The establishment of a secondary market for bad loans in Morocco reflects a proactive approach to managing financial instability, particularly in light of recent economic challenges.
The doubling of the non-performing loans ratio over the past decade indicates a growing concern for the health of the banking sector in Morocco, necessitating urgent reforms.
By simplifying the transfer process of non-performing loans, the central bank aims to enhance liquidity in the banking system, which is crucial for economic recovery.
If the secondary market for bad loans is successfully implemented, it may lead to improved financial health for Moroccan banks and stimulate lending activities.
The reduction in non-performing loans could enhance investor confidence in the Moroccan banking sector, potentially attracting foreign investment.
Should the economic conditions remain unstable, further legislative measures may be required to support banks in managing bad debts effectively.
Morocco is set to launch a secondary market for bad loans, as announced by Abderrahim Bouazza, the Director General of Bank Al-Maghrib. This initiative comes in response to a significant rise in non-performing loans, which reached 8.6% of the total loans in September, amounting to approximately 98 billion dirhams ($9.8 billion). Bouazza highlighted that this percentage has doubled over the past decade and now represents about 7% of Morocco's gross domestic product (GDP).
The proposed legislation aims to eliminate existing barriers that hinder the direct transfer of non-performing loans, including the cancellation of the debtor’s consent requirement and the simplification of recovery notification procedures. This move is expected to alleviate the financial strain on banks, which have seen their liquidity needs increase to 120 billion dirhams ($12 billion), a demand that is currently being met by the central bank.
As banks are compelled to raise their coverage ratio to 68.6% (67.2 billion dirhams or $6.7 billion) due to the surge in bad loans, the establishment of a secondary market is viewed as a strategic tool to manage distressed assets. Bouazza noted that selling these loans could serve as a complementary measure to securities issuances, offering the advantage of reducing structural costs while easing regulatory burdens.
