Jurisdictions that have regulatory gaps are more prone to fraudulent practices. Regulators must guide the evolution of financial institutions by favouring stability-enhancing and discouraging instability-augmenting institutions and practices. Regulators often have to act as bomb disposal experts when confronted with a potential risk of financial instability.
Those at the helm of regulatory authorities bear in mind one thing: if they don’t hear any explosion, it means they are dead already. Last year, the Bank of Mauritius revoked the banking license of a 7-year old bank that was part of one of the biggest corporate bodies in the country. It was a systemically important Group of companies.