The Systemic Risks Coordination and Surveillance Committee, made up of representatives of Bank Al-Maghrib, the Moroccan Capital Market Authority, the Insurance and Social Welfare Control Authority (ACAPS) and the Management of Treasury and External Finance, held its sixteenth session on Thursday, December 22 at the headquarters of Bank Al-Maghrib (BAM) in Rabat.
In a press release, the Committee indicates that it took stock of the state of progress of the inter-authority financial stability roadmap covering the period 2022-2024 and examined the draft joint circular of the supervisory authorities of the financial sector relating to financial conglomerates.
The Committee also indicated that it had analyzed the mapping of systemic risks weighing on the national financial system, in a context still surrounded by great uncertainty. As such, it reviewed the conclusions of the monthly meetings of its representatives held since the onset of the health crisis as well as the evolution of the monitoring indicators. The latter continue to show the solidity and resilience of the Moroccan financial sector.
After examining the situation of the financial system with regard to economic and financial trends, observed and expected, the Committee noted several points.
According to the Committee, the evolution of macroeconomic conditions does not highlight so far major risks that could threaten financial stability, but the vulnerabilities arising from the external and internal environment (repercussions of the war in Ukraine, drought, consequences of the pandemic, inflationary pressures, etc., which call for vigilance according to the same source and continue to be closely monitored. According to Bank Al-Maghrib projections, the growth of the national economy is expected to slow to 1.1% in 2022 before accelerating to 3% in 2023 and 3.2% in 2024.
As for inflation and after a sharp acceleration in 2022 to 6.6%, the Committee estimates that it will ease while remaining at a high level of around 4% on average in 2023 and 2024. Regarding the external position , the current account deficit is expected to narrow to around 2% over the next two years, while official reserve assets would stand at 362.9 billion in 2023 and then at 371 billion in 2024, equivalent to almost 6 months of imports of goods and services, explains the same source.
With regard to public finances, the Committee notes that the budget deficit would gradually decrease from 5.3% of GDP in 2022 to 4.6% in 2023 and 4% in 2024. The Treasury debt, for its part, would ease to 67.7% of GDP in 2023 and 66.1% in 2024.
Despite a difficult context, the Committee indicates that bank credit intended for the non-financial sector should accelerate to 5.1% in 2022, driven mainly by the liquidity facilities granted to private companies. It should fall to 3.3% in 2023 before recovering to 5.5% in 2024. The non-performing loans rate stabilized at 8.7% for a provisioning rate of 67% at the end of October 2022.
In addition, the banking sector recorded, at the end of the 1st half of 2022, a good performance of intermediation results and a decline in the cost of risk, while the rise in interest rates nevertheless impacted 2 the results on market leading to a 7.5% drop in the banks’ cumulative profit. The banking sector is solid with average solvency and Tier 1 capital ratios, standing on an individual basis at 15.3% and 11.8% respectively for regulatory minima of 12% and 9%, underlines- we.
On a consolidated basis, these ratios stand at 13.3% and 10.8%, underlines the Committee, noting that the banks have liquidity cushions above the regulatory minima. The macro stress test exercise carried out by Bank Al-Maghrib on the basis of the economic projections of December 2022 continues to show at this date the resilience of the banks in the face of shock scenarios simulating a sharp deterioration in economic conditions.
With regard to Financial Market Infrastructures, according to the Committee, they continue to show strong resilience both financially and operationally and still present a low level of risk for financial stability.
For its part, the insurance sector continued to display solid fundamentals and demonstrate its resilience despite the difficult international environment marked by considerable uncertainty. On a technical level, the sector maintained at the end of the first three quarters of this year a good growth rate of around 7.7% compared to the same period of the previous year, to reach 42.4 billion of dirhams.
This development, continues the Committee, was supported by both the life branch (+ 9.5%) and the non-life branch (+6.1%). On the financial level, the investments of insurance companies have increased by 3% since the beginning of the year to stand at 216.7 billion dirhams at the end of September, it is underlined.
However, unrealized capital gains fell by 40.6% to stand at 19.3 billion dirhams, due in particular to the drop in the stock market and the rise in secondary market rates. In terms of profitability, the net result recorded an improvement of around 11.3% year-on-year at the end of June. Regarding solvency, the sector continues to generate an average margin of more than three times the regulatory minimum required.
With regard to the retirement sector, the Committee pointed out that the main basic schemes are experiencing a difficult financial situation marked overall by the size of their implicit debts and by the depletion of their reserves at various horizons. The systemic pension reform should make it possible to establish a balanced pricing, but also to absorb, in significant proportions, the uncovered past commitments, and therefore to restore financial balances in the future.
On the Casablanca Stock Exchange, the MASI index recorded a drop of 15.73% on December 9, 2022 compared to the beginning of the year against an increase of 18.35% recorded in 2021. The average volatility was down to 9 .4% against 10.8% in the first half of 2022. In this context, the overall valuation of the Stock Exchange is down significantly to 17.2x against 19.8x on average for the 5 years before the Covid 19 crisis. The volume Issuance on the stock market in mid-December 2022 is almost stable year-on-year, with a volume of 2.35 billion dirhams. Also, the stock market liquidity ratio at the end of November stood at 8.51%, down 13.2% year-on-year.
At the level of the bond market, the Committee emphasizes that rates have taken an upward trajectory in 2022, particularly on the secondary market. This rise in rates was accompanied by an increase in volatility which reached high levels. Outstanding private debt at the end of October 2022 amounted to 254 billion dirhams, up 4.1% year-on-year. With regard to non-financial issuers, their net debt at the end of June 2022 stands at level 3 overall under control and down to 66% of equity against 68% at the end of 2021 and 86% at the end of the year 2020.
As for asset management, the Committee experienced contrasting developments during 2022. The UCITS sector was thus impacted by the fall in the stock market and by the upward tensions on the interest rate market and suffered an outflow at the level of the categories of UCITS MLT Bonds, CT Bonds and Equities.
The overall net assets of UCITS stood at 536.5 billion dirhams as of December 9, 2022, down 9.5% compared to the start of the year. The other asset management compartments achieved growth in line with those observed in previous years, with a stabilization of assets under management for securitization funds and two- and three-digit growth for OPCCs and OPCIs respectively. The net assets of OPCIs thus reached 49 billion dirhams at the end of October 2022, up 127% since the start of the year, with a preponderance of funds reserved for qualified investors.
The Committee also took stock of the preparatory work for the on-site visit by FATF assessors, under the coordination of the National Financial Intelligence Authority. He recommends maintaining the efforts of all stakeholders for the success of this visit.