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Morocco’s Banking Sector: Strengthening Supervision and Crisis Management

Rabat, Morocco - To ensure the stability of its banking sector, Morocco’s central bank, Bank Al-Maghrib (BAM), has been working to strengthen supervision and crisis management mechanisms. The efforts aim to prevent difficulties in credit institutions, manage crises effectively, and promote cooperation among regulators.

Supervision Reform

The BAM has been reforming its supervisory framework to ensure that foreign subsidiaries of Moroccan banking groups are subject to effective monitoring. This includes:

  • On-site inspections and off-site supervision activities
  • Focus on the parent company’s governance system, risk management, and internal control arrangements

Additionally, the central bank has signed cooperation agreements with most host country supervisory authorities where Moroccan banks have subsidiaries.

Crisis Management and Resolution

To prevent difficulties in credit institutions, the BAM has a range of tools at its disposal:

  • Formal notices, cautions, injunctions, warnings, and prohibitions on dividend distribution
  • Suspending or restricting certain activities
  • Appointing an interim administrator or withdrawing a license if necessary

The BAM is updating its manual for handling difficulties in credit institutions to reflect the new banking law. The manual provides corrective measures for credit institutions rated 4 or 5 by the system for rating credit institutions (SANEC).

Crisis Committee and Information Sharing

In April 2014, the BAM signed a protocol with the Securities Commission and the Director of the Insurance and Social Security Directorate for information sharing in normal times and crisis situations. The Crisis Committee, created in 2012, is chaired by the Minister of Finance and includes representatives from the BAM, CDVM, and DAPS.

The committee aims to coordinate actions during financial crises that require government intervention. However, a comprehensive crisis communications policy remains undefined.

Cross-Border Crisis Simulation Exercise

Given the rapid international expansion of Moroccan banks, it is essential to conduct a cross-border crisis simulation exercise as soon as possible to test the effectiveness of the new mechanisms.

The new banking law significantly increases the BAM’s powers in the event of difficulties in systemically important institutions. The Governor of BAM chairs the Systemic Risk Supervision and Coordination Committee (CCSRS), which coordinates crisis resolution actions.

Conclusion

Overall, Morocco’s efforts to strengthen supervision and crisis management are crucial for maintaining a stable banking sector and protecting the interests of depositors and investors.