In every institution, there are limits that regulate all the individuals within the community. Regulation is the process of promulgation, monitoring and enforcement of rules that is creating a new law to monitor individuals and to ensure that every individual is obedient. If these rules are not enough to regulate individuals, the enforcement of rules is required. Likewise in the financial market, the need of regulatory bodies is required. It can take form of a public authority or government agency but there are also independent regulatory agencies which are not associated with government. Financial regulation is important to maintain integrity in the financial market. If a new financial institution is to be opened, it must abide to certain requirements, restrictions and guidelines. There is no restriction or exemption; all financial institutions whether big or small must follow the same rules.
The existing financial structure of Mauritius is a non- unified one. The Financial structure should actually have been a transition one which would have firstly consisted of a Twin Peak Model which would lately have been merged together to form a unified structure. Nonetheless, there is still a regulatory body for the banking sector and another one for the non banking sector. The Bank of Mauritius (BOM) is the authority which has been set up for the regulation of banks. The non banking sectors, on the other hand are under the responsibility of the financial Services Commission (FSC). Both the FSC and BOM follow risk- based supervision approaches and formal strategies to centre their resources on those institutions and practices that include bigger risks. In recent years, the financial markets of Mauritius have undergone growth and have also been successful in weathering the global financial crisis reasonably well.
Despite this, due to the emergence of complex financial structures with overlapping activities in different areas of the financial sector, it was perceived that it might prove more efficient to carry out an integrated form of regulation for financial services. Moreover, regardless of past issues and the minor problems that may have occurred with the ministry of finance or government, the regulatory bodies of Mauritius have been doing a rather good job. The Banking sector of Mauritius kept performing well even after the problem that it faced due to the Barclays bank. Mauritius’s Banking sector was ranked 15th out of 144 in “The Global Competitiveness Report 2012-2013 of the World Economic Forum”. Nevertheless, the issue of whether to have separate specialist bodies or a unified supervisory agency continues to provoke intense debate amongst academicians, practitioners and in government quarters.
The structure of financial services sector throughout the world is undergoing dynamic changes. Will Mauritius need to redesign its financial regulatory structure to increase effectiveness and confidence remains the question. As there had been the past failure of 3 banks and 3 insurance companies, Mauritius requires vigilance and strong supervision in the maintenance of an overall stable financial system. Should Mauritius shift from a Twin peaks to a Single peak? First of all, we should keep in mind that having a Twin peaks or a single peak will not always guarantee effective supervisions. Both a unified and non-unified body will have its advantages and disadvantages.
In the case of Mauritius it might be thought that swapping to a single peak framework might improve effectiveness and confidence. However it would all be determined by the global trends in the financial market, the social and economic aspects of Mauritius. To transform its goals into action, Mauritius has to respond more forcefully to its dynamic environment. Policies should be strengthened to reassure investors of the solidity of the economic sectors and the transparency with which economic information is disseminated to economic operators and users. Such an approach would promote good governance and investor confidence, which, in turn, would contribute to sustained economic growth. As Mauritius is a relatively small jurisdiction, it does not have the advantage of having a long established track record nor an efficiently operating financial market. Hence unifying the regulatory body may be considered as necessary to heighten the credibility and the quality of financial sector regulation and supervision in a strategic approach to develop Mauritius as a more credible financial centre.
As stated by the Minister, Mr. Xavier- Luc Duval; Making Mauritius a financial center is not an easy task. It indeed takes some time to establish a good reputation and see it grow as a financial centre. To make this possible, the jurisdiction, existing laws and economic stability are very important. Unfortunately recent scandals such as the white dot case and theSunkai case prompted the authority to sound the alarm. It must thus be noted with regret that without a good regulatory framework and enforcement of laws, some financial intermediaries would not at all hesitate to deceive investors. Hence, the government might consider a unified body to be the best regulatory framework for Mauritius but at the same time the government might also opt to continue with the existing framework that is Twin Peaks but improve it. Mauritius would thus continue to be an attractive centre for financial services if well managed. It is very difficult to choose one of the financial regulatory structures. There is no best or ideal model that would fit every country.
According to the Manraj report, the main recommendations of the steering committee are as follows:
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