Prior to July 2014, the year Basel III was introduced, banks in Mauritius had to maintain a 10 per cent minimum capital adequacy ratio consisting of a ratio of 5% Tier 1 capital and a similar ratio of 5% Tier 2 capital to risk-weighted assets. Tier 1 capital consisted of equity, general reserves, statutory reserves (15%) and retained earnings.
Tier 2 capital, limited to 100% of Tier 1 capital, consisted of subordinated debt of maturity of at least 5 years, which can only be redeemed after approval has been received from the Regulator, revaluation reserves with a 55% haircut and other instruments as may be approved by the Regulator.