A Case Study Of The Bank Of Mauritius Finance Essay - Free Essay Example

Sample details Pages: 8 Words: 2543 Downloads: 5 Date added: 2017/06/26 Category Business Essay Type Analytical essay Did you like this example? The central bank (CB) of a country is one that has the right and duty to lend money to the government and commercial banks, set monetary policies, supervise and regulate the activities of financial institutions, mainly banks (Kock 1974, p. 14). Clear differences exist between central banks and commercial banks.  [1]  The central bank of Mauritius, responsible for these functions, is known as the Bank of Mauritius. This chapter will focus mostly on the role and the position that the Central bank holds in a country such as Mauritius. The way the CB is organised and managed will help in understanding how the bank proceeds in ensuring compliance by commercial banks. History of the bank The Bank of Mauritius (BoM) was founded in September 1967 under the Bank of Mauritius Act, and was modelled on the Bank of England. The bank is led by a Governor, who is also the Chairman of the Board of Directors. The Governor is appointed by the actual President, on the reco mmendation of the Prime Minister, and is the principal representative of the Bank who is also responsible for its general supervision. The Governor is answerable to the Board of Directors, who is appointed by the finance minister. The bank was established in order to cater for the needs of a more developed and complicated financial system and monetary dealings. The BoM was formed with the help of senior officers of the Bank of England, along the line of the well-known Radcliffe Report as a separate organisation with a life of its own, capable of generating advice, views and proposals that are something more than a mere implementation of its superiors instructions.  [2]  In other words, the bank should be independent legally and politically. However, as pointed out by Chandran Jankee, associate finance professor at the University of Mauritius, the independence of the BoM is subject to some debate, since it is doubtful whether the government in power controls the bank or whethe r the bank is free from politics (Arouff 2009).  [3] After the creation of the BoM, our monetary system became more developed, such that the system moved from a Sterling Exchange Standard to that of a managed currency, implying that the flexible role of the monetary authority becoming more important.  [4]  The country gained more control over its currency. The BoM is not the only financial regulator of the country. The Financial Services Commission (FSC) is responsible for supervising non- bank financial institutions. There is interaction between the two regulators.  [5]  As stated by Mr. Meetarbhan (2007), the Joint Coordination Committee was launched in order to avoid conflicts between the two regulators, so that the two bodies work together to regulate the financial industry.  [6]  This union between the two regulators will lead to more efficiency and thus, the country will be in a better position to compete with other countries. Role, duty and functions of the Bank of Mauritius All CBs, including the Bank of Mauritius, have some common tasks. The principle of any regulatory authority in any economic and financial system is to primarily attempt to save troubled financial institutions.  [7]  According to the Bank of Mauritius Act 2004, the functions of the central bank are to: conduct monetary policy and manage the exchange rate of the rupee, taking into account the orderly and balanced economic development of Mauritius; regulate and supervise financial institutions carrying on activities in, or from within, Mauritius; manage, in collaboration with other relevant supervisory and regulatory bodies, the clearing, payment and settlement systems of Mauritius; collect, compile, disseminate, on a timely basis, monetary and related financial statistics; and manage the foreign exchange reserves of Mauritius.  [8] The goals of monetary policy include economic growth, low inflation and stability of the currency, high e mployment, interest rate and financial market stability amongst others (Presson and Tabellin 1995, p. 250). Without the involvement of the BoM in the setting of such objectives, the countrys financial situation and market would have been highly volatile, rendering the country not very attractive to invest in and uncompetitive. It is, furthermore, in charge of setting interest rates and controls the money supply. The bank will adjust its strategy depending on the economic situation of the country and the also the world economy. For instance, if the economy is in a period of economic prosperity, the bank will aim at a reduction in money supply in order to avoid inflation. It can do so by, for example, increasing the rate of interest. As a result, people will be more interested in saving money than spending, thus, reducing the money supply in circulation. Kock (1974, p. 34) declared that CBs fulfil the functions of agent, adviser of the Government and banker of both the latter and c ommercial banks.  [9]  The CB can also be considered to be the financial advisor of the government, as it helps in managing public debt and devise strategies and plans to reduce such debts. By so doing, the bank helps the government to sustain economic growth and tries to adjust any surplus or deficit in the Balance of Payment. This is one of the methods used by the central bank to control the value of the currency of the country. Another important function of the CB is the supervision and regulation of commercial banks, both domestic and offshore, under the Banking Act 2004. Nineteen banks fall under the regulation of the BoM. Additionally, it also supervise foreign exchange dealers and money changers, licensed under the Foreign Exchange Dealers Act as well as non-bank financial institutions authorised to take deposits under the Banking Act.  [10]  Freixas and Rochet (1998, p.257) claim that bank regulation is justified by market failures that can come from the presence of market power, the importance of externalities, or asymmetric information between buyers and sellers.  [11]  Without the supervision of the BoM, commercial banks may, for instance, launch a service which might be disadvantageous to their customers. They may even adopt dishonest practices to get rid of weak competitors. Commercial banks in Mauritius are regulated and supervised by the Bank of Mauritius under the Banking Act 2004 which replaced the 1988 Act, with a view to reinforce and modernise the regulatory and supervisory system as well as to provide for the legal framework for the establishment and operations of offshore banks domiciled in Mauritius.  [12]  The BoM and compliance officers of commercial banks normally work hand in hand. In order to be more efficient, the Banking Committee chaired by the Governor of the Bank and comprising Chief Executive Officers of banks formerly holding a Category 1 Banking Licence decided to set up a Committee between the Regulato r and the Compliance Officers (Committee) of those banks to serve as a platform for interaction on Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) issues.  [13]  The bank should ensure that financial institutions adopt policies and procedures designed to control and manage risks effectively. As the regulator, it should monitor system-wide factors that might have or potentially have a negative impact on the financial condition of financial institutions.  [14]  The BoM holds a major part in the compliance practices of other financial institutions.  [15] Powers of the BoM  [16] The powers of the CB of Mauritius are mainly set out in the section 6 of the Bank of Mauritius Act 2004. Contrary to what many people may believe, CBs are not all-powerful. They have limited powers to put their policies into effect because of many constraints, both economic and political. One of the powers of the BoM is to provide financial services and facilities (depo sits, lending money etc..) to the Government, institutions and funds controlled by the Government, to financial institutions, any statutory or corporate bodies as the Board may approve, and to the receiver and manager or the liquidator of any financial institution in liquidation. In general, the bank has the power to deal with anything regarding the foreign exchange reserve and market. It can adopt relevant policies to deal with the development and any fluctuation in the money market. The bank has also some discretionary powers for the sale and re-purchase of bonds, treasury bills and any type of securities; in other words, it has the capacity of raising funds for the government. Besides of raising fund from the public, it can also borrow money from international institutions like the World Bank and the International Monetary Fund for any project which the board may approve. The CB of Mauritius has also the authority of controlling many issues concerning other financial bodies , such as, appointing any other financial institutions to act as its agents in Mauritius, and any other financial institutions abroad to act as its agents or correspondents abroad. It is able to regulate the fees and charges in respect of services provided by financial institutions and with the consent of the Minister, subscribe to, hold and sell shares of any corporation or company set up for the purpose of facilitating economic development.  [17] As it can be seen above, the BoM has several powers which it must employ with precaution, and within the legal and moral framework of the country. It must also be noted that, if ever the BoM, namely the Governor, makes abuse of his powers, he can be removed and replaced by the Prime Minister. Effectiveness of the Bank The CB will be effective in achieving its goals and objectives if it co-ordinates its various policies and fiscal policies made by the government, so that they can go side by side without hindering each other. If ever there is a clash between the policies, then the desired results will not be obtained. BoM regulation of commercial banks is essential, since without it, the dealings and affairs of these banks will become arbitrary. Since its establishment, the bank has been quite successful in achieving its objects. Except in some cases, where commercial banks have gone off track, like the case of MCB/NPF  [18]  . However, one cannot expect the central bank of a country to be perfect. As the ex Governor of the BoM, Ramesh Basant Roi, rightly said, The Board of Directors provides for the checks and balances in the event that abuses of authority are detected. Governors are not faultless Buddha. An example of the effectiveness of the BoM is present in this case, whereby the Bank adopted an approach that best served the welfare of the countrys financial sector and the economy. The BoM made sure that the measures taken by the MCB to fully restore its internal controls and procedures are carr ied through and that such controls are properly implemented and procedures are strictly followed.  [19] Independence of the BoM An independent central bank is not affected by political pressures and is free to set its policies without worrying about the consequences that such policies will have on the image of the government in power.  [20]  Such independence is very essential if a central bank wants to achieve its objectives.  [21]  A paper written by Carlstrom and Fuerst (2006, P. 2) pointed out that, if central banks are pressed on to adopt measures which seem beneficial, like inflating the currency in the short run to deliver a more favourable exchange rate, a higher output rate, or a lower level of inflation-adjusted debt. Such short-run inducement may contravene the aim of long-run price stability. One good example of the advantages of having an independent central bank is the case of New Zealand, whose average annual inflation dropped from 7.6% to 2.7% afte r giving more independence to the Reserve Bank of New Zealand. New Zealand Bank is ranked among the most independent ones. Even though the fall in inflation rate cannot be wholly attributed to the greater independence given to the bank, it has played a key role in achieving this target.  [22] Whenever the government interferes in the matters of the central bank, it is not always for the banks own good. Most of the time, not always though, ministers will be biased by their political situation, in giving suggestions and recommendations. To better illustrate this, let us consider a situation whereby the country is in a period of general election. The government in power will try to induce the population to vote for them, and thus, it may issue guidelines to the central bank to adopt measures which will look favourable now, but not that beneficial in the long run, just to look good in the eyes of the public. Because the bank does not have to worry about influencing an electorate to vote for it, it is more likely to act in the best long-run interests of the economy. For the case of the BoM, according to the law, the bank is an independent bank, because the Governor is accountable to the Board and not the parliament. This has been set out in the Bank of Mauritius Act 2004 for good reasons. The Bank has to be protected against the influence of politicians. It is the Governor who is responsible of formulating guidelines and policies. However, some have raised the question whether the bank is really independent politically, and not just in theory. When some argue that the BoM is run by the Governor, others claim that it is run both by the minister of finance and the Governor. As a consequence, there might be conflicts when drafting policies. While the Governor might be motivated by some factors, the minister might be motivated by others, more political ones. The fact that both the Governor and the Board are appointed by members of the Parliament implies that the government is bound to step into the matters of the bank.  [23]  The Prime Minister will not appoint someone who is against his opinions and way of doing things. If he feels that the Governor is not acting in accordance of his will, then he may devise a mean to make him step down and appoint someone else. However, given that it is the Board who has the power to direct and instruct the Governor to proceed in accordance with the majoritys decision at the Board level, may imply that if the government has no control over the Board, then it will not have any control over the running of the bank. It must be noted again that the Board also is appointed by the Minister of Finance. As a result, some members of the Board might be more committed to the Minister instead of the Governor. The case of the Ex Governor, Mr. Ramesh Basant Roi, may put some doubt on the autonomy of the Bank. Since he was removed from office as he was not in agreement with the then Minister of Finance. Most members of the Board were also against him. He was clear about the fact that the central bank should be completely free from political pressure. He said in an interview accorded to LExpress newspaper on the 12th April 2008, Under normal circumstances the fact remains that a central bank can and should ignore governments policy priority if it suspects attempts of misuse of certain levels of power to meet political ends at the expense of price stability or even growth. I reiterate that central banks have long term policy goals. But governments have short-term policy goals and interests.  [24]  According to him, the government should avoid interfering in the matters of the Central Bank, in order to have a sound financial industry and ensure that financial institutions do indeed comply with laws and regulations established.  Don’t waste time! Our writers will create an original "A Case Study Of The Bank Of Mauritius Finance Essay" essay for you Create order

National Philosophy of Education - 2127 Words

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Current Activities Matched With Future Goals free essay sample

Junior Year, almost to the end, close to being a senior, yet far from graduating. The question that never fails to be asked continues to come across with almost every adult I have a conversation with Where do you think you will go to college? It is almost like even the slightest stutter or pause to the question would be frowned upon by the adult who is just all so suddenly interested in my future decision. And then, the next question What do you think you want to study? Now this is the question I can just about answer without a doubt every time. I am sure of my future occupation, yet skeptical about my future college choice.With my occupation in mind, I am sure the perfect college for me will align with the perfect occupation and goals I have in mind. My name is Heather Willet and I want to become a future child-life counselor that specializes with children that have been through horrific circumstances medically, physically and emotionally. My goal is to one day work for Make A Wish Foundation where I can not only help make terminally ill childrens dreams become possible, but communicate with them on regards of meeting their emotional needs. I hope to work in a positive, creative, uplifting environment where I can simply talk too and encourage children all day long. I believe my current extra- curricular activities will most definitely help me get there. My first current activity I am involved in that will benefit my future, is my participation in doing volunteer work for my church in the childrens ministry where I teach Sunday School. By encouraging words and constant involvement in keeping the church classroom a positive, fun environment, skills are developed and practiced. I believe by connecting with the children in the church, and being involved in the ministry, I can learn from my experience and use that to aid my future occupation. My second current extra-curricular activity that would help achieve my future goals would be my part-time job as a babysitter for children from ages three to ten. I am connected with at least four different families where I watch their children on a monthly basis. By being connected with several types of kids, each having unique personalities I can learn to relate to various personality types. I believe my active involvement in spending quality time with kids ranging from different ages and different personalities, can develop skills that will help me relate to with whom I will work with in the future. My last extra-curricular activity I have been previously involved in are spring mission trips with my school. For the past three years, I have been given an amazing opportunity to travel and connect with people in foreign citys such as Guatemala City, Guatemala and San Salvador,El Salvador. My heart has been greatly impacted by these two countries. I believe by witnessing and communicating with children across the nation, learning about their hardships and teaching them about true joy and fulfillment will make an awesome impact in my future occupation. Due to my heart for children and my love of helping, I hope to one day adopt a child from a foreign country. I believe I have been blessed with the gift of encouragement and I am super excited to see how I can use that to achieve my goals. It is all about bringing peace, love and joy to this broken world and making it beautiful.

Michael Clayton Final free essay sample

He describes his job as a janitor for the firm, cleaning up messes for wealthy clients. This penchant for unethical behavior s mirrored in Michaels personal life where he gambles his money at underground poker tables and owes $80,000 dollars on a failing restaurant investment. The following sequence occurs just after Michael has discovered LLC-North documents detailing the companys decision to produce weed killer it knew was carcinogenic. His friend and once partner at the firm Arthur sought to expose before his untimely death.Of course we know u-north hired hit men to kill Arthur secretively before he could expose them, but presently Michael only has growing suspicion that his friends death wasnt the result of an accidental suicide as it was declared. The first shot in this sequence shows us Michael walking into his firm with proof his boss was aware of LLC-Norths cover-up and just as importantly to Michael, his friend was right. We will write a custom essay sample on Michael Clayton Final or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page The document blocks Michael and takes up half the frame to signify its importance.The part of Michael that values morality believes in the Truth, something even more important than him. Before a quick cut, we hear one of the hit men speaking with Karen Crowder, the U- north lava. Year who arranged the killing of Arthur. The hit man tailed Michael and knows he has the proof to expose I-?I-north. The two meet on the street, a series of quick cuts makes the scene feel frantic, jumping back and forth between Crowder and the hit man as she skims the document. The hit mans eyes wander from side to side being the shady character he is.Quick cut back to Crowder, who looks up in horror when she realizes what Michael has got his hands on. Back to Michael inside the law firm, he rounds a corner to reveal the office is abuzz. Michael in centered in the frame, in focus with employees surrounding him on all sides, out of focus. The composition provides continuity with the frenzied pace created by the dining in the aforementioned shots, creating a smooth transition. It also reinforces a motif of Michaels conflicted morals, feeling trapped by the firm.Throughout the rest of this sequence Michael will be framed in this context repeatedly. In Martyrs office Michael is presented with an $80,000 bonus check he asked for to cover his restaurant debt and a new three-year contract, all in the middle of trying to show him the U-north document. Barry comes in to explain Michael will have to sign a confidentiality agreement, and tries to shake him down over the $80,000. Once again Michael is framed in the middle, between Martyrs and Barry (framed at eye level with each other), caught between his morals and his immoral job. This is also depicted rather literally by Michael holding the u-north document in one hand, and his bonus in the other. Marty and Barry walk out leaving Michael alone, where we see a very split lighting down the middle of his face. The light shining in the window again reinforces he has the potential to rise above the corruption of the firm, but in this moment he cannot yet. The final two shots of this sequence mirror the first two. Once again the document is given significance by its size within the frame, only now it is folded up in Michaels pocket.The next shot shows Michael looking very obviously defeated, and once again trapped, within the confines of the elevator. He had just stormed in full of confidence, but he left in defeat, still unable to rise above corruption even with solid proof. The shots at the beginning Of this Sequence were quick and decisive, before we thought Michael was going to expose I-I-north. However, by the end they are longer and more contemplative when we learn Michael is still trapped.