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Understanding the Implementation of Basel III in Algerian Banks

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Background

The Bank of Algeria has not yet finalized the application of Basel III pillars 2 and 3, which are related to market risk and operational risk, respectively.

Methodology

In this study, a field survey was conducted on a sample of Algerian banks to assess their level of awareness and implementation of Basel III requirements.

Key Findings

Complexity of Implementation

  • The texts of the agreement are complex, making it difficult for banks to appreciate.
  • This complexity hinders the effective adoption of Basel III standards.

Liquidity Standards

  • Banks will be required to hold high liquidity assets, which may impact their profitability.
  • This could lead to a decrease in lending rates and negatively affect bank profitability.

Financial Leverage Ratio

  • The commitment to a financial leverage ratio will lead to a decline in lending rates, negatively affecting bank profitability.
  • This change may also have an adverse effect on the overall economy.

Conclusion

While the Bank of Algeria has taken steps to develop internal control systems and comply with Basel III requirements, there is still a significant gap between the current level of implementation and the required standards.

References

This study highlights the challenges faced by Algerian banks in implementing Basel III requirements and suggests that there is still a significant gap between the current level of implementation and the required standards.