8 September 2022

Banking Regulation Comparative Guide

Banking Regulation Comparative Guide for the jurisdiction of Morocco, check out our comparative guides section to compare across multiple countries
Morocco Finance and Banking
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1 Legal framework

1.1 Which legislative and regulatory provisions govern the banking sector in your jurisdiction?

The Moroccan banking sector is governed by the following legislative instruments:

  • Royal Decree 1-14-193 promulgating Law 103-12 relating to credit institutions and similar bodies; and
  • Royal Decree 1-19-82 promulgating Law 40-17 on the status of Bank Al-Maghrib (BAM).

Regulatory provisions are included in the decisions, directives and circulars of the governor of the Moroccan central bank, BAM. These regulatory provisions are published in the Official Gazette by means of decrees of the minister of economy and finance.

1.2 Which bilateral and multilateral instruments on banking have effect in your jurisdiction? How is regulatory cooperation and consolidated supervision assured?

A number of bilateral and multilateral instruments have effect in Morocco – in particular:

  • standards issued by the Basel Committee on Banking Supervision; and
  • international financial reporting standards pursuant to Circular 56/G/2007 issued by BAM. These reporting standards require that all entities under the supervision of BAM use International Financial Reporting Standards for accounting periods.

In the context of its consultation approach, BAM or the minister of economy and finance may refer to the professional association of banks in Morocco (Groupement Professionnel des Banques du Maroc) (GPBM) on any matter of interest to the banking sector.

BAM systematically submits draft regulations relating to the banking sector to the members of the GPBM.

1.3 Which bodies are responsible for enforcing the applicable laws and regulations? What powers (including sanctions) do they have?

BAM, as the central bank, is responsible for ensuring the application of legislative and regulatory provisions relating to the exercise and control of the activity of credit institutions in Morocco.

According to Law 40-17, BAM is in charge of the following, among other things:

  • issuing banknotes and coins that constitute legal tender in the territory of Morocco;
  • defining and implementing monetary policy within the framework of the economic and financial policy of the government;
  • adopting all necessary measures to facilitate the transfer of funds and ensure the proper functioning, security and efficiency of payment systems; and
  • issuing administrative, disciplinary or pecuniary sanctions against those that violate the applicable laws. Disciplinary or pecuniary sanctions can be issued by BAM if a financial institution infringes Law 103-12. For example, Article 173 provides that BAM can apply a financial penalty to any financial institution that is in breach of the law's provisions. BAM can also issue a warning against that financial institution.

1.4 What are the current priorities of regulators and how does the regulator engage with the banking sector?

BAM is pursuing several priorities for 2021–23, as follows:

  • the adaptation of the monetary policy framework to promote the resilience and competitiveness of the economy;
  • the development of economic and financial expertise; and
  • the emergence of a more inclusive and competitive model for financing the economy.

BAM organises its strategy around the following goals:

  • transforming banking processes, while promoting innovation and strengthening cyber-resilience;
  • remodelling managerial structures to facilitate the development of expertise, collective performance and wellbeing at work; and
  • strengthening the efficiency and agility of governance and organisation.

2 Form and structure

2.1 What types of banks are typically found in your jurisdiction?

In Morocco, there are two types of credit institutions: banks and financing companies.

Payment institutions, micro-credit associations, offshore banks, financial companies, Caisses de dépôt et de gestion and Caisses centrale de garantie are assimilated to credit institutions according to Law 103-12.

2.2 How are these banks typically structured?

Credit institutions in Morocco should take the form of either a public limited company with fixed capital or a cooperative with variable capital.

Credit institutions established as cooperatives are not subject to the Moroccan law on cooperatives.

According to Law 103-12, payment institutions can take the form of either a public limited company or a limited liability company.

Micro-credit associations can take the form of an association constituted in respect of the provisions of Royal Decree 1-58-376 of 15 November 1958 regulating the right of association.

2.3 Are there any restrictions on foreign ownership of banks?

There are no restrictions on foreign ownership of part of the share capital of Moroccan credit institutions.

2.4 Can banks with a foreign headquarters operate in your jurisdiction on the basis of their foreign licence?

Foreign credit institutions may operate in Morocco by way of a Moroccan-authorised branch or subsidiary. This is subject to the approval of Bank-Al-Maghrib.

3 Authorisation

3.1 What licences are required to provide banking services in your jurisdiction? What activities do they cover?

Before operating in Morocco, any credit institution, micro-credit association, offshore bank or payment institution should obtain the approval of the governor of Bank-Al-Maghrib (BAM) further to the opinion of the Credit Institutions Committee.

The licence obtained by an applicant may cover several activities, including:

  • receipt of funds from the public;
  • credit operations;
  • provision of all means of payment to customers, or their management;
  • investment services;
  • foreign exchange operations;
  • operations in gold, precious metals and coins; and
  • leasing operations of movable or immovable property.

3.2 What requirements must be satisfied to obtain a licence?

In order to obtain a licence, the applicant must meet the following conditions:

  • It should have the required corporate form;
  • It should justify a fully paid-up capital in its balance sheet;
  • It should ensure that at any time its assets effectively exceed its liabilities by an amount at least equal to the minimum capital;
  • It should have the necessary quality and relevance in terms of human, technical and financial resources to conduct its activities;
  • It should demonstrate the professional experience and good repute of its founders, its contributors of capital and the members of the administrative, management and executive bodies;
  • It should demonstrate its ability to comply with Law 103-12 and its implementing regulations; and
  • The capital links which may exist between the applicant and other legal persons should not be such as to hinder prudential supervision.

3.3 What is the procedure for obtaining a licence? How long does this typically take?

In order to obtain a credit institution licence, the applicant should submit a licence application to BAM before commencing its activities. When examining the licence application, BAM is entitled to request any documents and information it may require.

The licence application should be completed with all documents and information specified in BAM Circular 5/W/15 relating to the documents and information required for a licence application, which include the following:

  • the nature of the requested approval;
  • the presentation of the capital contributors and the groups to which they belong;
  • information on the shareholding of the entity;
  • a presentation of the project for the operation and governance of the entity;
  • the risk management system;
  • the anti-money laundering system;
  • the system for the protection of personal data;
  • the internal control and external control system; and
  • the control of the parent company.

The applicant should also provide several documents to BAM, including those relating to the applicant entity, the capital contributors and the directors and managers. The applicant should also complete a questionnaire in relation to the capital providers and contributors.

BAM will notify the applicant of its decision on whether to a grant licence or a duly motivated refusal within four months of receipt of all required documents and information.

This decision may limit the approval granted to the exercise of only some of the activities that the applicant has requested in its application.

4 Regulatory capital and liquidity

4.1 How are banks typically funded in your jurisdiction?

Moroccan credit institutions are generally initially funded by their capital contributors. Once operational, they are funded by funds received from the public which are collected in the form of deposits.

Credit institutions also finance themselves by means of very short-term liquidity loans on the interbank money market segment.

4.2 What minimum capital requirements apply to banks in your jurisdiction?

Credit institutions in Morocco must justify a fully paid-up capital on their balance sheet or a fully paid-up endowment, the amount of which must be at least equal to MAD 200 million.

Where a credit institution which is approved as a bank does not collect funds from the public, the minimum capital required is MAD 100 million.

Credit institutions which are approved as financing companies must justify on their balance sheet an effectively paid-up capital or a fully paid-up endowment of a minimum amount of MAD 50 million, MAD 40 million or MAD 30 million, depending on the types of transactions that are contemplated.

4.3 What legal reserve requirements apply to banks in your jurisdiction?

Bank Al-Maghrib (BAM) requires that licensed credit institutions constitute obligatory reserves with it in the form of deposits.

If the credit institution does not comply with BAM requirements, BAM is entitled to apply to the relevant institution a pecuniary sanction of up to one-fifth of the minimum capital to which it is subject, independently of any caution or warning that it may issue.

5 Supervision of banking groups

5.1 What requirements apply with regard to the supervision of banking groups in your jurisdiction?

According to Law 103-12, ‘financial companies' are entities that control, exclusively or mainly, one or more credit institutions. The following requirements apply to these financial companies:

  • They are bound by the prudential rules applicable to credit institutions set by Bank Al-Maghrib (BAM);
  • BAM verifies the adequacy of their administrative and accounting organisation and internal control systems, and ensures the quality of their financial situation;
  • In order to ensure that their subsidiaries comply with the prudential rules, BAM can carry out on-site inspections; and
  • All documents and information necessary for BAM to accomplish its mission must be submitted to it as required.

5.2 How are systemically important banks supervised in your jurisdiction?

For systemically important credit institutions, the following rules apply:

  • the application of more restrictive prudential rules in comparison to those governing other credit institutions; and
  • an obligation to present an internal crisis recovery plan.

The systemic importance of a credit institution in Morocco is determined with regard to its size and the extent of its interconnection with the financial markets and other institutions of the financial system.

5.3 What is the role of the central bank?

In addition to issuing banknotes and coins in circulation, and in addition to its banking supervision function, BAM is responsible for defining and implementing monetary policy, as well as ensuring price stability.

BAM further ensures the operation and security of systems and means of payment. It also sets the ratio between the dirham and other currencies under an exchange rate regime, and ensures the parity of the dirham. Moreover, it holds and manages foreign exchange reserves.

Alongside these core functions, BAM is the financial adviser of the government and the financial agent of the Moroccan Treasury.

6 Activities

6.1 What specific regulations apply to the following banking activities in your jurisdiction: (a) Mortgage lending? (b) Consumer credit? (c) Investment services? and (d) Payment services and e-money?

(a) Mortgage lending?

Royal Decree 1-14-193 promulgating Law 103-12 relating to credit institutions and similar bodies.

(b) Consumer credit?

Law 31-08 on consumer protection.

(c) Investment services?

Royal Decree 1-14-193 promulgating Law 103-12 relating to credit institutions and similar bodies.

(d) Payment services and e-money?

  • Royal Decree 1-14-193 promulgating Law 103-12 relating to credit institutions and similar bodies; and
  • Governor of Bank Al-Maghrib Circular 7/W/16 of 10 June 2016 setting out the terms for the provision of payment services.

7 Reporting, organisational requirements, governance and risk management

7.1 What key reporting and disclosure requirements apply to banks in your jurisdiction?

Credit institutions should provide Bank Al-Maghrib (BAM) with all documents and information necessary for the proper functioning of services of common interest (eg, payment incident centralisation services, irregular check centralisation services).

Credit institutions should also submit to BAM all accounting documents and annexed statements that will allow it to carry out its control of credit institutions.

7.2 What key organisational and governance requirements apply to banks in your jurisdiction?

The governance and organisational obligations of credit institutions include the following:

  • They must appoint administrators or independent members to the board of directors or supervisory board. These independent directors or independent members of the board must not be owners of any shares in the institution; and
  • The members of the board of directors or the supervisory board of a credit institution that receives funds from the public must not combine their functions with similar functions in any other company.

7.3 What key risk management requirements apply to banks in your jurisdiction?

Credit institutions should have an appropriate internal control system aimed at identifying, measuring and monitoring all of the risks they incur; and should set up systems that enable them to measure the profitability of their operations.

In addition, credit institutions should set up:

  • an audit committee that is responsible for monitoring and evaluating the implementation of internal control systems; and
  • a risk committee that is responsible for monitoring the risk identification and management process.

7.4 What are the requirements for internal and external audit in your jurisdiction?

The requirements regarding internal audits include the following:

  • Credit institutions should establish an internal audit charter which defines the powers and objectives of the internal audit function, its responsibilities and the nature of work of this function. The charter should be approved by the audit committee;
  • The internal audit function should be based on mapping that identifies the significant risks incurred by the institution and its subsidiaries; and
  • The internal audit function should define a multi-annual audit plan and monitor the implementation of its obligations.

Credit institutions must also appoint two external auditors, subject to the approval of BAM. These auditors have the following missions:

  • to audit the accounts; and
  • to verify the accuracy of the information intended for the public and its concordance with the accounts.

8 Senior management

8.1 What requirements apply with regard to the management structure of banks in your jurisdiction?

The key obligations of the management bodies of a credit institution include the following:

  • The following personnel may not combine their functions with similar functions in any other company:
    • the chief executive officer, executive director, deputy chief executive officer, members of the executive board and anyone with delegated powers of management in a credit institution; and
    • the chairman, chief executive officer and members of the board of directors and the supervisory board of a credit institution that receives funds from the public.
  • The chief executive officer, executive director, deputy chief executive director, members of the executive board and any person holding an equivalent position in a bank must inform the members of the executive board or the supervisory board of their institution, as well as the minister of finance and the governor of BAM, of any anomaly or serious event that occurs in the activity or management of that institution which is likely to jeopardise the bank's situation or damage the reputation of the profession.

8.2 How are directors and senior executives appointed and removed? What selection criteria apply in this regard?

The following applies to credit institutions that take the form of a public limited company or société anonyme.

  • Where the institution has a board of directors:
    • directors are appointed by the status or by the ordinary shareholders' meeting and can be removed by the ordinary shareholders' meeting; and
    • the chairman of the board of directors is appointed by the board of directors and can be removed by the board of directors.
  • Where the institution has an executive board and a supervisory board:
    • the chairman and members of the executive board are appointed by the supervisory board, and members may be removed by the shareholders' meeting upon the proposal of the supervisory board; and
    • members of the supervisory board are appointed by the status or by the ordinary shareholders' meeting and are removed by the shareholders' meeting. The chairman of the supervisory board is appointed by the members of the supervisory board and can be removed by the supervisory board.

8.3 What are the legal duties of bank directors and senior executives?

The directors and senior executives of credit institutions are vested with the broadest powers to act in all circumstances on behalf and for the good of the credit institution.

8.4 How is executive compensation in the banking sector regulated in your jurisdiction?

To the best of our knowledge, there are no provisions under Moroccan law relating to the compensation of the directors and senior executives of credit institutions. However, public limited company law provides, for example, that the compensation of the chairman of the board of directors is determined by the board of directors.

9 Change of control and transfers of banking business

9.1 How are the assets and liabilities of banks typically transferred in your jurisdiction?

The assets and liabilities of credit institutions can be transferred through a merger of credit institutions or through the acquisition of a credit institution by another credit institution. Such mergers and acquisitions are subject to Bank Al-Maghrib (BAM) approval.

9.2 What requirements must be met in the event of a change of control?

Any change of control of a credit institution requires the issue of a new licence by BAM.

Moroccan banking law defines a ‘change of control' as any of the following:

  • the direct or indirect holding of a fraction of the capital conferring the majority of the voting rights at the general meetings;
  • the power to hold the majority of voting rights by virtue of an agreement concluded with other partners or shareholders;
  • the exercise, with a limited number of partners or shareholders, of administrative, management or supervisory powers;
  • the exercise of administrative, management or supervisory powers pursuant to legislative, statutory or contractual provisions; or
  • the power to take decisions at shareholders' meetings through voting rights.

10 Consumer protection

10.1 What requirements must banks comply with to protect consumers in your jurisdiction?

The requirements that credit institutions must comply with to protect consumers include the following:

  • Prior to any consumer credit operation, the credit institution should provide the borrower (customer) with an offer in writing, so that the borrower can assess the nature and scope of the financial commitment. The prior offer should, in particular:
    • be presented in a clear and legible manner;
    • identify the parties and, where applicable, the guarantor; and
    • specify the amount of credit.
  • When granting credit to a consumer, the credit institution should give the consumer a cooling-off period of seven days (starting from the date of acceptance of the credit offer). To enable the consumer to exercise this right to withdraw, a detachable form should be attached to the prior offer.
  • When providing advertising or information documents in relation to a mortgage loan to a consumer, the credit institution should specify that:
    • the borrower has a cooling-off period; and
    • the sale is subject to the loan being obtained.

10.2 How are deposits protected in your jurisdiction?

Under Moroccan banking law, a collective deposit guarantee fund (fonds collectif de garantie des dépôts) has been established with the aim of protecting the deposits of consumers should those deposits become unavailable.

The guarantee fund covers all deposits and other repayable amounts collected by credit institutions, with certain exceptions (eg, amounts received from other credit institutions or subsidiaries of the credit institution).

11 Data security and cybersecurity

11.1 What is the applicable data protection regime in your jurisdiction and what specific implications does this have for banks?

In terms of personal data protection, the regulations that apply in Morocco include:

  • Law 09-08 promulgated by Royal Decree 1-09-15 of 18 February 2009 on the protection of individuals with regard to the processing of personal data;
  • Law 132-13 approving the protocol to the European Convention for the Protection of Human Rights and Fundamental Freedoms with regard to the processing of automated personal data, promulgated by Royal Decree 1-14-136; and
  • Decree 2-09-165 of 21 May 2009 implementing Law 09-08 relating to the protection of individuals with regard to the processing of personal data.

The specific implications of these regulations are that a credit institution is required in particular to guarantee its customers the right to access and rectify their personal data. In addition, the credit institution should implement technical and organisational measures and data protection policies to ensure the lawfulness of data processing and ensure a level of data security.

11.2 What is the applicable cybersecurity regime in your jurisdiction and what specific implications does this have for banks?

As regards cybersecurity in Morocco, the applicable regulations are mainly provided by the following instruments:

  • Law 05-20 relating to cybersecurity;
  • Decree 2-15-712 establishing the mechanism for the protection of sensitive information systems of vital infrastructure; and
  • Bank-Al-Maghrib Directive 3-W-16 dated 10 June 2016 relating to the minimum rules to be observed by credit institutions to carry out penetration tests of their information systems.

The implications for credit institutions include obligations:

  • to assess the security of their information systems, which includes the regular conduct of tests within an overall framework for assessing the effectiveness of security systems based on a risk-based approach; and
  • to undertake risk mapping of their information systems with regard to the risks of hacking or cyberattacks.

12 Financial crime and banking secrecy

12.1 What provisions govern money laundering and other forms of financial crime in your jurisdiction and what specific implications do these have for banks?

In Morocco, the provisions on money laundering are mainly set out in Royal Decree 1-07-79 promulgating Law 43-05 relating to the fight against money laundering. Provisions on money laundering are also set out in Bank-al-Maghrib circulars – for example, according to Circular 5/W/2017 on the due diligence obligations of credit institutions, credit institutions are subject to the following obligations, among others:

  • an obligation of vigilance;
  • an obligation to conduct internal monitoring; and
  • an obligation to report suspicious transactions.

12.2 Does banking secrecy apply in your jurisdiction?

Banking secrecy applies in Morocco and is governed by the provisions of Law 103-12.

Anyone who, in any capacity whatsoever, participates in the administration, direction or management of a credit institution or who is employed by it, and anyone called upon in any capacity whatsoever to know or use information relating to a credit institution, is strictly bound by professional secrecy for all matters of which he or she has knowledge, subject to certain exceptions provided by law.

13 Competition

13.1 What specific challenges or concerns does the banking sector present from a competition perspective? Are there any pro-competition measures that are targeted specifically at banks?

An internal study conducted by Bank Al-Maghrib (BAM) which analysed banking competition in Morocco revealed that:

  • the Moroccan banking sector is characterised by a "moderately high degree of concentration"; and
  • competition between Moroccan credit institutions clearly increased in the periods 2000–08 and 2009–15.

Moroccan banking law provides for the following measures in relation to competition:

  • The Competition Council may conduct, on its own initiative and after seeking the opinion of BAM, studies relating to credit institutions in relation to anti-competitive practices and economic concentration operations; and
  • When examining an application for a licence or a request for approval of a merger or acquisition between two or more credit institutions, if BAM considers that the planned operation may or is likely to constitute a breach of the provisions relating to economic concentration operations, BAM will postpone any action on the application and request the opinion of the Competition Council.

14 Recovery, resolution and liquidation

14.1 What options are available where banks are failing in your jurisdiction?

Where it appears that the deliberative, supervisory or management bodies of a credit institution can no longer operate normally, the governor of Bank Al-Maghrib (BAM) will appoint a provisional administrator. This provisional administrator may propose:

  • the liquidation of the credit institution if its situation is considered irremediably compromised;
  • the total or partial transfer of the credit institution to another credit institution;
  • the transfer of the assets of the credit institution which are considered to be compromised to an ad hoc structure licensed as a credit institution; or
  • the demerger of the credit institution.

14.2 What insolvency and liquidation regime applies to banks in your jurisdiction?

If BAM considers that a credit institution does not offer sufficient guarantees in terms of solvency, it may issue an injunction to remedy the situation within a specified period.

In addition, BAM may call upon shareholders or members with a stake equal to or greater than 5% of the capital to provide the credit institution with the financial support it needs.

Any credit institution whose licence has been withdrawn must enter into liquidation. The licence withdrawal may occur either:

  • at the request of the credit institution itself; or
  • where the credit institution:
    • has not made use of its licence within a period of 12 months from the date of notification of the decision granting authorisation;
    • has not been in business for at least six months; or
    • no longer meets the conditions under which it was licenced.

In these cases, the liquidator or liquidators will be appointed by the governor of BAM.

During the liquidation period, the institution remains subject to the control of BAM and may carry out only those operations that are strictly necessary for its liquidation; and may refer to itself as a credit institution only together with a statement that it is in liquidation.

Any legal action against a credit institution that is likely to lead to the pronouncement of a judgment opening a judicial liquidation must be brought to the attention of BAM by the president of the court seized.

15 Trends and predictions

15.1 How would you describe the current banking landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

While the ongoing COVID-19 pandemic has led to an increase in the cost of credit, credit institutions remain resilient in terms of solvency and liquidity, as evidenced by:

  • the average solvency ratio of 15.5% and the average Tier 1 capital ratio of 11.4% as at the end of June 2020, which are well above the regulatory minimums; and
  • the liquidity cushion, which stood at 176% as at the end of October 2020.

In terms of developments, Bank Al-Maghrib (BAM) will continue to transpose the prudential rules of the Basel Committee to Moroccan credit institutions. Moreover, and in the near future, the development of the legislative and regulatory framework to reflect the presence of new players in the banking and para-banking markets, such as fintech companies, is expected to occur.

15.2 Does your jurisdiction regulate cryptocurrencies? Are there any legislative developments with respect to cryptocurrencies or fintech in general?

No regulations on cryptocurrencies exist to date and there have been no legislative developments with respect to fintech in Morocco.

On 21 November 2017 the Capital Markets Authority, together with BAM and the Ministry of Economy and Finance, issued a press release on the use of virtual currencies in Morocco. The press release aimed to warn the public against the use of virtual currencies.

The press release highlighted that the use of virtual currencies is a non-regulated activity under Moroccan law and the main risks relating to the use of virtual currencies, which include:

  • the absence of consumer protection;
  • exchange rate volatility compared to currencies with an official exchange rate;
  • the use of virtual currencies for illicit or criminal purposes – in particular, for money laundering and the financing of terrorism; and
  • non-compliance with regulations in force – in particular, those relating to capital markets and the foreign exchange legislation.

The position of BAM as detailed in the press release remains unchanged today.

16 Tips and traps

16.1 What are your top tips for banking entities operating in your jurisdiction and what potential issues would you highlight?

Moroccan law does not yet expressly regulate several emerging areas, such as virtual currencies, and the law in those areas could thus be described as subject to a high degree of legal uncertainty.

Thus, due to the lack of regulations and the absence of a clear regulatory framework, banking entities should seek the opinion of Bank Al-Maghrib in relation to subjects on which there are no legal provisions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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