Rabat - Bank Al Maghrib (BAM) is not happy with Fitch Ratings’ latest report on Moroccan Banks undervalued impaired loans. But despite its disagreement with the agency's findings, the national central bank has announced a reform of the debt classification system.
Rabat – Bank Al Maghrib (BAM) is not happy with Fitch Ratings’ latest report on Moroccan Banks undervalued impaired loans. But despite its disagreement with the agency’s findings, the national central bank has announced a reform of the debt classification system.
“We will get [in touch with] Fitch to understand the basis on which this report, the conclusions of which we do not share, was made,” said Hiba Zahoui, Director of Banking Supervision at Bank Al-Maghrib on Thursday in Casablanca.
During the presentation of the banking supervision report by the Moroccan central bank, Zahoui stated that to calculate the exact figures of impaired loans as Fitch said it had done, it would have been necessary to examine the banks’ portfolios. “We’re wondering how Fitch was able to do that,” questioned the director.
In a note published on July 19, the New York-based ratings agency revealed the vulnerabilities of some Moroccan banks. The agency believes that the banks’ overdue receivables are underestimated in their balance sheets.
Impaired loans stood at 9.7 percent on average for the first seven banking groups at the end of 2016. Fitch points out, however, that “local reporting practices understate the true extent of asset quality weakness” on their balance sheet.
The rating agency estimates that “impaired loans to represent between 12 and 14 percent of sector loans,” if it were to “include under-reported impairments as well as watch list, restructured and foreclosed loans.”
While Fitch’s sources, as well as the basis for its report, remain unclear, Zahoui confirmed that in fact “the current classification standards for receivables do not capture all of the indices relating to impaired debts.”
The central bank is currently erecting a reform concerning two main issues: defining the criteria of classification of credit risk, and introducing a new criterion that exceeds “the permissible lines in a persistent manner” for impaired loans.