The Bank of Mauritius enlisted the services of N?Tan Corporate Advisory Pte Ltd of Singapore in March 2003 to investi- gate into the irregularities at the Mauritius Commercial Bank Limited (MCB). N?Tan Corporate Advisory Pte Ltd submitted its report to the Bank of Mauritius in February 2004.

2. The Bank of Mauritius is bound by the duty of confidentiality under the Bank of Mauritius Act and the Banking Act and has the legal obligation to treat and keep as confidential any information obtained by it in the course of any inspection or examination of a bank.

N?Tan Corporate Advisory Pte Ltd and the bank examiners of the Bank of Mauritius are equally under the legal obligation of confidentiality under Section 9 of the Bank of Mauritius Act 1966 that has been repealed and replaced by Section 26 of the Bank of Mauritius Act 2004. Both under Section 39(8) of the Banking Act 1988, that has been repealed and replaced by the Banking Act 2004 and under Section 64(11) of the Banking Act 2004, it is provided that the Bank of Mauritius or any person making an inspection or conducting an examination shall not reveal, unless required by a Court to do so, any information in relation to the affairs of a customer obtained in the course of the inspection or examination.

3. In exceptional cases the Courts have allowed disclosure of confidential banking information at the request of parties having a direct interest in obtaining such information for an overriding public interest. However, in such cases the disclosure is normally limited to what is reasonably necessary to achieve the purpose of the public interest required by the disclosure. Any disclosure of confidential information not related to the public interest invoked has not been allowed.

The BOM May be sued by various parties

4. The Bank of Mauritius did not find it appropriate for N?Tan to carry out an exercise on the Maxwellisation of its draft Report. This would have involved sending letters to parties against whom adverse findings have been made, informing them both of the findings and the material facts relating to them.

5. The Bank of Mauritius cannot contravene the provisions of banking laws. Should the Bank of Mauritius go against the provisions of the laws it might be sued by various parties.

6. Honourable Prime Minister, Sir, you requested me to bring the issue regarding the N?Tan Report before the Board of Directors of the Bank of Mauritius and to find ways and means within the law of making the N?Tan Report public. The Board of Directors of the Bank of Mauritius met on 16 March 2005 at 10.30 a.m. The Board gave anxious consideration to the request that you had made in the National Assembly. In particular, the Board weighed carefully the reasons for and against the release of the N?Tan Report considering the legal environment constraining the Bank?s scope of action as financial regulator and the wider public interest invoked in the present case. Consideration was also given to protecting the good standing, in the longer term, of the Bank of Mauritius as a financial regulator and of Mauritius as a jurisdiction.

The Board is of the view that it is not provided in the banking laws for inspection reports, including the N?Tan Report, to be made public and that this would only have been possible if the existing banking laws were amended to make provision for such disclosures. There does exist a risk, in the opinion of the Board, that if ever an amendment to this effect is resorted to, it could have serious adverse implications with regard to upholding the confidence of bank customers in the banking system of Mauritius and Mauritius? reputation as an international financial centre.

This option is therefore not a recommended course of action. The Board considered that, with due deference to the National Assembly that itself recently enacted the legislation governing confidentiality of inspection reports, it is not entitled to travel outside the boundaries set by the legislator. The Board clings tenaciously to the conviction that the overriding objective of preserving monetary and financial stability far outweighs short-term considerations. The Board, therefore, decided that it would not be in the best interests of one and all to make public the N?Tan Report.

7. As I mentioned earlier, the Bank of Mauritius took the initiative to appoint N?Tan Corporate Advisory Pte Ltd to investigate into the irregularities at the MCB Limited. The Bank of Mauritius, having achieved its objective of elucidating facts and identifying the weaknesses in the internal control system and procedures and having obtained the recommendations for remedial actions, decided not to proceed further with the exercise in view of the escalating costs.

Given that the Independent Commission Against Corruption (Icac) was already investigating into allegations of fraud and corruption at the MCB Limited, it was deemed appropriate by the Bank of Mauritius not to overstep into Icac?s domain thereby also avoiding unnecessary further costs. Moreover, had N?Tan Corporate Advisory Pte Ltd been allowed to proceed further with the exercise, the Report would very likely not have been completed by even today with, of course, the ever rising cost.

Shortcomings highlighted

8. Following the submission of the Report by N?Tan Corporate Advisory Pte Ltd in February 2004, I held a meeting with the Board of Directors of the MCB Limited in March 2004. I outlined to the Board of Directors of the MCB Limited all the findings of the Report as well as the recommendations made therein.

Indeed, I reprimanded the Board of Directors of the MCB Limited for the serious shortcomings in risk management highlighted in the Report. The Board of Directors of the MCB Limited responded positively and undertook to carry out a thorough re-structuring of their organisation with the expert assistance of new recruits. Following my meeting with the Board of Directors of the MCB Limited, the First Deputy Governor of the Bank of Mauritius addressed a letter to the MCB Limited outlining its shortcomings in risk management as pointed out in the N?Tan Report and the recommendations that needed to be urgently implemented by the MCB Limited in consequence.

9. The perception that the N?Tan Report has been put to rest is emphatically not correct. Since March 2004 the Bank of Mauritius has been actively and closely monitoring the progress being made by the MCB Limited in the implementation of the various recommendations made by the N?Tan Report as well as the progress that is being made in the implementation of the guidelines issued by the Bank of Mauritius so far. The Bank of Mauritius carried out an on-site inspection at the MCB Limited during the period March to June 2004.

It has been observed that the MCB Limited has indeed effectively improved its risk management structure. With the new banking laws in force now, I would like to re-assure you that should the MCB Limited fail to adhere to the guidelines issued by the Bank of Mauritius and/or fail to conduct its banking business in line with the banking laws, the Bank of Mauritius will necessarily and as a matter of course take actions as appropriate.

A critical point which is overlooked

In this connection, I am delighted, Prime Minister, Sir, to bring into sharp focus a critical point that seems to have been generally overlooked: Section 50(5) of the Bank of Mauritius Act 2004 provides that any person who fails to comply with instructions or guidelines issued by the Bank of Mauritius shall be liable on conviction to a fine not exceeding Rs 500,000 and to imprisonment for a term not exceeding five years.

Moreover, Section 100(4) of the Banking Act 2004 provides that any person who fails to comply with guidelines or instructions made by the Bank of Mauritius shall commit an offence and be liable on conviction to a fine not exceeding Rs100,000 and to imprisonment for a term not excee- ding 2 years. Unfortunately, these intermediate powers did not exist in the previous legislations.

10. Honourable Prime Minister, Sir, I advised you in March 2004, that the Report is protected by provisions of confidentiality under the Bank of Mauritius Act and the Banking Act and as such no one outside the Bank of Mauritius could have access to it. Indeed, you fully appreciated my stand. I do fervently hope that the stand of the Board of Directors of the Bank of Mauritius will be equally appreciated.

R. BASANT ROI, G.C.S.K