Rising interest rates: Banks are getting ready
Tince the announcement of the second key rate increase by the central Bank, Bank Al-Maghrib, decided in December 2022 (50 basis points bringing the key rate to 2.50%), everyone expects the banks to pass it on their own rates.
According to information collected by l’Economiste, the increase in lending rates should vary between 25 to 30 basis points for certain institutions, while for others the hike can range from 75 to 100 basis points, depending on several factors, including risk assessment.
Generally, when central banks increase their key rate, commercial banks pass on this increase on the interest rates of loans granted to customers to align with the key rate. Banks have to pay more to refinance themselves with the central bank and therefore de facto, there is an increase in the interest rates. “ Such an approach requires weeks, even months of preparation. For the moment, there is nothing official, we are awaiting directives from the headquarters”, explains a banker. “ If banks have not yet taken the plunge, it is also because of competition. They cannot afford to make increases when others have not yet done so ”, added the banker, especially since the situation is rather difficult. “ You should know that lately we are fighting to keep the activity afloat, the applicants for credit are not jostling at the gate. If we increase the cost even more, we will be penalized more” , said another banker. In any case, the headquarters of banking institutions have been in turmoil since the announcement of the last increase in the key rate. Meetings follow one another to integrate the measure into the system (sales, communication, training, etc.). “ This increase will happen for sure. We’re talking 75 basis points to 100 bps,, but whatever it is, it’s all negotiable. It all depends on the profile of the borrower, especially when it comes to loans to businesses. In some cases, there may even be no rate increase at all ”, says the business department director of another bank. « All rates are negotiable with customers», says another source. For that person, the most difficult part remains the upcoming negotiations with the companies with which the banks are bound by agreements. “ As soon as the increase is official, we will have to review all the contracts binding us to our partners to update the rates. It won’t go smoothly «. Competition is fierce, some banks are willing not to pass on the increase in order not to be penalized. Regarding corporate loans, they should range between 4.25% and 8%, depending on the size of the company as well as the risk spread. “ Once again everything is negotiable”, insist our sources. On the mortgage side, fixed rates should not rise sharply. The hike should be more or less 50 basis points, and it is mainly new buyers and variable rate borrowers who will feel the effects. « The most penalized will be consumer credit applicants knowing that the rates are already very high «, anticipates a banking market professional.
Fedoua TOUNASSI
