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Le groupe est en infraction avec les règlements de la FSC


PNQ

La PNQ du leader de l’opposition adressée au ministre des Finances, jeudi après-midi,  portait sur  une compagnie d’assurances faisnt partie d'un conglomérat.

Paul Bérenger a demandé au ministre si le Fonds monétaire international (FMI) aurait à plusieurs reprises fait part de ses inquiétudes quant aux opérations d’une compagnie d’assurances, si cette compagnie d’assurances  en fait partie d’un conglomérat, et si  une grande partie de ses actifs auraient été investies dans ses sociétés sœurs. Le leader de l’opposition a également voulu savoir si ce conglomérat a obtenu une licence pour des opérations bancaires et si cette compagnie d’assurances ne respecte pas les critères imposés par la Financial Services Commission (FSC) portant sur le barème de 10 % imposé pour tout investissement d’actifs dans des compagnies sœurs.

Dans sa réponse le ministre a concédé que le groupe est en infraction avec les règlements de la FSC. Une telle pratique pourrait avoir des répercussions sur le système financier du pays. C’est la mise en garde du Fonds monétaire international (FMI) quant aux opérations d’un conglomérat possédant une compagnie d’assurances, mais détenant aussi une Banking Licence, a ajouté le ministre. Il a expliqué que la FSC suit les choses de près et que le groupe a ainsi demandé un délai à cette dernière pour se mettre aux normes, soit décembre 2014.

Ces agissements ne représentent aucun danger pour le pays, a aussi tenu à indiquer le ministre des Finances. Le leader de l’opposition a mis en exergue le fait que le FMI a souligné que les répercussions pourraient être fatales sur le système financier du pays en cas de réclamations massives par des clients de la compagnie d’assurances. Paul Bérenger a cité l’exemple des Caraïbes où, il y a 8 ans, tout un système financier s’était écroulé par la faute d’une compagnie d’assurances agissant à la manière d’un système de Ponzi.

S’agissant dans lesquelles circonstances ce conglomérat a pu obtenir une Banking Licence, elles ont été critiquées dans le rapport de la FMI, a fait ressortir le leader de l’opposition. Les permis ont été octroyés par la Banque de Maurice, lorsque le groupe a racheté une autre banque, a expliqué le ministre des Finances.

Répondant  à une demande de Paul Bérenger, le ministre a déclaré que le rapport du FMI ne sera pas rendu public.


Lire la PNQ intégralement

INSURANCE COMPANIES – RELATED COMPANIES - INVESTMENT


The Leader of the Opposition (Mr P. Bérenger) (by Private Notice) asked the vice-
Prime Minister, Minister of Finance and Economic Development whether, in regard to the
financial and banking services, he will state if -
(a) the International Monetary Fund has repeatedly expressed  concerns in relation to an
insurance company, part of a conglomerate, which is operating with a substantial
proportion of its assets invested in its related companies, indicating if the said
conglomerate has been issued with a  bank licence, and  
(b) any insurer is presently operating without meeting the legal requirement, set by the
Financial Services Commission, for the aggregate value of its investments in one or
more of  its related companies not to exceed 10% of its assets.
The Vice-Prime Minister, Minister of Finance and Economic Development (Mr X.
L.  Duval):  Mr Speaker, Sir, the financial services sector plays an extremely important role in
our economy. It represents some ten percent of our GDP. The reputation of Mauritius as a
regional financial centre is well-established.  Government has always taken all necessary
measures to ensure the soundness and stability of our financial system, both banking and non-
banking financial institutions. These institutions are constantly being assessed and monitored by
local regulators as well as by international organisations.  
The Bank of Mauritius Act 2004 clearly established the independence of the Bank of
Mauritius as a regulator.  
And the Financial Services Commission was set up under the Financial Services
Development Act in 2001.  
Both Acts were promulgated during the period 2000 to 2005.  
These two regulators are totally independent and adhere to international best practices in
meeting their objects and in carrying out their functions.  
In meeting their objectives the FSC and the BoM work in close collaboration with each
other.  In fact, they have a number of mechanisms for coordinating their policies and actions,
including an MOU setting up several Joint Working Groups which meet regularly to deal with
issues such as licensing, supervision, exchange of information, and financial stability.  I am
informed that there has been a total of 138 exchanges of information between the FSC and BoM
from January 2013 to date and 10 separate meetings.  
International organisations also play a significant role in monitoring and assessing the
performance of our financial system.
• First, the yearly Article IV IMF mission that focuses on financial stability-
building on the achievements under the Financial Sector Assessment Programme (FSAP);
fiscal and monetary policies evaluation; exchange rate and external balance assessment;
debt sustainability analysis and institutional and structural issues, crucial to the efficient
functioning of a modern economy.  
• Second, the Financial Sector Assessment Programme carried out
periodically by the IMF and World Bank.  
• Third, Report on Observance of Standards and Codes, (ROSC) by the
World Bank.   The ROSC report in 2012 was on the Insurance sector.  
• Fourth, on a regional basis, a peer review mechanism has been set up by
SADC to ensure that the member countries meet international standards  
concerning the financial services sector.
• Fifth, the Financial Stability Board set up under G20 which regularly
carries out surveys to assess the soundness of our financial system.  
Mr Speaker, Sir, the overall assessment of these organisations has been favourable,
indicating that Mauritius has a strong, sound and resilient financial system.  
For example, concerning the banking sector the IMF Article IV for 2013 states that the
banking system is well-capitalised and profitable, which provides important buffers against a
range of shocks to their credit portfolios.  
As regards the insurance sector, the latest report of ROSC by the World Bank in 2012 has
concluded that the Mauritian insurance sector and the FSC as supervisor have made exceptional
progress whilst undergoing a complete and quite radical renovation of its regulatory and
supervisory arrangements.  
However, as the market and financial products become more sophisticated, taking into
consideration developments at the international level, we are constantly adapting our regulatory
framework to meet these new challenges.       
Mr Speaker, Sir, it is precisely with the objective of constantly taking measures to ensure
the soundness and stability of our financial system that Government decided to request the IMF
technical assistance in April 2012, through the Bank of Mauritius, in the areas of financial sector
regulatory structure, deposit insurance and sovereign asset-liability management.  The report
covers a wide range of issues and makes several recommendations.    
The mission recommended, inter alia, that no action be taken at this time to integrate the
Bank of Mauritius and the FSC, but rather proposed enhanced cooperation between the two
institutions.  They also found the machineries for coordination adequate, but needed to be made
to work – no new machineries were needed.  
Mr Speaker, Sir, in regard to part (a) of the question, the report flagged the issue of a
conglomerate which is operating with a substantial proportion of its assets invested in related
companies.  The report specifically highlighted that the group may not pose a systemic threat,
but nevertheless the issue needed to be addressed.   
Mr Speaker, Sir, whenever the IMF or any other international organisations raise any
concerns, the respective regulatory bodies take appropriate measures to address them.  
In that particular case, I am informed that the FSC has conducted a number of meetings
with the conglomerate concerned to find a workable solution.  It must be pointed out that the
IMF Mission considered that the present efforts to find a solution, enhanced by improved
cooperation, should be allowed time to work, Mr Speaker, Sir.
I am informed by the Bank of Mauritius that a banking license was issued in 2008 to the
parent company of a conglomerate following the acquisition of an existing bank.    
Mr Speaker, Sir, as regards part (b) of the question, the legal requirements concerning
investment in related companies by insurance companies are set out in  insurance (long-term
insurance business solvency) rules 2007 issued under sections 23 and 130 of the Insurance Act.
Following the submission of the IMF Report, the FSC has promulgated the necessary
Rules to define clearly the responsibilities of insurance companies concerning investments in
related companies.  
Thus the Rule 12(6) which was made on 20 May 2013 made it clear that the aggregate
value of investments of an insurer in one or more of its related companies shall not exceed 10
percent of the assets of the insurer.  
Furthermore, it was provided that an Insurer who does not meet this requirement shall
take such measures as may be necessary to comply with the provisions thereof by 30 June 2014.
Moreover, an insurer who is not able to comply with the above condition may apply to
the Commission for an extension of the deadline.  Where the FSC is satisfied that any non-
compliance is due to a just or reasonable cause, it may extend the deadline for a period not
exceeding six months on such conditions as it may deem fit.    
Thus, Mr Speaker, Sir, an insurance company has up to 31 December 2014 to comply
with the 10 percent Rule concerning investment in related companies.  
I am informed that the FSC is closely monitoring insurance companies to comply with
the provisions of the above Rule.   
Mr Speaker, Sir, the House can rest assured that Government will spare no efforts to
protect the reputation of the financial system.   
Mr Bérenger:  Mr Speaker, Sir, can I ask the hon. Minister of Finance whether he is
aware of the paragraph 28 May 2013, Financial Sector Reform Report, that is last year’s report,
and paragraph 28 which I may quote –
“The 2007 – it refers to a previous report – Financial sector assessment Programme
update report referred to a single insurance company with a substantial proportion of its
assets invested in related companies and emphasised the need for this issue to be solved.  
The mission – that is last year’s mission - found that the issue had not been resolved.”
That has been going on for a number of years.  Can I ask the hon. Vice-Prime Minister
and Minister of Finance why the issue has not been resolved since it was first raised by the IMF?
Mr Duval:  Mr Speaker, Sir, it is good for me to point once again that it was at the
request of the Ministry of Finance through the Bank of Mauritius that the IMF came to Mauritius
to have this special report.  This is not the normal annual article for report.  This was a special
technical assessment report done at the request of the Ministry of Finance through the Bank of
Mauritius.  That is a first one.  It arose, Mr Speaker, Sir, because it is true there have been
several remarks made in the past by the IMF particularly on this one conglomerate which was
taking time to abide and was in the opinion of the IMF which is shared also by the FSC that it
had too much of concentration of its portfolio in related companies.  So, it was at our request that
it came.  We made a request, they came and we acted upon the request, Mr Speaker, Sir.  As I
mentioned just now, the FSC has had numerous meetings with the company concerned and has
come up with rules dated May of this year which set out very clearly because the previous rules
were unclear.  This time it was set out very clearly what exactly are the limits for investment of
portfolio funds by an insurance company into related companies and it is limited to 10% taking
into consideration all the possible investments in the related companies.  So, we did take the
actions that the hon. Leader of the opposition is mentioning.  Action was taken and FSC is, of
course, following the matter very closely.   
Mr Bérenger:  Mr Speaker, Sir, will the hon. Vice-Prime Minister and Minister of
Finance agree with me when I say that the IMF was so concerned that, in fact, it suggested that
the Bank of Mauritius and the FSC should carry out what it called ‘war games’ in prevision of a
possible financial crisis?  May I quote paragraph 55 –
“The two authorities – that is, the Bank of Mauritius and the FSC – should also engage in
joint war games in which they play out their reaction to a crisis in the Financial Sector.  
There would be advantage in devising a financial crisis scenario such as the failure of an
insurance company making it unable to pay a large claim made by a foreign-owned bank”
Can I know whether this has been taken up and whether the joint war game in prevision of the
possible financial crisis has been taken up?
Mr Duval: Mr Speaker, Sir, this is obviously a hypothetical issue.  Paragraph 55 does
mention war games.  War may be an evocative word, but, in fact, it goes on to say “it is
contingency planning.” And we know that contingencies are things that have not occurred, but
which may occur in the future.  It is appropriate that we should take all risk mitigation actions
which are necessary.  So, it is a contingency that the IMF is mentioning.  This is, I must say, a
report of 2012, but we have the Article IV Report of 2013.  Article IV Report - which the hon.
Leader of the Opposition may have seen - at page 19, is quite élogieux of the relationship now
between the FSC and the BOM, saying that there have been regular meetings between these two
institutions.  I mentioned also to you the number of exchange of information and meetings
between the BOM and FSC this year.   I should say to you, Mr Speaker, Sir, that one of the
issues that the IMF, apart from this conglomerate - which has flagged now and then - has
consistently raised is the issue of insufficient coordination between the two institutions.  We
have resolved this to the satisfaction, I must say - if you care to look at the IMF Report Article
IV - to the satisfaction of the IMF.
Mr Bérenger: The Article IV Consultations Report is du domaine public - it is made
public.  Can I know whether the hon. Minister is prepared to make public this May 2012
Financial Sector Reform Report from the IMF?
Mr Duval: Mr Speaker, Sir, this was a confidential report, which was asked for going
deeply into the financial sector.  I do not propose, at this stage, Mr Speaker, Sir, to make it
public.
Mr Bérenger: In the explanatory notes to his Budget Speech, the hon. Minister of
Finance said that the Criminal Code would be amended to prohibit the conduct - the English that
is found in the speeches is not mine - of Ponzi Pyramid Schemes.   Can I ask whether the
definition that will be provided of what is a Ponzi Pyramid Scheme will include insurance
companies - the case we are talking about -and whether the definition of Ponzi Pyramid Scheme
is available, and if yes, if it can be circulated as soon as possible, so that full consultation takes
place?
Mr Duval: Mr Speaker, Sir, I think we need to be very careful, even by association, in a
question dealing with one conglomerate, if you come up with a Ponzi that might be associated; I
don't know if that was the point, but it should not be.  We should not, by association, mix any
insurance company with a Ponzi.  Mr Speaker, Sir, let me remind the House that an insurance
company is by definition a highly regulated entity.  By definition, it is highly regulated.  It exists,
it is there, it works according to appropriate rules, and it has a set of auditors.  So, it has a
double-barrelled supervision, if you like, Mr Speaker, Sir; the auditors and the Financial Services
Commission.  The hon. Leader of the Opposition himself has spoken highly of the FSC recently.  
I hope he doesn't mean that this company, or whoever, may be operating illegally without the
knowledge of the FSC.
Mr Bérenger: Mr Speaker, Sir, I think the hon. Minister of Finance does not understand
why I raised the Ponzi Scheme.  Therefore, can I ask him whether he is aware that, a number of
years back, the whole financial system in the Caribbean crashed, precisely because the whole
financial system was based on an insurance make-up built on a huge Ponzi Scheme?  That's
happened years ago, and if I am linking the Ponzi Scheme issue with the issue of the insurance
sector here, it is for that reason.  Is the hon. Minister aware of what took place some eight years
ago in the Caribbean?
Mr Duval: I am not fully aware, but I have heard of that, Mr Speaker, Sir, which I
presume does not have anything to do with what we are talking about today.   And I repeat, Mr
Speaker, Sir, that this is a company that is regulated.  It is a group that is regulated by the
Financial Services Commission.  It has auditors.  It has just published its financial statement for
31 December 2012, which shows Rs6 billion of excess assets over liabilities, Mr Speaker, Sir.  
We must be very careful, and I make an appeal here.  Just like in previous times, when there
have been problems in the financial sector, in the banking sector during the last Government’s
tenure, it had to be very carefully dealt with, and I will take the time of the House to quote one
paragraph from the IMF which says that whilst they believe that the issue should be addressed,
and we are addressing the issue, the IMF itself says that –
“The present efforts to find a solution are satisfactory, and it should be allowed time to
work.”
The whole thing is about allowing time to work.  Any drastic solution will achieve the opposite.  
Government is following the situation very carefully.  The regulators are following very
carefully, and we are addressing the situation in a satisfactory way, to the satisfaction of all
concerned, and there should not be, Mr Speaker, Sir, anything that would create any undue
reaction or panic, because that is not the case.  
Mr Bérenger: Of course, I am not suggesting any drastic action, Mr Speaker, Sir.  We
have been dealing with that problem supposedly over a number of years.  Can I move to the
banking part of my question.  After what the hon. Minister has said, can I quote again, paragraph
28 of the IMF Report of last year.  After talking about this issue of an insurance company
holding a substantial part of its assets in related companies, can I quote the following -
“In addition to these problems - which I have just referred to - the FSC was concerned
that a banking licence was given to a company in the same Group by the Bank of
Mauritius, without proper consultation with the FSC, notwithstanding the issues
described above.”
Can I know whether the hon. Minister of Finance has looked into that, and what comment can be
offered?
Mr Duval: Mr Speaker, Sir, we are going back a few years now, at a time when I believe
the FSC and the Bank of Mauritius were not sufficiently exchanging information.  As I
mentioned just now, to the satisfaction of the IMF, that is happening.  I understand that the Bank
of Mauritius issued a licence upon purchase, by the Group, of one Bank in Mauritius.  It issued a
new licence.  Mr Speaker, the proof of the pudding is in the eating.  The bank, I understand from
the Bank of Mauritius, is operating to the satisfaction of the Bank of Mauritius.
Mr Bérenger: I am sure the hon. Minister is concerned that the bank mentioned in that
report, which he has just referred to, is, in fact, involved now in an alleged massive fraud affair,
which was raised in the House recently through a question by hon. Reza Uteem.  Can I know
what progress is being achieved there, and whether there is any case of money laundering?
Mr Duval: Mr Speaker, Sir, I am not aware.  To speak specifically about the bank,
maybe, if there is a specific question, either myself, or if it is law and order issue, the hon. Prime
Minister will respond.  But, Mr Speaker, Sir, I understand it is not a massive fraud.  That is what
I understand.  It is a substantial fraud, but not by any way can be described as being massive.  I
don't have any information as to who is involved.  That is law and order issue, but it is not such a
fraud that would have endangered the bank.
Mr Bérenger: We most probably do not have the same definition of ‘massive’.  Replying
to a question on 12 November, that is, from hon. Reza Uteem, referring to that alleged fraud,
massive or not, at that bank, which obtained its licence in the circumstances I referred to earlier
on, the hon. Minister of Finance informed us that the Bank of Mauritius has instructed the said
bank to make up any shortfall identified through a fresh injection of shareholders fund, and the
bank has undertaken to do so.  Can I know whether this has been done?
Mr Duval: I presume, Mr Speaker, Sir.  I need prior notice of this question. I would not
have revealed the amount, but in case it is misinterpreted, I understand - that needs to be further
confirmed - that the fraud, although it is important, does not exceed Rs60 m., which is not
massive, but is an important amount.
Mr Bérenger: Before I leave the insurance, I forgot one question. I think I am being
influenced by the hon. Minister. Can I know whether there has been any reports of what is called
pension mis-selling, I would call it over-selling, but pension mis-selling? A few years back, there
was a huge scandal in the UK where poor old to be people were promised heaven under the In
Old Age Hell. Has there been an allegation of pension mis-selling here in Mauritius by any
insurance company, if yes, has there been any report published by the FSC in relation thereto
and, if yes, can it be made public?
Mr Duval: Mr Speaker, Sir, I have no information as to that. I’ll check with FSC. If there
is anything we can make it public, but I have no information as to that.
Mr Bérenger: Going back to this alleged fraud we just referred to, the Bank of Mauritius
is supposed to be enquiring thereon. In the interest of the financial sector in general, the image
and reputation of Mauritius, is Government prepared to have a full enquiry on that alleged fraud
carried out by the IMF, and not by the Bank of Mauritius?
Mr Duval: Mr Speaker, Sir, I cannot see what it would come to, because there is, I
presume, the Police enquiring on that issue. I am not in charge of law and order, I don’t have that
information, but I cannot see what it would get at. I think the best thing is to allow independent
institutions here to look into it. But, I must say, Mr Speaker, Sir, that, generally speaking,
Government is concerned about the prevalence of financial fraud in Mauritius. In many, many
countries now, theft, larceny, etc. are reducing. It is happening in Mauritius, but what is
increasing in Mauritius like many developed countries, is white-collar fraud, and that is precisely
for that reason that the Prime Minister is setting up a Serious Fraud Office with the help of
overseas consultants.
Mr Bérenger: Last part of my question, Mr Speaker, Sir, and I wish to congratulate the
FSC here, because it is clear that after years of trying to convince the insurance company
concerned to set matters right as far as the proportion of its assets invested in related companies,
finally, the FSC took le taureau par les cornes on 25 May 2013, and published regulations that
say that no insurance company must hold more than 10% of its assets in all its related companies
in aggregate. I ask the hon. Minister of Finance whether the insurance company we are talking
about or any other insurance company for that matter. I am interested to know whether there are
– in that case it is clear, in the case of the insurance we are mentioning, but there could be others
which would be very disturbing. Therefore, I put my question again: apart from the one we are
talking about now, is any other insurance company outside the rules as set by the FSC that no
insurance company should invest more than 10% of its assets in all its related companies?
Mr Duval: Mr Speaker, Sir, I understand there is one conglomerate which is involved
and that this particular issue does not affect any other insurance company. This is the information
I have from FSC and, I must say again, Mr Speaker, Sir, that Government is following this very,
very carefully and that the rules have been set now, they have been published, the procedure has
been set clearly.   Previous rules in 2007 meant well, but they were very vague and enabled
insurance companies not to fully comply with them. Now they are very clear, they are set and we
are taking, in fact, a commitment here that, although we need to give sufficient time – as we  are
talking about many, many assets that cannot be disposed in a fire sale and have to be disposed in
an orderly way to protect the interest of the policy holders - all insurance companies will abide
by the FSC rules.
Mr Bérenger: The hon. Minister of Finance has confirmed that there is one insurance
company that is outside those rules, but the rules give until 30 June 2004 for all insurance
companies, insurers, including that one to comply. Can I know whether the Minister has the
figure? What percentage, as at now, of its total assets - but it is more than 10% - how disturbing
is it, and is there a movement? Is that insurance company improving its position, that is,
decreasing from what it is today - I don’t know 30%, 40%, 50% of its assets - to reach the
maximum of 10%? Is there a movement or is that insurance company going to wait for 30 June
and then apply for an extension?
Mr Duval: No, Mr Speaker, Sir, there is movement in a right direction - I don’t have the
exact amount – and FSC is under, I can’t say, instruction, but it is the wish of Government that
this be brought down to within the rules. But, as I mentioned to you, Mr Speaker, Sir, a hasty
reaction and overreaction will not help anyone in these circumstances. This is a company which
has been here many, many years. The situation has existed many, many years before and,

therefore, Mr Speaker, Sir, now that we have the situation we need to ensure that everything is orderly and happens with time, but that the company understands quite clearly that it has to abide by the rules and regulations of the Financial Services Commission. 

Mr Uteem: The 2007 Regulation provided that an insurer shall not invest more than 10%
of its assets in any related company, and we know the IMF, as far back as 2008, highlighted that
issue to the Financial Services Commission. May I know from the hon. Vice-Prime Minister why
it has taken six years for the Financial Services Commission to come with that regulation when
he would agree with me that having more than 10% invested in any related party is a threat?
Mr Duval: Mr Speaker, Sir, I think this existed for many, many years - 10 years or more.
This is not something new. Perhaps I did not mention clearly that the rules of 2007 were vague,
were not precise enough and allow the company to comply with a vaguer rule. Now if you look
at the new rules, they are very clear, that it is the total investment. All the related companies
together should not exceed the 10% and it had been interpreted before that each individual
investment should not exceed the 10%.
Mr Speaker: Last question to the Leader of the Opposition!
Mr Bérenger: Can I request the hon. Minister of Finance to have a progress report as we
near the dates that have been set for applying the new rules from the FSC, that we will be kept
informed of the evolution of the situation?
Mr Duval: Mr Speaker, Sir, I look forward to regular PNQs on this issue. I am quite
happy, Mr Speaker, Sir, at any point in time, to apprise the House as to what is the progress. It is
in everybody’s interest that this happens. Thank you.
Mr Speaker: Time is over!