Initiatives to Enhance Climate-Related Financial Risk Management in Moroccan Banking Sector

by time news

2024-04-18 10:11:13

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

The banking sector in Morocco could become more vulnerable to climate transition risks and physical risks. This can be noted from a recent publication jointly produced by the Al-Maghrib Bank and the World Bank. In fact the institutions carried out research work, the first of its kind in the MENA region, in order to assess the level of exposure of bank portfolios to drought and flood risks and the implementation of carbon taxation also the vulnerability of banking players to shocks climate hypotheses. “Although the impact of climate change is not systemic across the financial system, climate impacts may vary significantly across banks, and some banks are expected to be particularly vulnerable to the effects of these risks”, can we to be noted in this sense. And it added: “The impact of climate risks on the banking sector may be largely underestimated due to the need for data and the inability to capture the complex links between climate, financial, social and macroeconomic impacts count”. A series of recommendations was issued in this regard. 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 asked to continuously improve its understanding and management of climate-related financial risks.
“Work to analyze future risks could consider scenarios and improve modeling, for example, by exploring additional transmission channels for the economy and the banking sector,” we can read to that effect.

The World Bank also considers that, based on this initial analysis of climate risks, the Al-Maghrib Bank could assess whether there is a need to update the central bank’s macro and micro-prudential monitoring and evaluation framework for the consideration of climate and environmental risks be structurally integrated. . “Developing an internal roadmap for integrating climate-related risk considerations into micro- and macro-prudential oversight can be an important tool for defining forward-looking priorities, engaging with relevant internal stakeholders and supporting implementation coordinated approach within the organization”. we keep in this sense. It is also recommended that additional supervisory guidance be developed regarding risks related to the climate and the environment. Which, according to the report, could help strengthen the banking sector’s response to managing those risks. It also appears that a forward-looking orientation to climate and environmental policies can support long-term decision-making and risk management practices.

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