Hassan II University Mohammedia

Morocco
Financial system stability
assessment-update
2007
Dr. Moulay El Mehdi Falloul

Introduction
The Moroccan banking sector is stable, adequately
capitalized, profitable, and resilient to shocks.
Morocco has conducted major structural reforms within
the framework of a policy of actively seeking economic
and financial sector openness.
The recommendations of the 2002 Financial Sector
Assessments Program have been largely implemented.

Financial spill-overs from the global credit turmoil has so

far been very limited
Banking supervision complies with the majority of the
Basel Core Principles for effective Banking Supervision
(BCP).
more operational independence is required for Bank Al
Maghrib, to conduct an autonomous monetary policy and
effective supervision.

CONTENTS
I. Macroeconomic Environment
II. Structure of the Financial System
III. Banking Sector Performance, Soundness and
Vulnerability
IV. Banking Supervision, Corrective Measures, and
Deposit Guarantee
V. Stress Tests
VI. Capital Account Liberalization
VII. Increased Openness of the Economy: Implications
for Liquidity and Macroeconomic Risk Management

VIII. Nonbank Financial Institutions II.

IX. Insurance Sector
X. Capital Markets
XI. Expansion of the Banking System and Access to
Financial Services
XII. Payment Systems
XIII. Anti-Money Laundering and Combating the
Financing of Terrorism (AML/CFT).......

I. MACROECONOMIC ENVIRONMENT
Moroccos recent economic performance has been
favorable.(real GDP per annum 5.4 percent since 2001).
The external position is comfortable.
The fiscal situation improved significantly through 2007,
but the recent surge in subsidies related expenditure
poses a major challenge to fiscal policy.
Monetary aggregates are rising rapidly, reflecting robust
domestic demand.

II. STRUCTURE OF THE FINANCIAL SYSTEM

With bank assets equivalent to 109 percent of GDP in
2007 (81 percent in 2003),
Six banks are majority domestically privately owned; five
are majority foreign owned; five are majority publicly
owned.
Capital markets are increasingly contributing to financial
deepening, with stock market capitalization.
Moroccos insurance sector is the largest market in the
Maghreb.

III. BANKING SECTOR PERFORMANCE,

SOUNDNESS, AND VULNERABILITY
With an average risk weighted capital adequacy ratio
(CAR) for banks of 10.6 percent (minimum 8 percent),

14. Banks remain highly profitable, as a result of :

(i) high interest rate margins,
(ii) moderation of operating expenses (2 percent of assets);
and (iii) an increase in fees and commissions.

IV. BANKING SUPERVISION, CORRECTIVE

MEASURES, AND DEPOSIT GUARANTEE
BAM exercises banking supervision on the basis of the
2006 banking law( wide range of tools for intervention in
noncompliant banks)
Under the banking law, BAM and its Governor has the
authority to appoint a provisional administrator in a
problem bank, and may determine the mandate of that
administrator and its duration.
Since 1996, Morocco has had a deposit guarantee fund
financed by the banks (with the exception of the offshore
banks)

V. STRESS TESTS
Credit risk, foreign exchange risk, interest rate risk and
liquidity risk stress tests, as well as a multi-factor test,
were performed by the mission, in close collaboration
with the BAM team.

The stress tests showed that the banking sector as a

whole is largely resistant to credit risk shocks ;
BAM staff has made significant strides in its stress
testing capabilities

VII. INCREASED OPENNESS OF THE

ECONOMY: IMPLICATIONS FOR LIQUIDITY
AND MACROECONOMIC RISK MANAGEMENT

In the context of a more flexible exchange rate regime,

BAM is preparing to move to inflation targeting.
The central bank has also reformed its communications
and transparency strategy to make monetary policy more
effective, and enable financial institutions to better
manage risk.

VI. CAPITAL ACCOUNT LIBERALIZATION

In August 2007, a number of additional measures
were taken to liberalize the capital account
For exemple: (i) increasing the share of export receipts that can be
maintained in foreign exchange or convertible dirham accounts from
20 percent to 50 percent;
(ii) allowing broader opportunities for direct investment abroad;
(iv) liberalization of credit provided by Moroccan banks and
exporters to their non-resident clients;

VIII. NONBANK FINANCIAL INSTITUTIONS

The non-bank financial institutions hold broadly one third
of the financial systems assets, the Caisse de Dpt et
de Gestion (CDG) remains the largest nonbank financial
institution.
A Key role is played by the Poste in providing wide range
of financial services,
The microcredit Associations , providing credit to
1.1 million creditors (3.7 percent of the population).
The Caisse Centrale de Garantie currently operates 14
guarantee and co-financing operations on behalf of, and
with the backing of the government.

IX. INSURANCE SECTOR

The insurance market appears to be both concentrated
and stable and has grown steadily over the past years
(by 12 percent in 2006 and 20 percent in 2007).

The Moroccan insurance market is the second largest in

Africa, after South Africa. It is the leading market in the
Maghreb and in the Arab world.

X. CAPITAL MARKETS

Capital markets represent a growing share of the

financial sector with stock market capitalization at 73
percent of GDP in 2006 and 98 percent of GDP in 2007.
Good progress has been made to make more dynamic
Casablanca stock exchange
Of particular interest are the strengthening of the
powers and accountability of the Conseil Dontologique
des Valeurs Mobilires

XI. EXPANSION OF THE BANKING SYSTEM AND

ACCESS TO FINANCIAL SERVICES
Access to banking services has greatly improved since
the assessment in 2002.
Despite this progress, access to bank credit is limited to
a small segment of the economy,
BAMs have taken many actions to improve access to
bank financing by small and medium size enterprises.
The plans to establish a credit bureau to improve
reliability of financial information

XII. PAYMENT SYSTEMS

Implementation of the authorities 2004-2006 strategic

plan for the payment system has led to substantial
modernization of the payment system.

A new law on the payment system and means of

payment is being drafted.

XIII. ANTI-MONEY LAUNDERING AND COMBATING THE

FINANCING OF TERRORISM
(AML/CFT)
The main recommendations of the 2007 MENAFATF
report on AML/CFT compliance call for
a more accurate and comprehensive description of money
laundering as an offense,
the confiscation and freezing of illegal gains,

For some years now, the Moroccan authorities have

embarked on an ambitious project to complete the
AML/CFT system.

CONCLUSION
The saying about the chaos Theory
The flap of a butterfly wings in Europe set off
a hurricane in the Caribbean sea
Moroccan country wasnt in fact impacted by the
financial crisis, nevertheless he has to realize its well
defined strategy of a more protected and integrated
financial system, to succede in financial globalization
and to avoid any potential crisis.

Thank you for your attention

References
Morocco: Financial System Stability Assessment
Update IMF Country Report No. 08/333
2008 International Monetary Fund
Morocco: Financial System Stability Assessment
Update IMF Country Report No. 03/212
2003 International Monetary Fund