Offshore banks provide access to politically and economically stable jurisdictions. This may be an advantage for those residents in areas where there is a risk of political turmoil who fear their assets may be frozen, seized or disappear. However, developed countries with regulated banking systems offer the same advantages in terms of stability.
Some offshore banks may operate with a lower cost base and can provide higher interest rates than the legal rate in the home country due to lower overheads and a lack of government intervention. Advocates of offshore banking often characterize government regulation as a form of tax on domestic banks, reducing interest rates on deposits.
In comparison with other small islands in the Indian Ocean region, Mauritius is a leader in financial services, with a notable offshore banking sector. The offshore banks in Mauritius offer a wide range of services including foreign exchange dealing, lending, deposit taking, trade finance, offshore trust and securities and fund management.
Offshore business activities became a significant sector in Mauritius as from 1992, when the Mauritian Offshore Business Activities Act (MOBA Act 1992) came into force, bringing into being the Mauritius Offshore Business Activities Authority (MOBAA), which was active and effective in structuring offshore regimes in various sectors. Non-bank financial services legislation was updated and modernized in 2007.
In 2001, under the Financial Services Development Act 2001 the government established a Financial Services Commission (FSC) and an Advisory Council. The FSC now monitor the country's stock exchange, offshore business activities and the insurance industry. It also supervises non-regulated or partly-regulated non-banking activities such as fund management, pension schemes and management, collective investment schemes, investment advisory services and leasing.
Mauritius has adopted a cautious attitude towards banking development, having admitted only in the region of ten 'Offshore Banking Units' (OBUs). In any case, the distinction between 'onshore' and 'offshore' banks has since been removed.
Offshore Banks can conduct banking and investment banking business in currencies other than the Mauritius rupee. OBUs may engage in fund administration and portfolio management, and offer treasury, custody and trust services.
Last Updated on: 20-04-2010