MAURITIUS Law and Practice Contributed by: Valerie Bisasur, Jean-Vincent Dacruz and Shane Mungur, BLC Robert & Associates
Quantity and Quality of Capital Requirements, Including Rules on Capital Buffers Banks licensed in Mauritius must meet capital ratio requirements set out in the BoM Guideline at two levels: • the bank standalone (“solo”) level, which measures a bank’s capital adequacy based on its own capital and risk profile; and • the consolidated (“group”) level, which includes the bank’s subsidiaries but excludes insurance or non-financial activities. The framework will also apply, on a fully consoli - dated 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 capital adequacy, banks must maintain: • 6.5% of risk-weighted assets as common equity Tier 1; • 8% of risk-weighted assets as Tier 1 capital; and • 10% total capital (Tier 1 plus Tier 2), exclusive of the capital conservation buffer. The capital conservation buffer, set at 2.5% of common equity Tier 1, ensures capital availabil - ity during stress periods. Banks are expected to maintain capital above the minimum require - ment, utilising the buffer only in periods of stress. If a bank’s buffer drops below the required level, it may continue operations but cannot distribute dividends, buy back shares or make discretion - ary payments until it regains compliance. Liquidity Requirements All banks licensed by the BoM are required to comply with its Guideline on liquidity risk man - agement, which includes maintaining a liquid -
ity coverage ratio (LCR). The LCR ensures that banks hold sufficient high-quality liquid assets (HQLA) that consist of cash or assets convert - ible into cash at little or no loss of value in the market, in order to meet their liquidity require - ments 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 liquid - ity coverage ratio has two components: • the value of HQLA under stressed conditions; and • total net outflows, as defined by the BoM’s parameters outlined in the guideline. If a bank’s LCR falls below 100% during financial stress, it must notify the BoM within one busi - ness day, justifying the HQLA use and outlining corrective steps. The LCR helps banks moni - tor and control liquidity risk, requiring bimonth - ly reporting to the BoM. During stress, banks must be able to increase reporting frequency to weekly or daily if necessary. Banks must also submit a maturity mismatch profile of assets and liabilities to the BoM and disclose liquidity data through their financial reports, website or regula - tory publications. LCR disclosures must follow a common template, including bimonthly aver - ages, number of data points, and daily HQLA averages over the quarter. Qualitative analysis is also required to contextualise the LCR data. Systemically Important Banks The BoM’s Domestic-Systemically Important Banks (D-SIB) framework, aligned with the Basel Committee on Banking Supervision (BCBS), aims to assess a bank’s impact on the domestic economy. The BoM evaluates a bank’s system - ic importance through indicators such as size, interconnectedness, substitutability, financial infrastructure and complexity. Given Mauritius’
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