Approaches to assessing bank credit risk

In Morocco, the banking system has developed steadily. The rate of bancarisation approaching 71% (according to banking system indicators provided by the central bank represented by Bank Al-Maghrib in June 2017) augurs well for the sector’s growth prospects. However, this development must be accompanied by effective risk management tools in line with the bank’s strategy, local banking regulations, notably Bank Al-Maghrib and Bâloise regulations. With regard to loans, the prudential authorities have required banks and credit institutions to set up an internal rating system that will enable them to control their exposure to credit risk (Bank Al-Maghrib Circular No. 3/W/2016), by assigning a rating that distinguishes financially sound borrowers from borrowers at risk of default. The aim of this paper is to present the internal rating system used by a Moroccan bank and the parameters used to develop it.