation under preparation currently addresses t= he matters highlighted by the Report, including governing legislation for Collective Investment Schemes.

The full Financial Sector Asse= ssment report may be downloaded by clicking

here

Financial Services Commission<= /b>

24 September 2003