Corporate Governance Chapter 5 Chapter 5 witnessed any serious liquidity crunch either. The independence of the system with regard to large-scale interbank borrowings to fund its operations partly explains this. The system is also less reliant on extra-territorial sources for building up its domestic assets. The foreign funds it used for domestic deployment were as low as 2 per cent, thus insulating it from the liquidity crunch in global financial markets. In general, the banks were not exposed to toxic assets like mortgage-backed securities. two finances mortgages while the other grants personal loans to closed groups, particularly retired civil servants. NBDTIs have been insulated from the turmoil in financial markets. However, it has become necessary to monitor them closely in order to reduce the spill over effects of the downturn in the real economy caused by the global economic crisis. However, the regulatory requirements for NBDTIs have been strengthened to bring them in line with those of banks. This builds greater resilience in the system. The insurance sector The SEM Ltd 691. The insurance industry is an important part of the Mauritian economy. The FSC regulates and supervises it. Regulations require assets to be spread adequately. A large proportion of insurance assets is deployed locally. This sector is well developed and has about 21 companies operating in Mauritius. Its penetration rate is about 4.1 per cent (premia/GDP). 695. 692. Life insurance contributes 61 per cent to the business of this sector. Generous government tax incentives, together with favourable housing and pension financing, favour the insurance sector. All these sectors are important for Mauritius’s growth and development in a highly competitive global economy. The country’s ability to improve its corporate governance environment will therefore go a long way to attracting international investment to the country, increasing FDI and improving economic growth and development. The Stock Exchange Act of 1988 established the SEM of Mauritius, as a private limited company responsible for operating and promoting an efficient and regulated securities market in Mauritius, on 30 March 1989. The SEM became a public company on 6 October 2008. The SEM’s operations, as well as its regulatory and technical framework, have been significantly overhauled over the years to reflect the everchanging standards of the stock market environment worldwide. The SEM is now one of the leading exchanges in Africa and is a member of the World Federation of Exchanges (WFE). 696. The SEM operates two markets: the Official Market and the Development and Enterprise Market (DEM). The Official Market started operating in 1989 with five listed companies and a market capitalisation of nearly USD92 million. There are 40 companies currently listed on the Official Market with a market capitalisation of nearly USD3,894.54 million as at 30 June 2009. The DEM was launched on 4 August 2006. There are 49 companies currently listed on this market with a market capitalisation of nearly USD1,352.45 million as at 30 June 2009. 697. Parliament passed the new Securities Act of 2005 on March 2005. The act came into force in September 2008. Its main purpose is to ensure a fair, efficient and transparent securities market and, most important, to strike a balance between protecting investors and protecting the interests of the securities market. 693. The global financial crisis did not directly affect the insurance sector or other sectors of the financial system in Mauritius. However, vulnerability caused by reinsurers could cause concern. The fact that the global reinsurance industry has remained unaffected by the financial crisis suggests that this is not likely. The current global situation clearly shows that the crisis is deepening and continuing. This has possible ramifications for the real economy. It could affect the values of assets that the sector holds. This emphasises that the sector must be continually vigilant to ensure that it identifies all potential threats and minimises them in time. Nonbank deposit-taking institutions (NBDTIs) 694. 252 Corporate Governance NBDTIs are also involved in financial intermediation. NBDTIs are companies that raise public deposits (other than demand deposits) to fund their activities. There were 13 NBDTIs on 31 December 2008. Eleven of them were in the leasing business. One of the remaining SOEs 698. The state in Mauritius owns a number of enterprises. It exercises its ownership in two ways. Acts of Parliament regulate a number of parastatal enterprises like the Central Water Authority (CWA) and Central Electricity Board (CEB). Other enterprises operate as public limited liability companies. The government or other state-owned entities own the majority of shares in these entities. There are minority 253