Supervision and Regulation of Financial Conglomerates and Crisis Preparedness in Morocco
Project Development Objective ( PDO )
The aim of this project is to strengthen financial sector stability through improved regulations for the oversight and resolution of financial conglomerates and improved crisis preparedness and management capabilities.
The Moroccan financial sector weathered the global financial crisis well, although Morocco remains exposed to weak growth in Europe. The financial and regulatory landscape has changed significantly since the 2007 Financial Sector Assessment Program. The system has become larger and more complex, with a significant expansion into Sub-Saharan Africa by the three systemic financial conglomerates. The authorities have begun to implement Basel III and adopted a new banking law in 2014, with emphasis on regulation and supervision of financial conglomerates, systemic stability, and recovery and resolution of systemic financial conglomerates. Three banks account for two-thirds of system assets and have been designed as systemic by the central bank of Morocco (Bank Al-Maghrib, or BAM). These banks have expanded into Africa and belong to broader financial conglomerates (insurance, securities firms, and asset managers).
BAM has requested technical assistance to conduct a second crisis simulation exercise. Such an exercise will help it further internalize expectations of G-20 (Group of Twenty) and the Financial Stability Board for financial supervisors concerning risk management, aggregation, and reporting, as well as key attributes for effective resolution regimes. In addition, BAM wants to follow up on the 2015 Financial Sector Assessment Program Update to mandate the production of recovery plans for systemic banks, which also follows the Financial Stability Board’s Key Attributes for Effective Resolution of Financial Institutions.
The project would have the following components:
Component 1: Crisis management arrangements
The project will (a) conduct a realistic crisis simulation exercise, (b) discuss the findings and recommendations emanating from the CSE, and (c) develop an action plan to improve crisis preparedness and management and intra- and interagency coordination.
Component 2: Recovery plans for the banking parts of financial conglomerates
The project will (a) develop regulation (circular) to systemic banks to file with BAM workable recovery plans for the banking part of the financial conglomerate (Article 79) and (b) draft a technical guidance note on the above regulations. The project team is also (a) conducting a workshop for BAM staff members who are involved in recovery planning and (b) coordinating a consultation workshop with the industry (BAM conducts systematic consultations on major regulatory work).
The expected outcomes of this project are as follows:
1. Implementing an action plan to improve crisis preparedness, coordination, communication, data
sharing, and systemic risk assessment
2. Establishing a process and instruments and more adequate preparation of authorities for
handling a crisis
3. Creating greater clarity by decision makers in how and when to act in a crisis
4. Increasing coordination among the financial supervisors and enhancing systemic risk
identification, monitoring, and supervisory oversight notably through living wills and crisis
5. Developing a robust legal framework that supports the maintenance of safety and soundness of
financial conglomerates and, hence, the financial sector as a whole
6. Creating more effective supervision of financial conglomerates that results in compliance with
international best practices in corporate governance and prudential regulations that ultimately
strengthen the financial stability