Pillar II Moving on to large exposure limits falling under the principle 10 of the core principles, S 29 of the Bank Act

2004 requires the central bank to set out by way of guidelines on credit concentration limits related to the capital base of a bank. According to guidelines set on

exposure limits banks need to conduct periodic reviews of its risk management process to identify large exposures and risk concentrations and to ensure its integrity, accuracy, and reasonableness. The frequencies of the review vary depending on the size and complexity of individual banks.

Pillar III Exposures to related parties is catered for in section 28(2) of the Banking Act 2004 which requires the Bank of Mauritius is to determine limits to which a bank or non-bank deposit taking institution may grant credit to a related party. Financial institutions need to have adequate information systems to monitor its related party credit exposures and identify exceptions, along with a list of related parties, which should be updated regularly. Banks also need to ensure that disclosures of interest are made in accordance with the provisions of section 48 of the Banking Act 2004. Pillar I The assessment of country risk involves the determination of the nature of risks associated with individual country exposures and the evaluation of country conditions. Guideline on country risk management, drawing authority from Section 50 of the Bank of Mauritius Act 2004 and Section 100 of the Banking Act 2004, provides a broad framework for banks to assess measure and monitor country risk and would be included in the ICAAP programme. Banks have established internal policies for the management of country risk.

Pillar I Market risk defined as the risk of a loss, due to the day to day potential of an investor to experience losses from fluctuations in securities prices is divided into components namely; Interest Rate Risk; Equity Risk; Foreign Exchange Risk; and Commodities Risk.

Guideline on Measurement and Management of Market Risk drawing authority from Section 50 of the Bank of Mauritius Act 2004 and Section 100 of the Banking Act 2004 mentions that The Bank of Mauritius allows banks to compute capital charge using a mixture of: 1) Standardised Measurement Method (SMM) 2) Internal Model Method (IMM). In line with its respective internal market risk management policy, every bank is required to review and distinguish all assets and liabilities entries that have to be classified either in the trading book or in its banking book.

References: Guideline on Measurement and Management of Market Risk; Bank of Mauritius; Available on:https://www.bom.mu/pdf/Legislation_Guidelines_Compliance/Guidelines/Guideline_Market Risk.pdf [Accessed on 21.02.13]

Guideline on Credit Concentration Risk; Bank of Mauritius; Available on: https://www.bom.mu/pdf/Legislation_Guidelines_Compliance/Guidelines/Guideline_on_Cre dit%20con_%20Risk_Dec_11.pdf [Accessed on 21.02.13]

Guideline on Supervisory Review Process; Bank of Mauritius; Available on: https://www.bom.mu/pdf/Legislation_Guidelines_Compliance/Basel_II_Implementation/Draft_ Guideline_on_Supervisory_Review_Process.pdf [Accessed on 23.02.13]

Guideline on country risk management; Bank of Mauritius; Available on: https://www.bom.mu/pdf/Legislation_Guidelines_Compliance/Guidelines/Guideline_Country_R isk_Management.pdf [Accessed on 23.02.13]

Guideline on Related Party Transactions; Bank of Mauritius; Available on: https://www.bom.mu/pdf/Legislation_Guidelines_Compliance/Guidelines/Guidelines_RPT_201 21001.pdf [Accessed on 23.02.13]

S28 (2) The central bank may determine the maximum limits of credits and off-balance sheet commitments, which a bank or non-bank deposit taking institution may grant to a related party and to all related parties.

29. Limitation on concentration of risk (1) The central bank shall by way of guidelines set out regulatory credit concentration limits related to the capital base of a bank in respect of (a) individual large credit exposure, including off balance sheet commitments, to any one customer or group of closely-related customers; and (b) aggregate amount of large credit exposure to all customers and groups of closely-related customers.

48. Disclosure of interest (1) Any director or senior officer of a financial institution who is in any manner, whether directly or indirectly, interested in an advance, loan or credit from the financial institution shall (a) disclose in writing the nature and extent of his interest to the board of directors of the financial institution.

50. Power to issue instructions (2) The Bank may, for the efficient achievement of the purposes of this Act, by notice in writing to banks or to other financial institutions, issue instructions or guidelines or impose requirements on or relating to the operations and activities of and standards to be maintained by the banks and other financial institutions.

100. Guidelines or instructions (1) The central bank may make such guidelines or instructions as it thinks fit for the purposes of this Act.

(2) Any guidelines or instructions made under subsection (1) shall apply to all financial institutions or to one or more categories of financial institutions and shall take effect on the date of their issue to the financial institutions or on such later date as may be specified in the guidelines.

(3) Any person to whom guidelines or instructions are issued shall comply with those guidelines and instructions.