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Improving Bank Resolution Planning and Deposit Insurance in Morocco

Project Development Objective ( PDO )

This project aims to help Morocco establish an adequate legal and regulatory framework, interagency arrangements, and procedures/tools for the resolution of systemic banks that belong to financial conglomerates, and to operationalize the Deposit Insurance Corporation.

Background

In Morocco, the top three banks (67% of system assets, all private domestic banks) belong to broader financial conglomerates. Some are controlled by holdings whose interests extend to non-financial activities. The three groups have been designated as systemic.

The FSAP Update of 2015 recommended a thorough review of the special resolution regime for systemic banks in light of the Financial Stability Board’s 2014 Key Attributes of Effective Resolution Regimes for Financial Institutions. In response, the active FIRST project (A062) has an amended scope that focuses on recovery planning for systemic banks that belong to financial conglomerates, while this D010 project concerns resolution planning of the banking part of financial conglomerates.

In addition, the 2014 Banking Law created a Deposit Insurance Corporation (DIC), a legally independent entity incorporated under Morocco Company Law that is fully separate from the central bank, to manage the Deposit Insurance Fund (DIF). Currently, several elements are missing in order to operationalize the 2014 Banking Law’s provision to establish the DIC.

The main counterparts are the Ministry of Economy and Finance and Bank Al-Maghrib--BAM (Central Bank of Morocco).

Activities / Output

The expected activities include the following:

1.  Resolution planning for systemic banks that belong to financial conglomerates
a)  Assisting in drafting the new chapter to the Banking Law on bank resolution, any other laws as
     needed.
b)  Assisting in drafting new Memoranda of Understanding 
c)  Revising and update in the light of the above actions the BAM internal manual on resolution
     procedures and emergency liquidity assistance (ELA)
d)  (Carried over from project A062) Regulations to extend the oversight perimeter for Financial
     Conglomerates (Article 21 of the 2014 Banking Law)

2.  Operationalizing Deposit Insurance Corporation
a)  Assisting in improving the regulatory and governance framework
b)  Assisting in producing a new Rulebook
c)  Drafting Operational manual for paying out insured deposits in case of bank liquidation including
     obligations for member institutions to deliver timely information about 

Expected Outcomes

The expected outcomes of the project are: 

•  Amended Banking Law enacted with adequate legal framework for bank resolution
•  Clear institutional arrangements, manuals, policies/procedures for bank resolution established
•  Strengthened deposit insurance system