Casablanca – A recent large-scale simulation conducted by the Bank for International Settlements (BIS) has placed Morocco at the center of a cross-border banking crisis scenario, highlighting both the country’s growing leadership in regional financial stability and the structural challenges that continue to affect banking integration in Northwest Africa.

The exercise, coordinated by the BIS’s Financial Stability Institute, simulated the collapse of a systemically important regional banking group headquartered in Morocco, with major subsidiaries operating in Mauritania, Tunisia, and the West African Monetary Union. The goal was not theoretical but operational: to test how national and regional authorities would respond to a severe financial shock affecting multiple jurisdictions simultaneously.

A stress test designed to mirror reality

The scenario assumed a rapid deterioration in regional economic conditions, marked by a surge in non-performing loans, a weakening of bank capital, and a sharp decline in market confidence. At the center of the simulation stood a fictional banking group, often referred to as Banque Soleil, designed to resemble a large, regionally active financial institution.

Morocco, as the home country of the parent company, was designated the “home authority,” responsible for coordinating the crisis response, defining the resolution strategy, and managing communication with host countries. This role placed Morocco in a particularly demanding position, as decisions taken at the national level had direct implications for financial stability across several economies.

A modern resolution framework put to the test

One of the central features of the exercise was the use of a “Single Point of Entry” (SPE) resolution strategy. Under this approach, losses are absorbed at the level of the Moroccan holding company through the conversion or cancellation of debt instruments, allowing subsidiaries in other countries to remain operational and adequately capitalized.

According to the BIS assessment, Morocco demonstrated that it possesses a modern and comprehensive bank resolution framework. This includes legal powers to transfer assets and liabilities, establish bridge banks, facilitate asset sales, and apply partial bail-in mechanisms. These tools align with international standards for managing the failure of systemically important financial institutions.

Throughout the simulation, Moroccan authorities organized multilateral meetings, facilitated information-sharing among regulators, and coordinated strategic discussions. The country’s central role enabled a group-wide perspective rather than a fragmented, country-by-country response. At a critical stage of the exercise, Morocco proposed the sale of the entire banking group to an international institution, Universal Bank, as a way to preserve the group’s integrity and maintain financial continuity across borders.

Regional coordination: a strength with limits

The exercise highlighted Morocco’s capacity to think and act at the level of a regional banking group. Evaluators noted that Moroccan authorities consistently took into account the operational and financial interdependencies between subsidiaries, including shared IT systems and centralized service functions. This integrated approach reflects a shift from purely national supervision toward a regional financial stability mindset.

However, the simulation also exposed the limits of cross-border coordination. While Morocco can design and propose a group resolution strategy, it cannot enforce it on host jurisdictions. Some participating countries in the exercise favored national solutions, such as selling local subsidiaries, liquidating them, or partially nationalizing them. These decisions complicated the implementation of a unified resolution strategy and ultimately prevented the completion of the proposed group-wide sale.

This outcome underscores a key structural challenge: regional financial stability depends not only on the strength of one country’s framework but also on the alignment of legal systems, supervisory practices, and political priorities across all involved jurisdictions.

Financial capacity and operational preparedness

Another important finding concerns financial resources. The simulation revealed that the volume of debt instruments that could realistically be converted into capital within the Moroccan banking group remains limited. As a result, even a well-designed SPE strategy could require public or quasi-public financial support in a severe crisis. While this constraint is not unique to Morocco, it directly affects the effectiveness of private sector-led resolution mechanisms.

Operationally, the exercise also showed that some crisis-management procedures continue to rely heavily on human judgment rather than on fully formalized and detailed protocols. Areas such as early intervention measures, public communication strategies, and coordination with certain national authorities would benefit from clearer operational playbooks and predefined decision-making frameworks.

Morocco’s strategic position in the regional financial system

Despite these challenges, the BIS assessment concluded that Morocco stands out as a central pillar of regional financial stability. The country concentrates key functions related to governance, capital, and resolution capacity and is currently the only jurisdiction in the region capable of proposing a collective resolution strategy consistent with international standards.

This centrality, however, also represents a vulnerability. As long as legal frameworks, resolution tools, and cooperation mechanisms remain uneven across the region, Morocco’s ability to stabilize the entire financial system will remain constrained. The simulation confirmed that Morocco is institutionally prepared for group-wide bank resolution, but the broader regional ecosystem is not yet fully equipped to support such an approach.

Implications for regional financial integration

The BIS exercise carries broader implications for financial integration in Northwest Africa. It highlights the need for deeper harmonization of banking laws, resolution regimes, and supervisory practices. It also underscores the importance of strengthening cross-border cooperation agreements, crisis management groups, and information-sharing arrangements.

For policymakers, the simulation serves as both validation and warning. It validates the progress Morocco has made in modernizing its banking supervision and resolution framework. At the same time, it warns that regional financial stability cannot rely on one country alone. Sustainable stability will require coordinated reforms, shared standards, and mutual trust among neighboring financial authorities.

As financial systems in Africa continue to evolve and regional banking groups expand their cross-border presence, the lessons from this exercise are likely to resonate beyond Northwest Africa. The Moroccan case illustrates how national leadership can drive regional stability, but also how the success of such leadership ultimately depends on collective commitment and institutional convergence.