The report analyses the different sectors:
- The Non-Banking Financial Services Sector (NBFIs) accounting for 22.2% of GDP: which showed continued strength, supported by a favourable domestic environment despite global volatility. Balance sheets have expanded thanks to high interest rates, increasing the profitability and solvency of companies. The pension fund sector stepped up its equity investments, while the insurance sector benefited from increased penetration.
- The banking sector, which accounts for 89% of the financial sector, maintained solid stability, with a 5.2% increase in the assets of non-bank deposit-taking institutions (NBDTIs), reaching 72.7 billion rupees. Profit margins remained robust, with an annual profit of 2 billion rupees. Capital ratios exceeded regulatory requirements, guaranteeing a high level of solvency in the face of credit risk (Financial Stability Rep...).
- The insurance sector: The insurance sector experienced stable growth, with a 7.2% increase in life insurers' assets and an improvement in liquidity. However, the number of life insurance policies declined, although this was offset by investment income. The general insurance sector also grew, supported by higher premiums in the motor and health segments (Financial Stability Rep...).
- The Global Business Sector, which accounts for 8.2% of GDP, continued to grow, underpinning the Mauritian economy and foreign currency flows. Investor confidence in Mauritius as an international financial centre remains strong, despite global economic uncertainties (Financial Stability Rep...).
In the second half of 2023, conditions in the Global Business (GB) sector improved significantly, with reduced risks of a severe global economic downturn boosting investor confidence. This led to an increase in new GBCs and a decrease in GBC exits. The MIFC benefited from its compliance with FATF recommendations and its Investment Grade status. The sector's diverse activities required a risk-based approach to regulation and supervision, with a focus on managing risks such as Money Laundering and Terrorist Financing. Compliance levels improved to about 90% over three years.
in the second half of 2023, the GB sector showed steady activity, with the number of active GBCs growing at an annual rate of 2.1% by December. Despite ongoing global economic uncertainties, the sector remained resilient. Over the past three years, the number of GBC exits declined, and non-live GBCs decreased by 10.8% annually by December 2023. Additionally, the number of newly licensed GBCs (excluding conversions) increased by 8.0% annually, indicating continued stability and growth in the GB sector.
In the second half of 2023, the Mauritius International Financial Centre (MIFC) continued to be a key financial hub, with GBCs leveraging it to access Indian and African markets. As of December 2023, GBCs held US$700.8 billion in assets, with 73.4% invested in non-resident entities and 24.6% in cross-holdings among GBCs. They also held US$12.4 billion in deposits with banks, accounting for about one-third of total bank deposits.
Banks managed the volatility of GBC deposits effectively through robust liquidity risk management and buffers. GBC deposits rose by 3.7% to US$12.4 billion in December, although volatility persisted, with fluctuations in August but stabilizing later. Approximately 80% of GBC deposits were considered stable.
GBCs were a major source of foreign exchange (FX) deposits for banks, but this reliance decreased over time. By December 2023, GBC FX deposits made up 48.2% of total FX deposits, down from an average of 58% in previous years. In contrast, non-resident FX deposits increased to 35.6% of total FX deposits.
Cross-border banking activities remain integral to the sector's growth. Regulatory updates, including revised guidelines and the introduction of the Net Stable Funding Ratio in 2024, aim to manage financial stability risks and ensure sustainable funding structures. The banking system's FX liquidity buffers were strong, with FX liquid assets covering 126.2% of GBC deposits as of December 2023, supported by substantial deposits held abroad and investments in foreign securities.
Quarterly stress tests conducted by the Bank evaluated the resilience of liquidity buffers against sudden GBC deposit withdrawals. The tests simulated three levels of deposit withdrawals—30%, 40%, and 50%—to assess how banks would handle these shocks. Results showed that most banks' liquidity buffers were sufficient to manage these hypothetical scenarios based on December 2023 data, except for one bank that showed vulnerability under moderate and severe conditions but has a minimal market share.
The Financial Services Commission monitors risk in the GB sector using a risk assessment matrix, which indicated a decrease in high-risk GBC exits in the latter half of 2023. The percentage of high-risk GBCs dropped from 15.7% in June to 9.3% in December, and the proportion of GBC deposits at high risk of leaving the banking system fell from 26.1% to 21.7%. Banks continued to adopt a cautious approach by maintaining adequate liquid assets to manage potential abrupt withdrawals.
By the end of December 2023, credit risk in the GB sector had significantly decreased. Loans to GBCs represented just 8.3% of total bank loans, amounting to US$2.1 billion. These loans had risen steadily in the latter half of 2023, reaching pre-pandemic levels due to improved global economic conditions.
The asset quality within the GB sector improved notably, with a substantial decrease in the non-performing loan ratio from 17.7% in June 2023 to 10.4% in December 2023. The coverage ratio for impaired assets remained high at 78.1%.
Overall, financial stability risks from the GB sector lessened. A positive global economic outlook and stable investment flows helped maintain a stable operating environment for GBCs. The reduction in reliance on GBC deposits and diversification of bank funding structures further diminished systemic funding vulnerabilities in the banking sector.
In conclusion, and despite the global challenges, Mauritius maintained solid financial stability in 2023. The non-banking, banking and insurance financial sectors have shown notable resilience, although some require increased oversight to ensure sustainable growth and prevent systemic risks in the future.
For more information on Mauritius, please contact office@rosemont.mu