HARVESH KUMAR SEEGOLAM: Mauritius bank rose to challenge of ensuring financial stability

Covid-19 has negatively affected the global economy and financial markets, our societies and our health. As all of this was unfolding, I took on the challenging role of governor at the Bank of Mauritius in March 2020. Like most countries we have been grappling with both the direct health impact and the wider economic fallout from the pandemic. 

My priorities to achieve economic stability have been threefold: action, protection and sustainability. These bywords will continue to guide our approach to responding to the pandemic and future challenges.

We have been able to maintain financial stability and protect the banking industry against contagion from the real sector. We have provided critical support to economic operators, SMEs, households and individuals through a mix of conventional and unconventional measures. These included moratoriums facilities, regulatory forbearance and a one-off government contribution for an economic stabilisation programme.

We also established the Mauritian Investment Corporation (MIC), which has successfully prevented the potential failure of systemically important domestic companies. This has contributed to maintaining financial stability and saving jobs, thus protecting the economy.

Today, our banking sector remains well capitalised, levels of bad debt are in check, liquidity is well above required levels and buffers are being rebuilt. This being said, though stress tests show that banks remain resilient, we must not rest on our laurels. As is the case for many central banks around the world, a critical point the Mauritian central bank must consider is how to phase out our support measures. This unwinding must be done cautiously, and in a way that does not entail risks to financial stability.

While mitigating economic risks stemming from the pandemic remains high on our agenda, there are also other priorities. We must continue to address climate change, stay abreast of the increasingly rapid pace of technological change, and keep our economy safe from rogue actors by ensuring a robust anti-money laundering and counter-terrorist financing regime. We stand shoulder to shoulder with the most stringent jurisdictions to ensure that Mauritius is no safe haven for money laundering or the criminal financing of terrorism.

In chairing the Mauritian Inter-agency Coordination Committee, which reports to the prime minister, I have been working with other stakeholders to strengthen legislation, boost our resources for enforcement and supervision, fast-track court proceedings and engage with businesses, both financial and nonfinancial, to help them stay safe.

We have successfully implemented an improved version of the risk-based supervision framework across all regulators and supervisors. We have seen an increase in collaboration between regulators, supervisors and law enforcement agencies. An important milestone is the recruitment of additional enforcement staff and the training of 100 graduates to ensure  there can be no stone left unturned in our fight against dirty money.

International bodies will come to their own independent conclusions on the progress being made by Mauritius on this front. People should rest assured that we have a long-term commitment to continually strengthen our financial systems and see to it that compliance is irrevocably adhered to across the jurisdiction.

Ensuring stability in a dynamic economy is never a static process. It requires us to constantly evolve, respond to challenges and to think ahead. Green finance and environmental, social & governance (ESG) issues are emerging as the next major areas of policy development and where central banks, by the very nature of their mandate, have a leading role to play.

Climate change has a range of financial and economic implications. The central bank’s climate change approach has two aspects: domestic and international. On the local front we recently released a “Guide for Issuance of Sustainable Bonds in Mauritius”. This guide marks a significant step in the bank’s commitment to building a green and sustainable financial ecosystem.

The guide has been designed to accompany and encourage issuers, investors and intermediaries in establishing a domestic sustainable bonds market. It provides an overview of the requirements and process for the issuance of sustainable bonds and the listing of these bonds on exchanges licensed in Mauritius.

We are also working on including ESG criteria in the investment analysis to improve the risk-return profile of the portfolio, develop a set of ESG indicators and supervisory initiatives with respect to green assets, and incorporate climate related scenarios in stress testing exercise.

With regard to fintech, we see both unprecedented opportunities to make financial services even more secure and joined-up, and potential for unprecedented disruption. New players are challenging old business models and regulatory policy needs to respond at speed to emerging technology to ensure that consumers are protected. So, we look forward to launching the Central Bank Digital Currency pilot early next year.

These are immense challenges, but if we can help ensure the right regulatory environment for the benefits of fintech to thrive, and for the risks to be well managed, then we can help grow and diversify the Mauritian economy even further.

Mauritius is working towards maintaining and strengthening its global reputation as a strong, tolerant and open African democracy, a great place to do business, and a vibrant international financial centre. Our geography makes us the ideal hub for greater trade between Africa and Asia, and we look forward to continuing to play a significant role in the unlocking of millions of potential new jobs and billions of dollars in GDP.

• Seegolam is governor of the Bank of Mauritius.