Bank Al Maghrib Enhances Banking Oversight by Integrating Climate Risks into Financial Supervision
Bank Al Maghrib has reaffirmed its increasing commitment to integrating climate and environmental risks into its regulatory framework, amid the growing impact of environmental issues on financial balances.
These risks are categorized into two main types: the first includes physical risks resulting from extreme weather events or chronic changes, which affect assets and borrowers’ repayment ability. The second is transition risks, stemming from regulatory or technological changes towards a low-carbon economy, which may threaten sectors such as energy, transportation, and real estate.
Despite being underrepresented in the risk models of Moroccan banks, Bank Al Maghrib considers these risks could lead to credit losses and systemic imbalances, necessitating an enhanced supervisory framework to encourage banking institutions to incorporate these risks into governance and financing strategies. Since 2019, the bank has joined a network of central banks and regulatory authorities focused on green finance, working to align its practices with their recommendations, particularly those related to incorporating environmental and social governance risks into banking supervision.
In 2024, Bank Al Maghrib continued its efforts in this direction by raising awareness among banking institutions through workshops and exchanging expertise, as well as conducting a qualitative assessment of climate risk governance within major banks, alongside preparing for climate stress tests in 2025 based on international scenarios. Coordination has been initiated with the Ministry of Energy Transition and public institutions to develop a national green classification identifying economic activities aligned with the country’s climate goals.
Although there are currently no specific regulatory ratios for climate risks within capital requirements, Bank Al Maghrib is gradually reviewing its supervisory and assessment approach by integrating ESG indicators, which requires developing the competencies of supervisors and updating regulatory reports. In the medium term, the bank intends to mandate financial institutions to disclose their carbon emissions, decarbonization strategies, and the proportion of their green financing, amidst challenges related to data scarcity and lack of standardization.
Bank Al Maghrib noted that high carbon-emitting sectors continue to account for a significant portion of loans despite the elevated risks associated with them. The aim is a gradual redirection of financing towards low-carbon sectors, ensuring that the financing gap is not deepened. This approach is based on dialogue and developing incentive tools such as refinancing lines and green guarantees.
The bank aims to make environmental risks a structural part of its banking oversight system by gradually aligning with international standards, mobilizing non-financial data, and enhancing the readiness of the Moroccan financial system in face of upcoming climate challenges.
