A mouthful of hot potato

With the Bramer Bank / BAI case, the government is left with a hot potato, and if it fails to manage carefully, it runs the risk of getting burnt. Already, imputed motives are coming from all sides despite official explanations.

If we rely on the press release of the Bank of Mauritius (BoM), dated April 2, justifying the closure of the Bramer Bank, mention is made of lack of liquidity and bank practices that are contrary to the regulations of the BoM. Some of these practices, undisclosed at this stage, date back to 2012, the statement said. According to the Saturday edition of l’Express, the big boss of BAI, Dawood Rawat, who is abroad, tried to inject Rs 1.4 billion in Bramer Bank from the business center of BAI in Kenya. But the BoM (who denied this in a statement issued on the same day) has nevertheless applied the guillotine. Why? Has the BoM, that, according to its own statement, noted irregularities to its Rules since 2012, is in presence of serious elements that require such a killing? What are they? The public has the right to know. Especially when the Financial Services Commission (FSC) has, for its part, based itself on the statement of the BoM to, in turn, put the insurance business, the heart of the BAI group, under seizure. Although it is not an outright expropriation, the regulatory authorities, through the appointment of two legal administrators (André Bonieux and Mushtaq Oosman) took control of the leading life insurance company (with more than 50 % of the market share) that Dawood Rawat has taken more than three decades to develop into a multinational, and which is present in at least six countries. BAI, itself, exists for more than 45 years. Again, the authorities have to justify their decision. We have seen in recent years, large international banks, such as HSBC and Barclays, commit serious malpractices in their aim to make money at any cost. They were punished with heavy fines, but have not been put to death precisely because of “systemic risks” and of the economic and social impact. It is also tempting for those working in the insurance sector to reinvest the money of policyholders in highly-paid business, but which in turn could also be dangerous and speculative for the insured. Hence the control that the regulatory authorities are expected to exercise at the presentation of each annual balance sheet of insurance companies. Has the FSC done its job? Why not heavy dissuasive fines if there were irregularities instead of the ultimate sanction that causes turmoil and uncertainty among thousands of policyholders and employees? Nobody would doubt that SAJ and Lutchmeenaraidoo do have not the public interest at heart. If there are two persons in this government who think of the country’s interests above all, it is them! If they relied upon information given by their junior and new Minister for Financial Services and Good Governance, it must be that they have been informed of things considered to be extremely serious. But one cannot help but to frown when interest rate or annual return of 7% or 9% in institutions supervised by the BoM or FSC, or by both, is termed as a roadside Ponzi scheme. Or when investment funds operating in a legal framework (there are at least twenty best known of them in Mauritius managed by subsidiaries of the most indebted companies of the private sector) are associated with embezzlement funds. Unless here too, the authorities are in presence (or is looking for) damning evidence. This would explain the extreme measures taken by the authorities, fortunately coupled with a guaranteed continuity of employment for the staff of the group and for clients to be able to make withdrawals. However, SAJ is right to say that those who take risks with their money (without reading the small print of the investment prospectus) have themselves to blame for losses. It remains that, given certain unsanctioned practices so far in other financial institutions, whether what happens to BAI could be called “targeting” as the rumour mill would have it. Anyway, after the last budget presented by Lutchmeenaraidoo, which gave hope to the country, it is expected that some serenity is back quickly in the business sector, so that investors do not have the impression that they are at risk of being ditched at the slightest mis-step ... amidst an atmosphere of settling scores or to satisfy the appetite of new politico-economic predators.