The Moroccans “TOO BIG TO FAIL”, Moral Hazard and Liquidity Risk

Hassan Boujettou,El Mehdi Tamouro

doi:10.5171/2018.513019

Abstract

The Moroccans “TOO BIG TO FAIL”, Moral Hazard and Liquidity Risk

Highlights

The liquidity risk is a systemic risk that has been generally discussed in the scientific literature as the consequence of another financial risk or an abnormal stressful situation that had originated in the real economy.Banks, in their role of liquidity suppliers to the economy, bear a liquidity risk in relation with their mission, even if they are perfectly fulfilling the capital requirements
The purpose of this article is to determine the existence of such banks in morocco that can eventually force the central bank to back them up.Our reflection was translated by the study of the banking sector balance sheets over the last decade in order to identify through various indicators the Moroccan TOO BIG TO FAIL
The information asymmetry between the central bank and the commercial banks unable the first one to intervene properly and so the central bank must, in order to ensure the stability of the financial system, intervene widely, which leads to the emergence of a moral hazard

Summary

Introduction

The liquidity risk is a systemic risk that has been generally discussed in the scientific literature as the consequence of another financial risk or an abnormal stressful situation that had originated in the real economy. As for underdeveloped and emerging countries, the central bank and the other monetary policies makers must impose a greater number of prudential regulations in order to reduce the opacity of the commercial banks practices in relation to their portfolio, to the capital requirement satisfaction and to the risk profile (Freedman, P., Click, R., 2006)[3] Those systemic banks may be identified through various aspects such as their relative size to the financial system or to the national economy, their interconnection (the volume of interbank transactions) and the complexity of their activities (the portfolios and the extraterritorial relations)

Literature Review

Findings

Conclusion