Impact of the covid-19 crisis on the Moroccan banking sector

Abstract

The health crisis severely affected bank profitability, both during the pandemic and after its immediate effects had subsided. Banks faced an increase in non-performing loans, a reduction in interest margins and a general decline in investor confidence. Containment measures and declining economic activity compounded these challenges, limiting credit opportunities and increasing default risks.Furthermore, our analyses reveal that even after containment measures were lifted, negative impacts on bank performance persisted. Banks had to revise their risk management strategies and adjust their long-term profitability forecasts. The crisis thus highlighted the vulnerability of the Moroccan banking sector to external shocks, and underlined the importance of strengthening resilience and risk management mechanisms to prepare for possible future crises.

The aim of our paper is to analyze the impact of the COVID-19 health crisis on the banking sector in Morocco, highlighting its negative effects on the performance of the Moroccan banking sector. To this end, we have used the GARCH (Generalized Autoregressive Conditional Heteroskedasticity) model to examine the volatility of the Moroccan banks' stock index, based on daily prices and geometric returns.

Keywords: Banks index, Covid-19, GARCH, financial shocks, volatility.

JEL Classification: G21.

Paper type: Empirical research