Mauritius will create a new company to take over Bramer Banking Corp. after the central bank revoked the lender’s license last week and the country’s prime minister said there was evidence of links to a $690 million Ponzi scheme.
The company, to be known as National Commercial Bank, will be given an operating license by the end of this week, Finance Minister Vishnu Lutchmeenaraidoo said in parliament in the capital, Port Louis, on Tuesday.
The Bank of Mauritius on April 2 withdrew Bramer’s banking license saying the lender had been “carrying on business in a manner which is contrary or detrimental to the interest of its depositors and the public,” according to a statement on its website. Large withdrawals of deposits from the bank had placed it in a “precarious liquidity situation,” it said.
The events surrounding Bramer threaten to undermine Mauritius’s efforts to position itself as a regional hub for financial services, which the central bank has described as the core of the Indian Ocean island nation’s economic system. The industry contributes about 10 percent to Mauritius’s $11.9 billion gross domestic product, according to the African Development Bank.
“The risk that investors shun Mauritius is unfortunately real,” said Reza Uteem, founder of Uteem Chambers, a Port Louis-based law firm, and a member of parliament. “Several of my offshore clients contacted me to have an explanation on what is happening with the Bramer case.”
Prime Minister Anerood Jugnauth said there was “strong evidence” that Bramer was engaged in a Ponzi scheme and an investigation is under way into what he said is an “unprecedented financial scandal.” Bramer’s stock fell 40 percent this year before being suspended on April 2, the second-worst performance on the benchmark Semdex Index.
SBM Holdings Ltd., operator of Mauritius’s second-biggest bank by market value, said on Tuesday it’s in talks for the “provision of limited assistance” to the new state-owned bank, without providing further details. SBM has canceled an offer to purchase some of Bramer’s assets and liabilities.
Bramer is a subsidiary of British American Investment Co. (Mauritius) Ltd., which also owns BAI Co., a Mauritian insurance company. The Mauritius Financial Services Commission said it has appointed Andre Bonieux and Mushtaq Oosman of PricewaterhouseCoopers LLP as conservators of BAI Co. “to safeguard the interests of policyholders.”
Bramer Chief Executive Officer Ashraf Esmael wasn’t immediately available when Bloomberg called his office seeking comment.