Bank Al-Maghrib and the World Bank give their verdict – Today Morocco

A series of recommendations were made as part of this study carried out jointly by the World Bank and Bank Al-Maghrib, with the support of the French Development Agency (AFD) and Facility Global Risk Financing. The aim is to further support the assessment and management of climate-related financial risks for the banking sector.

Morocco’s banking sector could become increasingly vulnerable to the risks of climate transition and physical risks. This is evident from a recent publication jointly produced by Bank Al-Maghrib and the World Bank. Exploratory work, the first of its kind in the MENA region, was actually carried out by the institutions with a view to evaluating the degree of exposure of bank portfolios to the risks of drought and floods and the vulnerability of banking players to hypothetical climate shocks. “Although the impact of climate change is not systemic across the financial system, climate impacts may vary significantly across banks, with some banks expected to be highly vulnerable to the effects of these risks,” we can note in this sentence. And added: “The impact of climate risks on the banking sector could be largely underestimated due to the need for data and the inability to consider the complex links between climate, financial, social and macroeconomic impacts.” A series of recommendations have been made in this direction. The aim is to further support the assessment and management of climate-related financial risks for the banking sector. Referring to the document, Bank Al-Maghrib is called on to continuously improve its understanding and management of climate-related financial risks.
“The work to analyze future risks could include improving scenarios and modeling, for example by exploring additional transmission channels to the economy and the banking sector,” we can read in this sentence.

The World Bank also estimates that based on this initial analysis of climate risks, Bank Al-Maghrib could assess whether the central bank’s macro- and micro-prudential monitoring and evaluation framework needs to be updated to structurally integrate the consideration of climate-related and environmental risks. . “Developing an internal roadmap for integrating the consideration of climate-related risks into micro- and macro-prudential supervision can be an important tool for defining forward-looking priorities, engaging relevant internal stakeholders and supporting a coordinated approach within the organization.” in this sense we reserve ourselves. It is also recommended to develop additional monitoring guidance on climate-related and environmental risks. Something that could help strengthen the banking sector’s response to managing these risks, according to the report. It also appears that a forward-looking orientation to climate and environmental policy can support decision-making and risk management practices in the long term.