Moroccan Financial System Assessment by Falloul Mehdi
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Transcript of Moroccan Financial System Assessment by Falloul Mehdi
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MoroccoFinancial system stability
assessment-update2007
Dr. Moulay El Mehdi Falloul
Hassan II University Mohammedia
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IntroductionThe 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.
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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.
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CONTENTS
I. Macroeconomic EnvironmentII. Structure of the Financial SystemIII. Banking Sector Performance, Soundness and VulnerabilityIV. Banking Supervision, Corrective Measures, and Deposit GuaranteeV. Stress TestsVI. Capital Account LiberalizationVII. Increased Openness of the Economy: Implications for Liquidity and Macroeconomic Risk Management
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VIII. Nonbank Financial Institutions II. IX. Insurance Sector X. Capital MarketsXI. 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).......
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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.
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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; fiveare majority foreign owned; five are majority publiclyowned.
Capital markets are increasingly contributing to financial deepening, with stock market capitalization.
Moroccos insurance sector is the largest market in the Maghreb.
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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.
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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)
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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
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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 communicationsand transparency strategy to make monetary policy more effective, and enable financial institutions to better manage risk.
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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;
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VIII. NONBANK FINANCIAL INSTITUTIONSThe 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.
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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.
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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
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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
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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.
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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.
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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.
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Thank you for your attention
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References
Morocco: Financial System Stability AssessmentUpdate IMF Country Report No. 08/3332008 International Monetary Fund
Morocco: Financial System Stability AssessmentUpdate IMF Country Report No. 03/2122003 International Monetary Fund