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A Critical Assessment of Basel III and its Implications on the Mauritian Banking Sector

Indranarain Ramlall and Faadilah Mamode

Journal of African Business, 2017, vol. 18, issue 1, 70-101

Abstract: This paper probes into the application of Basel III in Mauritius. Findings show that although Mauritian banks are well-capitalized and carry excess liquidity, they will have to restructure their balance sheets by incorporating highly liquid assets such as government securities. While Basel III will foster greater financial stability, this will translate into lower supply of credit, higher cost of credit and lower returns with potential strains on SME lending. Similarly, Bank of Mauritius’s ability to control credit growth will be hindered because banks’ existing leverage ratios are already higher than the stipulated minimum leverage ratio of 3%. To harness the full benefits of the reforms, additional measures tailored to the specificities of the Mauritian economy will be needed. Other challenges prevail like establishing robust data management, risk methodologies, reporting systems and IT architecture as well as identifying the timing and the size of the Countercyclical Capital Buffer. Local banks anticipate Basel IV in the coming years as a refined tool.

Date: 2017
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Handle: RePEc:taf:wjabxx:v:18:y:2017:i:1:p:70-101