Morocco seeks to boost international profile with banking reforms

There are many signs that Morocco is on the path to becoming a financial and economic crossroad between Africa and the rest of the world. First, the EU has granted the country “advanced status”, which is intended to help progressively integrate Morocco into the EU’s internal market, and, second, Casablanca Finance City (CFC) was established in 2009 with the goal of attract global financial operators who may wish to carry on their international activities in a favourable tax regime. To a large extent, the new banking law, No. 103-12, published in the Journal Officiel in March 2015 (Banking Law) illustrates Morocco’s ability to play a key role by serving as a meeting point for players to carry on their activities in Africa and to facilitate access to funding sources.

Converginh Towards Eurpoe

The Banking Law introduces new rules that further harmonise Morocco’s banking and financial industry with that of Europe. The law creates two new categories of financial provider that are largely inspired by EU directives. 1.1 Increasing competition in payment services: The Banking Law implements the new concept of payment services providers. These are defined as institutions that perform the following services:

• Services enabling cash transfers;

• Services enabling withdrawals of cash from a payment account;

• Execution of payment transactions where the payer’s consent is provided by means of any telecoms, digital or IT device, and the payment is sent to the operator of the system or the telecoms or IT network, acting solely as an intermediary between the user of payment services and the supplier of goods or services; and

• Execution of direct debits, including one-off direct debits, payment transactions carried out with a payment card and transfers of funds credited to a payment account. The payment account is defined by the Banking Law as an account held in the name of a person and which is used to carry out payment transactions. This new set of rules aims to reduce costs related to payment services that are borne by clients by breaking banks’ historical monopoly on payment services. 1.2 The EU’s concept of investment services: From a legal standpoint, investment services were previously unknown in Morocco. It was unclear whether such services could be validly offered to Moroccan residents. The only services that were recognised were asset management and securities trading on regulated markets.

Article 8 of the Banking Law now provides a list of investment services that, according to Article 7 of the same, can only be performed by credit institutions. These services include: portfolio management on behalf of third parties; receipt and transmission of orders on behalf of third parties; execution of orders on behalf of third parties; wealth management advice and assistance; financial management advice and assistance; financial engineering; placement; and credit ratings.

These investment services are expected to be defined by a circular from Bank Al Maghrib (BAM), the central bank. The services are assumed to relate to financial instruments and not to assets of any kind, but this is not expressly stated in the Banking Law.

It should be noted that a draft law, which is expected to abrogate and replace the stock exchange law of September 1993, also enumerates services that are likely to qualify as investment services under the Banking Law. If this draft law is promulgated, two legal regimes applicable to investment services will co-exist:

• Investment services performed by credit institutions, the definition, supervision and regulation of which will fall within the remit of BAM; and

• Investment services performed by conseillers en investissement, or investment advisors, the definition, supervision and regulation of which will come within the purview of the capital markets authority, the Autorité Marocaine de Marché de Capitaux. The CFC Law No. 68-12 also extends the list of operators likely to benefit from CFC status by including investment service providers (ISPs), which is another new status under Moroccan law. However, neither the abovementioned CFC Law nor the Banking Law, or any other law or bill, defines ISP status in Morocco. It may thus be reasonably assumed that ISPs governed by the CFC Law will be defined in the light of EU directives. If so, it would indicate more than a convergence, but rather an integration of Moroccan law into EU law. 1.3 Exemptions from professional secrecy: The Banking Law takes into account the modernisation of the banking industry by eliminating the risk that bankers run of breaching their professional secrecy obligations when, in various day-to-day situations, they need to disclose information that qualifies as confidential information, so that a bank can conduct business.

The Banking Law therefore contains an express derogation from banking secrecy that is applicable to the ordinary circumstances in which credit institutions have to disclose confidential information. For example, banks will be freed from the professional secrecy obligation when they provide the following third parties with confidential information in the following situations:

• Rating agencies, for the purpose of rating financial instruments; and

• Entities with which they negotiate, enter into or execute the transactions listed below, whenever such information is needed for these transactions: - Credit transactions, transactions on financial instruments and insurance operations; - Acquisition of an equity interest or a controlling interest in a credit institution, a financial advisory firm, an asset management company or an investment services provider; and - Assignments of assets or goodwill, transfers of re -ceivables or contracts. It is particularly important to note that banks will have the right to disclose confidential information in the abovementioned cases regardless of whether clients provide consent. Thus, one concern is whether banks may disclose confidential information in circumstances that are not expressly referred to by the law. Fortunately, the Banking Law states that credit institutions may, in addition to the situations expressly cited, divulge information governed by professional secrecy on a case-by-case basis, provided that the entities concerned have expressly consented to this.

Attracting Middle Eastern Investors

The Banking Law contains a reform of paramount importance: the implementation of Islamic banking. It will be possible to create sharia-compliant banks, known as banques participatives. Around 20 foreign and local institutions have expressed an interest in requesting and obtaining a licence from BAM to carry on and offer sharia-compliant banking services. However, it is unlikely that all 20 applicants will be granted a licence, as the Moroccan banking market is not large enough.

It is worth remembering that sharia prohibits the acceptance of specific interest or fees for monetary loans, irrespective of whether the payment is fixed or floating. Moreover, investment in businesses that provide goods or services considered to be contrary to Islamic principles (e.g. pork or alcohol) is prohibited. Sharia-compliant financial institutions are estimated to have represented approximately 1% of total world assets in 2014. This is a major increase since 2009, when there were 300 banks and 250 mutual funds worldwide complying with Islamic principles. In 2014 total global sharia-compliant assets were around $2trn. Islamic banking has been growing faster than banking assets as a whole, increasing at an annual rate of 17.6% between 2009 and 2013, and expected to see an average annual growth rate of 19.7% to 2018.

Available Options

The Banking Law lists the following sharia-compliant services that banques participatives will be authorised to offer their clients.

• Murabahah is a sale where the seller expressly mentions the cost incurred on the commodities for sale and sells them at a determined profit that is known to the buyer. It requires an “honest declaration of cost”. Murabahah one of three types of bayu al amanah, or fiduciary sales, which also include tawliyah, sale at cost, and wadiah, sale at specified loss.

• Ijarah is understood to be a sort of lease, rent or wage. Ijarah generally refers to selling the benefit of use or services for a fixed price or wage. Under this concept, the use of assets is made available to the customer for a defined period and price.

• Musharakah is a relationship between parties that contribute capital to a business and divide the net profit, bearing losses pro rata. This structure is often used in investment projects and to purchase real estate or property. All capital contributors are entitled to participate in management. The profit is distributed among the partners in pre-agreed ratios.

• Mudarabah is a kind of contract under which a banque participative provides the capital and an entrepreneur contributes know-how to realise a project. Profits generated are shared between the parties according to a pre-agreed ratio. If there is a loss, the bank loses the capital whilst the entrepreneur is not offered any return.

• Salam is a contract pursuant to which the seller undertakes to supply specified goods to the buyer at a future date in return for a pre-paid price.

• Istisna is a process where payments are made in stages to facilitate stepwise progress in manufacturing, processing or construction works. Istisna enables a company to obtain financing to construct a building by means of loans in instalments for each section. Istisna also helps manufacturers to obtain funds for manufacturing or processing costs for any large order of goods that are to be supplied in stages.


If Morocco wants to fulfil its ambition of becoming a financial centre for Africa, further reforms should be considered. These might include such measures as implementing guarantees to secure transactions, like ownership transferring sureties, internationalising the central depository, creating a legal regime governing over-the-counter derivatives and others. All these reforms are expected to be implemented in the short term. These are indicators that the country is developing financial know-how that will soon enable it to offer financial services to other countries in the region.

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The Report: Morocco 2015

Legal Framework chapter from The Report: Morocco 2015