The Regulatory Framework of Mauritius - Free Essay Example

Table of Contents What do you consider to be the best regulatory framework for Mauritius? Regulatory Framework of Mauritius A unified regulatory body (Single Peak) A unified regulatory framework may also give rise to some difficulties. A non-unified regulatory body (Twin Peaks) What are the main recommendations of the steering committee on the establishment of a new regulatory framework for the financial services sector in Mauritius? References What do you consider to be the best regulatory framework for Mauritius? In every institution, there are limits that regulate all the individuals within the community. Regulation is the process of promulgation, monitoring and enforcement of rules that is creating a new law to monitor individuals and to ensure that every individual is obedient. If these rules are not enough to regulate individuals, the enforcement of rules is required. Likewise in the financial market, the need of regulatory bodies is required. It can take form of a public authority or government agency but there are also independent regulatory agencies which are not associated with government. Financial regulation is important to maintain integrity in the financial market. If a new financial institution is to be opened, it must abide to certain requirements, restrictions and guidelines. There is no restriction or exemption; all financial institutions whether big or small must follow the same rules. Regulatory Framework of Mauritius The existing financial structure of Mauritius is a non- unified one. The Financial structure should actually have been a transition one which would have firstly consisted of a Twin Peak Model which would lately have been merged together to form a unified structure. Nonetheless, there is still a regulatory body for the banking sector and another one for the non banking sector. The Bank of Mauritius (BOM) is the authority which has been set up for the regulation of banks. The non banking sectors, on the other hand are under the responsibility of the financial Services Commission (FSC). Both the FSC and BOM follow risk- based supervision approaches and formal strategies to centre their resources on those institutions and practices that include bigger risks. In recent years, the financial markets of Mauritius have undergone growth and have also been successful in weathering the global financial crisis reasonably well. Despite this, due to the emergence of complex financial structures with overlapping activities in different areas of the financial sector, it was perceived that it might prove more efficient to carry out an integrated form of regulation for financial services. Moreover, regardless of past issues and the minor problems that may have occurred with the ministry of finance or government, the regulatory bodies of Mauritius have been doing a rather good job. The Banking sector of Mauritius kept performing well even after the problem that it faced due to the Barclays bank. Mauritiusà ¢Ã¢â€š ¬Ã¢â€ž ¢s Banking sector was ranked 15th out of 144 in The Global Competitiveness Report 2012-2013 of the World Economic Forum. Nevertheless, the issue of whether to have separate specialist bodies or a unified supervisory agency continues to provoke intense debate amongst academicians, practitioners and in government quarters. The structure of financial services sector throughout the world is undergoing dynamic changes. Will Mauritius need to redesign its financial regulatory structure to increase effectiveness and confidence remains the question. As there had been the past failure of 3 banks and 3 insurance companies, Mauritius requires vigilance and strong supervision in the maintenance of an overall stable financial system. Should Mauritius shift from a Twin peaks to a Single peak? First of all, we should keep in mind that having a Twin peaks or a single peak will not always guarantee effective supervisions. Both a unified and non-unified body will have its advantages and disadvantages. A unified regulatory body (Single Peak) Supervise both banking and non- banking sector May lead to economies of scale in regulatory activities Overall economic welfare increases as financial institution saves costs by adopting a single building with single disciplines Maintains clarity and cohesion of the objectives It is argued that an overlapping problem arises when there are separate agencies for regulations because the two functions are interrelated. This can be avoided by unifying the system As Mauritius is a relatively small jurisdiction, its attractiveness as a financial centre of high standing might be increased with the adaptation of a single peak A single manager structure would be responsible for overseeing all activities in the financial sector and this might ensure that some financial institution do not have an unfair advantage for competing for customers It is also believed that a single regulator can respond much more quickly and effectively to market innovation and development It strengthens accountability of supervisors Unification would also result in cost saving through a single set of central support services by the sharing of infrastructure and administrative resources. Unification also helps in retaining a body of skilled professional staff by developing coherent human resource policy In a twin peaks, each supervisor will tend to defend his separate turf whereas in a single peak, both supervisors will cooperate and work together Due to advancements in technologies, there has been the blurring of boundaries between the banking, securities and insurance sectors. Hence it is said that a single regulatory body might be more efficient A unified regulatory framework may also give rise to some difficulties. It might be difficult to set up a single set of objectives for both the banking and non-banking sector Can suffer from the Christmas tree effect If a problem arises, the whole sector can be affected It may undermine the overall effectiveness of supervision by not recognizing the unique characteristics of the banking, securities and insurance industries. May only work in certain countries and may be more suited for developed financial systems. A non-unified regulatory body (Twin Peaks) 2 different agencies supervising banking and non-banking activities Might create conflicts between agencies. In the case of Mauritius, the Bank of Mauritius might make some decisions which the Financial Services Commission do not approve If the staff are responsible and know their respective works well, it might be better to work in a non-unified regulatory framework rather than a unified one Through a Twin Peaks, more emphasis might be put on the different sectors. For eg: If a problem arises in the banking sector and at the same time another problem arises in the insurance sector; tackling the problem might be easier as the BOM would concentrate only on the banking sector while the FSC on the insurance. This will also prevent work overload If tomorrow a problem arises with a leasing company and a proper solution is not found. People might hold the regulatory body responsible. Hence, if there is a unified regulatory body, the banking sector as well might be affected as people will lose trust When adopting a non-unified regulatory body, it may be possible to achieve more than the desired result if there are good cooperation Even though it is believed that a single regulator can respond much more quickly and effectively to market innovation and development, the Twin Peaks as well might be as effective if the personnel is well trained and knows his responsibility In UK it was seen that they are adopting the Twin Peaks model in the view that: Each supervisory arm would make their own, separate, set of regulatory judgments against different objectives while coordinating internally to maximize the exchange of information in what is termed independent but coordinated regulation. In the case of Mauritius it might be thought that swapping to a single peak framework might improve effectiveness and confidence. However it would all be determined by the global trends in the financial market, the social and economic aspects of Mauritius. To transform its goals into action, Mauritius has to respond more forcefully to its dynamic environment. Policies should be strengthened to reassure investors of the solidity of the economic sectors and the transparency with which economic information is disseminated to economic operators and users. Such an approach would promote good governance and investor confidence, which, in turn, would contribute to sustained economic growth. As Mauritius is a relatively small jurisdiction, it does not have the advantage of having a long established track record nor an efficiently operating financial market. Hence unifying the regulatory body may be considered as necessary to heighten the credibility and the quality of financial secto r regulation and supervision in a strategic approach to develop Mauritius as a more credible financial centre. As stated by the Minister, Mr. Xavier- Luc Duval; Making Mauritius a financial center is not an easy task. It indeed takes some time to establish a good reputation and see it grow as a financial centre. To make this possible, the jurisdiction, existing laws and economic stability are very important. Unfortunately recent scandals such as the white dot case and theSunkai case prompted the authority to sound the alarm. It must thus be noted with regret that without a good regulatory framework and enforcement of laws, some financial intermediaries would not at all hesitate to deceive investors. Hence, the government might consider a unified body to be the best regulatory framework for Mauritius but at the same time the government might also opt to continue with the existing framework that is Twin Peaks but improve it. Mauritius would thus continue to be an attractive c entre for financial services if well managed. It is very difficult to choose one of the financial regulatory structures. There is no best or ideal model that would fit every country. What are the main recommendations of the steering committee on the establishment of a new regulatory framework for the financial services sector in Mauritius? According to the Manraj report, the main recommendations of the steering committee are as follows: A unified financial regulatory authority, covering both banking and non-banking activities, be established in a phased manner, as follows: Phase 1consist of the immediate establishment of a Financial Services Commission. Phase 2 consist of the eventual integration of the Financial Services Commission with the Bank of Mauritius. The Financial Services Commission will be responsible for the licensing, regulation and supervision of all non-bank financial services. It will also be responsible for the protection of the rights of consumers of financial services. The Financial Services Commission will take over the duties and functions of the Stock Exchange Commission, the Insurance Division and the Mauritius Offshore Business Activities Authority (MOBAA) as well as the regulation of all presently unregulated activities in the financial sector. The Financial Services Commission will be managed by a Board which will be chaired by the Managing Director of the Bank of Mauritius. There will also be the presence of a Vice Chairperson and such other members as may be appointed by the Minister. The Financial Services Commission will facilitate the smooth integration of the onshore and offshore activities. An appropriate legal framework is proposed for establishing the Financial Services Commission. A Financial Services Advisory Council will be established with the objective of giving overall direction and advice towards the development of the financial services sector. The Chairperson and Vice-Chairperson of the Advisory Council will be the Minister of Finance and the Minister responsible for Financial Services respectively. The other members will be the Governor of the Bank of Mauritius, the Chairperson and the Chief Executive of the Financial Services Commission, as well as practitioners from Mauritius and from overseas having an extensive exposure to financial sector development. The establishment of a Financial Services Promotion Agency (FSPA) is being proposed as a separate entity. It will act as a one-stop-shop for the development and promotion of the financial services industry. The FSPA will work in close collaboration with the Board of Investment to devise strategies to attract investors to the financial sector of Mauritius. The FSPA will also be responsible for human resource development and keep abreast of technological advances in that sector. References Business Mega; 9th April 2013 https://business.mega.mu/2013/04/09/preserve-integrity-financial-system-mauritius/

Learning About Financial Aid Isnt Just For Parents of High School Seniors

HomeFinanceFinancial aidLearning About Financial Aid Isnt Just For Parents of High School SeniorsThis page may contain affiliate links.Oct 23, 2019Back in 2016, in a huge shift to make it easier to fill out financial aid forms and get financial aid decisions back from colleges earlier, yearly FAFSA forms became available on October 1st instead of January 1st. In addition, families then had to use tax information from two years prior to when their student started college. These changes allowed families the chance to get financial aid information earlier from colleges and in turn have earlier conversations with their student about where to attend and how much college will cost. The changes made a difference, but, the real key to determining college affordability is to start doing research and having conversations much earlier than senior year. Ideally families should begin the process of understanding college costs and financial aid at the start of high school. Here are some tips for starting the process of understanding financial aid and how much college will cost your family Know Your Expected Family Contribution Your EFC is the magic number the federal government generates when you fill out the FAFSA. This is the key to knowing the amount you will be expected to contribute to your child’s education. The amount will probably seem unrealistically high to you (and it could conceivably be even higher), so it’s important to know early what you’ll be on the hook for so you can prepare. [How FAFSA Calculates Your EFC] If your income and assets don’t change from year to year, it’s easy to predict early with the College Board’s EFC calculator, which will also calculate your â€Å"institutional EFC† for private colleges. Use the federally generated EFC as a guideline, not the final word, because many colleges will charge you more than your EFC. Your initial EFC will be based on tax return informationfrom two years prior to the year your child begins college. Essentially, the tax year ending with December of your students high school junior year, is the tax year information that will be used to determine your EFC and financial aid eligibility for when your child applies to college. As you know these timelines, youd be prudent to start understanding financial aid, AT LEAST when you student is in 10th grade and starting 9th grade would be even better. Learn more How is Your FAFSA EFC Calculated? Understand How the FAFSA is Used It’s not just the federal government who uses the form for financial aid. Many states, institutions, and scholarship programs use the FAFSA to determine financial aid eligibility for state and institutional awards, too. Even if your student doesn’t qualify for a federal Pell grant or work-study at a public university, he may qualify for institutional aid and work-study at a private college as determined by the FAFSA. Keep yourself on track with the financial aid process by knowing what you need to do and when Download our Financial Aid Timeline * indicates required Email Address * First Name * Last Name * Understand Need Versus Merit Aid There are basically two types of financial aid for college: Need-based aid and Merit Aid, which translates into Merit Scholarships, and itis important to understand their differences. Need-based aid is aid that is predicated on a family’s income only. Your family may qualify for need aid at a private college but not at a public university, or you may qualify for aid at both. Each college is different. Merit-based aid is typically awarded for top academic performance, but also for less obvious attributes, such as leadership, community service, music, geographic diversity, and sports. Colleges want to improve their reputation and national ranking, and one way to do that is to attract exceptional students. Some colleges award automatic scholarships for a top GPA range. Families of all income levels who have students who excel in academics, sports or the arts should look for merit scholarships. Families whose income levels will not cover college costs should look at colleges that give good need-based aid. Learn more: Using Data To Find Merit Scholarships Quick report to help you compare up to 3 schools on the important statistics you should be looking at for either need or merit-based aid. How to Help Your Child Prepare For the ACT/SAT Becoming familiar with the ACT or SAT is key to your child increasing his/her test scores and chances of acceptance to the college of their choice. It also opens doors for scholarships and grant money. Strategy plays a huge part in how well students do on the tests. Some kids are able to prep well on their own with sample tests and books, while others will do better taking a prep class. Of course, we want our students to score well for the chance of increased college money, but keep in mind that too much pressure on a child to perform well can backfire with increased anxiety. Keep your own anxiety about money in check. Learn more: How to Plan Your Studying: SAT/ACT Prep Calendar Map Out Financial Aid Deadlines Begin looking at application deadlines in late summer or early fall to map them out on a calendar or spreadsheet, and check each college’s financial aid forms it requires. Most colleges will only require the FAFSA, but if your child applies to a selective CSS Profile college either â€Å"early decision† or â€Å"early action† (offered by a few schools), additional financial aid forms will be due—all at different times. Help your child make a calendar of deadlines, both applications and all financial aid forms. The fall of senior year is busy and it’s easy to miss things. Learn About the Loan Process When colleges return their financial aid letters to your student, it will likely include two types of federal loans, federal direct subsidized and unsubsidized loans. Sometimes the loans are called Stafford Loans. There’s also the Federal PLUS loan for parents and graduate students. If you need to go into deep debt to send your child to college, it’s worth considering another college or another avenue altogether. And, ifyou need more than what the federal loans offer, you’re veering into private loan territory. In that case, it’s worth reading up so you know what you’re getting into. This articlewill tell you everything you need to know about private loans.Another possibility for financing college is a home equity loan. Learning all you can about the financial aid process and all the characters involved, and learning about them BEFORE you really need to make some decisions, will alleviate a lot of the stress when that time comes.