BOM: Resilient banking sector for Mauritius with growing assets level.
Bank of Mauritius Financial Stability report indicates a resilient banking sector with assets growing at a rapid pace mainly due to further expansion of the foreign asset portfolio held by both domestic-owned banks and subsidiaries of foreign-owned banks, partly explained by the advances and placements of local banks in frontier markets in Africa as well as in India.
The central bank of Mauritius, Bank of Mauritius released the August 2015 issue of the Financial Stability Report provides a review of the core indicators of financial stability in the Mauritian economy, and makes an assessment of the resilience of the domestic financial system with respect to financial data ended March 2015.
The current Report draws attention to sectors exhibiting signs of vulnerability that raise concern for the stability and soundness of the financial system and highlighted that the domestic economy continued to expand during 2015, although Statistics Mauritius has revised downward its estimate of real GDP growth from 4.1% to 3.8% in 2015.
Nonetheless, growth is expected to gain support from implementation of measures announced in Budget 2015/16.
Public investment is also projected to increase further in 2015, given the Government’s willingness to revisit and unlock several projects that had not materialised.
Amid low energy and food prices, y-o-y inflation dropped from 3.3% in June 2014 to a low of 0.4% in June 2015. Reflecting the evolution of major currencies in international markets and domestic demand and supply conditions, the rupee depreciated significantly against the US dollar and Pound sterling during the first quarter of 2015 but stabilised thereafter.
The revision in balance of payment data revealed lower current account deficit at 6.3% in 2013 compared to an earlier estimate of 9.9%.
For the first time since the global financial crisis 2008, household indebtedness fell in the first quarter of 2015. Credit extended by banks to households continued to decelerate and reflected the sharp decline in consumption credit and some stabilisation in credit extended for housing purposes.
Given the background of high credit growth in a low interest rate environment, the Bank of Mauritius remains concerned over the level of household indebtedness. Prudence should therefore be exercised in the wake of persistent excess liquidity prevailing in the domestic market.
During the period under review, the banking sector was resilient. Banks were financially sound and adequately capitalised although they posted marginally lower profits over the year ended March 2015.
Banking sector assets grew at a rapid pace mainly due to further expansion of the foreign asset portfolio held by both domestic-owned banks and subsidiaries of foreign-owned banks. The upward trend in banks’ foreign assets is partly explained by the advances and placements of local banks in frontier markets in Africa as well as in India.
Finally, the insurance sector registered a sound performance in 2014 and accounted for 33.7% of GDP. The life segment is the main component in the insurance sector.