Advanced Search

Guideline on Country Risk Management

The purpose of this guideline is to require banks to put in place a framework for identifying, measuring and managing country exposures and making provisions thereon. The guideline outlines the minimum requirements that a bank’s country risk management system shall contain. However, the level of sophistication of a bank’s system shall be commensurate with the size, nature and complexity of its cross-border exposures. The board of directors of a bank incorporated in Mauritius has the prime responsibility for ensuring that country risk is managed effectively and efficiently. The assessment of country risk involves the determination of the nature of risks associated with individual country exposures and the evaluation of country conditions. In this connexion, banks shall make a thorough evaluation of risks which may be associated with their cross-border operations and which have the potential to adversely affect their risk profile. Banks shall determine the appropriate limits to be set for individual country exposures. The Guideline lists the minimum factors on which the determination of country exposure shall be based on. Banks shall have in place a structure to evaluate compliance with country exposure limits and sub-limits. The Guideline lists the minimum elements that a monitoring program shall cover for the monitoring of country exposures. Cross-border exposures give rise to an additional risk apart from the underlying credit risk of the counterparty. It is therefore necessary that banks put in place a system for reflecting the impact of country risk on their balance sheet. Banks shall, in their annual reports, disclose their country risk management policies and controls and shall provide sufficient qualitative and quantitative data to help market participants understand the nature and extent of their exposures. Disclosures shall be made in accordance with the Bank’s Guideline on Public Disclosure of Information.