Banking Compliance Challenges in Algeria: METAC Provides Technical Assistance

The Algerian banking sector is facing significant compliance challenges, according to a recent technical assistance mission provided by the Multilateral Economic Technical Assistance Centre (METAC). The mission aimed to help the Banque d’Algérie (BA) establish an internal credit rating system for non-financial corporations and improve financial supervision and regulation.

Credit Rating System for Non-Financial Corporations

The first part of the mission focused on setting up a credit rating system for non-financial corporations, allowing bank credit claims to be accepted as collateral in central bank liquidity-providing operations. METAC delivered tools for hands-on implementation of the methodology based on country-specific calibrations of relevant financial balance sheet ratios to achieve a credit rating scale for Algerian non-financial corporations.

Capacity Building for Supervisors

The mission also provided capacity building to supervisors on the risks and challenges related to outsourcing arrangements, enhancing their understanding, awareness, and capacity to assess these risks. Additionally, METAC supported the development of new regulation for banks and financial institutions to regulate their outsourcing activities, in line with European Banking Authority (EBA) guidelines and tailored to the Algerian banking sector characteristics and legal framework.

Compliance Risk Management Strategy for Extractive Industries

Another area where METAC provided assistance was in designing a compliance risk management strategy for the extractive industries (oil, gas, and mining). The mission conducted an environmental scan of local circumstances together with a review of global EI business models, tax planning, and regulatory frameworks. A draft mid-term program was prepared to provide regular and on-demand advice throughout FY25, enabling the Algerian General Directorate of Taxes (DGI) to implement a strategy to improve EI compliance and expand it to a broader tax base.

Data Collection and Future Recommendations

The mission highlighted the need for more progress in data collection to allow country-specific statistical calibration for the credit rating process. The Banque d’Algérie has made good progress on the organizational level, but more work is required to ensure the successful implementation of these initiatives.

Conclusion

These technical assistance missions demonstrate the importance of international cooperation in addressing banking compliance challenges in Algeria. As the Algerian economy continues to grow and evolve, it is crucial that the country’s financial sector remains resilient and compliant with global standards. METAC’s support will help to achieve this goal by enhancing the capacity of regulatory bodies and improving financial supervision and regulation.

Key Takeaways

• METAC provided technical assistance to improve banking compliance in Algeria
• The mission focused on establishing a credit rating system for non-financial corporations, capacity building for supervisors, and designing a compliance risk management strategy for extractive industries
• Data collection is a key area of focus for future improvements