Evidence of the cross border contagion risk for Moroccan banking system

Article type: Research Article

Authors: Zakaria, Firano^{; *} | Fatine, Filali Adib

Affiliations: University of Mohammed V Rabat, Morocco. E-mails: firanou@yahoo.fr, zakaria.firano@um5.ac.ma, filaliadib@live.fr

Correspondence: [*] Corresponding author. E-mails: firanou@yahoo.fr, zakaria.firano@um5.ac.ma.

Abstract: Analysis of contagion continues to attract growing interest from both regulatory authorities and the academic world and we are witnessing the development of analytical approaches for assessing the risk of contagion in the interbank market. Indeed, given its role in financial stability and monetary policy, the Central Bank must be able to accurately determine the level of international vulnerability associated with various scenarios for cross-border contagion, both to prevent than to manage situations systemic crises. The purpose of this study is to assess the risk of cross-border contagion of the Moroccan banking system through the data of the “BIS”. The methodology is to first approximate the gross bilateral exposures using data from the banks’ financial statements. Then simulations based on contagion algorithm integrating counterparty risk are conducted to assess the risk of contagion. Also centrality of indicators and measurement of systemic importance are presented. The results were synthesized in indicators to assess the systemic importance of the French banking system internationally to Morocco; the fall of the latter is a significant risk of contagion.

Keywords: Contagion risk, financial stability, systemic risk, cross border

DOI: 10.3233/RDA-180134

Journal: Risk and Decision Analysis, vol. 6, no. 4, pp. 299-315, 2017