The Bank of Mauritius (BoM) issued a new Guideline for Digital Banks and an amended Guideline on Private Banking on 6 December. The two guidelines, which set out the relevant enabling regulatory and supervisory frameworks for digital banks and private banking, were brought into force with immediate effect.
The new framework caters for the licensing of banks that intend to conduct banking business exclusively through digital and other electronic means. In parallel, the Bank has also focused on the digital on-boarding of customers, which is a prerequisite for digital banking.
In 2020, the BoM established a 24/7 digital payment system, the Mauritius Central Automated Switch (MauCAS), designed to make banking, e-commerce and mobile payments interoperable and encourage cashless means of payment.
Fintech firms can leverage this platform to offer value-added services and provide banks with opportunities to collaborate with emerging technologies service providers. This synergy was intended to bring more efficiency to the system and to act as a catalyst in the digital transformation of the economy.
BoM Governor Harvesh Seegolam said: “Today, digital banking is at an all-time high. The COVID-19 pandemic has also boosted the digital trend in payments across payment types, demographics, and geographies. A significant surge has been noted on the Bank’s MauCAS platform, and the launch of the MauCAS QR Code in September last is a more than opportune catalyst.
“As a forward-looking central bank, we are leaving no stone unturned to further strengthen and modernise the banking landscape, the more so that it has been empowered in 2020 to license digital banks. Accordingly, the Bank has developed, with the assistance of the IMF’s Regional Technical Assistance Centre for Southern Africa (AFRITAC South), a conducive licensing and regulatory framework for digital banks in Mauritius.”
No digital banks have currently been licenced in Mauritius. Under the new guidance, successful applicants will commence business as a restricted digital bank and will then be allowed to develop their controls over a five-year period before fully transitioning to a wholly digital bank.
A restricted digital bank will commence operations with either an amount paid as stated capital or an amount of assigned capital of not less than MUR200 million or an equivalent amount in any freely convertible currency held in assets in or outside Mauritius, as may be approved by the BoM.
A digital bank must have its principal place of business in Mauritius. This physical office will be used solely for administrative purposes, to deal with customer complaints or to interact with the BoM. It will not be used to conduct banking business with customers and must, always, be made accessible to the BoM for on-site examinations.
“Sovereign Consulting can assist potential applicants in respect of licensing applications,” said Hafeez Toofail, Compliance Director at Mauritius-based Sovereign Consulting Ltd. “The interesting part is that even existing banking licences (private or Islamic banking) that previously required physical presence can now be provided solely using digital means or through electronic delivery channels.”
The BoM has also revised its Guideline on Private Banking following a public consultation to provide an enhanced framework for both local and foreign investors who want to do business in Mauritius and offer private banking services.
The guideline sets out the parameters within which banks exclusively licensed to conduct private banking business will operate. In particular, it defines a private banking customer as a high-net-worth individual “possessing investable assets of at least USD500,000 or the equivalent value in another currency, or having an annual income of at least USD150,000.”
It also spells out the regulatory and supervisory framework applicable to banks conducting private banking business. It further covers the anti-money laundering and countering financing of terrorism (AML/CFT) requirements and has been benchmarked with guidelines on private banking issued by foreign jurisdictions.