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Mauritius: Conservatorship in banking

17 February 2024
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Overview

  • The Bank of Mauritius has placed Silver Bank Ltd under conservatorship in accordance with Section 65 of the Banking Act. The last time that a bank was put under conservatorship in Mauritius was BanyanTree Bank Ltd in 2020. Of note, the conservatorship of BanyanTree Bank Ltd was terminated when it was acquired by Silver Bank Ltd and recapitalised by the shareholders of Silver Bank Ltd.
  • This article answers the following questions: What is a conservatorship? What are the powers and duties of the conservator? What are the aims of the conservatorship?

The Bank of Mauritius has placed Silver Bank Ltd under conservatorship in accordance with Section 65 of the Banking Act. The last time that a bank was put under conservatorship in Mauritius was BanyanTree Bank Ltd in 2020. Of note, the conservatorship of BanyanTree Bank Ltd was terminated when it was acquired by Silver Bank Ltd and recapitalised by the shareholders of Silver Bank Ltd.

What is a conservatorship?

A conservatorship is a procedure whereby the Bank of Mauritius appoints a conservator to protect the assets of a financial institution for the benefit of its depositors and other creditors.

The Bank of Mauritius has the power to put a financial institution in conservatorship when it has reasonable cause to believe that its capital is impaired or there is a threat of such impairment; or that:

  • it or its directors have engaged in practices detrimental to the interests of its depositors; or
  • it or its directors have knowingly or negligently permitted its chief executive officer, any of its other managers, officers or employees or agents to violate any provision of the banking laws, any enactment relating to anti-money laundering or prevention of terrorism or directives, guidelines and instructions issued by the central bank, or that these actions or violations are about to occur; or
  • the assets of the financial institution are not sufficient to give adequate protection to the bank’s depositors or creditors.

What are the powers and duties of the conservator?

As from its appointment, the conservator will:

  • take charge of the financial institution and all of its property, books, records and effects; and
  • exercise all powers necessary to preserve, protect and recover any of the assets of the financial institution, collect all monies and debts due to it, assert causes of action belonging to the financial institution and file, prosecute and defend suits on its behalf.

The conservator will have all the powers of the shareholders, directors and officers of the financial institution and may operate the financial institution in its own name unless otherwise specified by the board of the Bank of Mauritius.

What are the aims of the conservatorship?

Conservatorship is aimed at rehabilitating the financial institution and returning it to its management. Alternatively, the conservatorship will aim to reorganise the financial institution in view of proposing a reorganisation plan.

To be approved by the board of the Bank of Mauritius, the reorganisation plan must:

  • be equitable under the circumstances, to depositors, other creditors and shareholders;
  • provide for bringing in new funds to establish adequate ratios between capital and deposits, capital and risk assets and liquid assets and deposits; and
  • provide for the removal of any director, chief executive officer, manager, officer or employee responsible for the circumstances which necessitated the appointment of the conservator.

If, during the reorganisation, it appears that the plan is inequitable or its execution undesirable, the conservator may recommend that the board of the Bank of Mauritius orders the compulsory liquidation of the financial institution.