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Financial Institutions Must Prioritize Transparency in Governance Practices

In a bid to enhance transparency and accountability, financial institutions in Mauritius are required to disclose key information about their governance practices, including the board selection process, management infrastructure, and risk profile.

Corporate Governance Requirements

The Banking Act 2004 and the Guideline on Public Disclosure of Information issued by the Bank of Mauritius (BoM) emphasize the importance of good corporate governance practices. Financial institutions must disclose their approach to corporate governance in accordance with the requirements of the Guideline, outlining the processes in place for receiving shareholder feedback and dealing with shareholder concerns.

National Code of Corporate Governance

The National Code of Corporate Governance 2016, issued by the Ministry of Financial Services, Good Governance and Institutional Reforms, provides eight principles and guidance for boards of directors to comply with governance practices. The code applies to public interest entities, including banks and non-banking financial institutions, and aims to minimize risks within companies while giving an indication of a company’s reputation.

Code of Ethics and Code of Banking Practice

The Code of Ethics and Code of Banking Practice issued by the Mauritius Bankers Association (MBA) sets out a common set of principles for all banks to adhere to, promoting transparency and accountability in their dealings with customers. The code fosters good banking practices and enhances relationships between banks and customers.

Senior Management Registration and Oversight

The Banking Act 2004 provides for the requirements applicable to the appointment and supervision of directors and senior officers of banks, as well as their disqualification. Senior officers include CEOs, deputy CEOs, chief operating officers, and other key personnel.

  • Before appointing or reappointing a director or senior officer, financial institutions must notify the BoM and obtain its approval at least 20 days in advance.
  • The notice must be accompanied by a certificate of good conduct, and the BoM must be satisfied that the proposed candidate meets the test of fitness and probity.

Fit and Proper Person Test

The fit and proper person test is designed to ensure that individuals appointed or reappointed to key positions in financial institutions meet certain criteria, including competence, honesty, integrity, diligence, fairness, reputation, and good character. The test is applied individually, but its cumulative effect determines whether a person meets the required standards.

  • Financial institutions must establish a fit and proper person policy and implementation processes in line with the guideline, applying it to directors, senior officers, and shareholders who may exercise significant influence on the institution.
  • The board of directors has a responsibility to ensure that nominations for election to the board or appointment as senior officer meet the test of fitness and probity before being placed before shareholders or the board.

Conclusion

In conclusion, financial institutions in Mauritius are required to prioritize transparency in their governance practices, including the board selection process, management infrastructure, and risk profile. The Banking Act 2004 and the Guideline on Public Disclosure of Information emphasize the importance of good corporate governance practices, while the National Code of Corporate Governance 2016 provides eight principles and guidance for boards of directors to comply with governance practices. The Code of Ethics and Code of Banking Practice promotes transparency and accountability in banking practices, while the fit and proper person test ensures that individuals appointed or reappointed to key positions meet certain criteria. By prioritizing transparency and accountability, financial institutions can enhance their reputation and contribute to the overall stability of the financial system.