Penny Hack, Business Lawyer: "There is No Truly Operational Central Bank Anymore"
Penny Hack, a business lawyer, states: "There is no truly operational central bank anymore."
Amid an unprecedented institutional crisis at the Bank of Mauritius, business lawyer Penny Hack offers a harsh assessment, highlighting the collapse of credibility in the national banking regulator.
For several weeks now, the situation at the Bank of Mauritius has taken a new turn. Resignations, interference, allegations, revelations, and denials have all contributed to this state of affairs. What is your perspective on the current situation within the banking regulator? Honestly, we can no longer truly speak of a banking regulator. What is happening at the Bank of Mauritius is far from what one would expect from a central bank. The behavior of those at the helm is disgraceful. I am not taking sides, as the responsibility is collective.
Board members continue to be compensated while remaining silent and passive in the background. Today, there is no truly operational central bank. I would prefer not to say what we have in its place, but one thing is certain: the country is suffering the consequences, both locally and internationally. The most serious issue lies not in the scandals themselves but in the fact that we are now in jeopardy concerning Moody’s.
Do you believe that the Governor of the Bank of Mauritius has overstepped his role by having to explain his son's actions, the released audio recordings, or what may have occurred before his appointment? Such a position requires discretion and restraint. Whether in the public or private banking sector, this type of behavior is unworthy of a governor. That said, I do not place all the blame on him, as responsibilities are shared. He does not operate in a vacuum; he acts in relation to others. Nevertheless, he has clearly succumbed to provocation and has found himself embroiled in an open and public conflict.
Can Rama Sithanen remain in office, in your opinion? That is a decision for him to make. But in my view, it is time to start anew on healthy foundations. Everything must be reassessed if we want to restore credibility and tranquility to the Bank of Mauritius. This also involves a thorough overhaul of the board of directors. The institution cannot move forward with its current composition.
What impact can the situation at the Bank of Mauritius have on the image of Mauritius as a jurisdiction in the eyes of investors? Mauritius has already gone through a decade of difficulties regarding financial reputation. Unfortunately, this continues. This instability does not come without effects on economic operators, particularly private companies that need a solid and credible banking environment. Foreign investors will think twice before placing their trust in a country that does not have a reliable central bank. The impact on growth will be inevitable. Even if it is not visible, it will be felt.
And what about Moody’s? Do you think these events will harm Mauritius's rating? Moody’s is already doing us a favor by not classifying Mauritius in the "junk" category. But with what is happening, we are almost inviting them to do so. Their assessment does not rely solely on economic figures. The agency also considers the overall environment: democracy, the financial system, the country’s reputation, its history, and the independence of its institutions... All these criteria weigh in the balance. Today, Mauritius's position is becoming very fragile.
Complaints have been filed with the police and the Financial Services Commission, with requests for compensation coming from the protagonists involved in the Bank of Mauritius affair. Do these actions seem justified to you? Will taxpayers be the biggest losers if the complainants succeed? These complaints are of a private nature. They do not target the Bank of Mauritius as an institution, nor do they directly target the State. However, given the positions held by the involved individuals, it has a direct impact on the country. This only exacerbates the instability of the central bank. The real question is whether these senior officials still have the time to focus on their mission. Do they have the necessary availability to fulfill the role for which they are well-compensated? I do not think so.
