Financial stability: Climate risks come into play
Faced with persistently high inflation, the central bank (Bank Al-Maghrib, BAM) continued to fine-tune its monetary policy. The latest report on financial stability, drawn up jointly by BAM, the Insurance and Social Security Supervisory Authority (ACAPS) and the Moroccan Capital Market Authority (AMMC), highlighted the new risks taken into account in assessing the resilience and solidity of the financial sector.
« In a context marked by uncertainty, the Systemic Risk Coordination and Monitoring Committee has continued to closely monitor the evolution of risks to which the Moroccan financial sector is exposed «. This is coupled with continued implementation of the financial stability roadmap covering the 2022-2024 period. To this end, BAM has strengthened its monitoring system, integrating climate and cyber risks. BAM has also « improved the conduct of macro-resistance tests for the banking sector «. This is the reasoning behind the reinforcement of the monitoring system, by integrating climate and cyber risks. BAM has also « improved the conduct of macroeconomic stress tests in the banking sector, in particular by refining the design of macroeconomic shock scenarios «. An initial survey on systemic risks was carried out among the main local banks, to ascertain their perceptions and degree of confidence in the stability of the national financial system.
In detail, the climate dimension is taken into account because, at a time when Morocco is facing water stress, its development, based on industry and agriculture, relies heavily on abundant water resources, according to the document. This is all the more important as the risk of a water shortage persists with the succession of drought years, and could ultimately damage economic and financial stability. With this in mind, BAM stresses the importance of assessing the impact of water stress on the soundness of the banking sector. The Central Bank has initiated a process to examine the appropriateness of integrating water/climate risk into the analytical framework of macroprudential policy.
According to BAM, preliminary analyses have been carried out and data has been collected from various partners. The idea is to adjust the methodology for designing macroeconomic scenarios for the macro-stress-test exercises. In particular, the goal is to take into account the impact of climate shocks on economic aggregates. This has also made it possible to examine the possibility of incorporating climate change-related risks into systemic risk mapping, by proposing indicators that should be analyzed and scored on a regular basis.
M.A.M.
