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Economic & Sector Work :: Financial Sector Assessment Program (FSAP)

Financial Sector Assessment : Algeria

ACCOUNTING ACCOUNTING STANDARDS AGENTS APPLICATIONS AUDITING AUTONOMY BANK LENDING BANK LIQUIDITY BANK PRIVATIZATION BANK RATINGS BANK RESERVES BANK RISK BANKING SECTOR BANKING SUPERVISION BANKING SYSTEM BANKRUPTCY BANKRUPTCY PROCEDURES BANKS BROKERS CAPITAL GAINS CENTRAL BANK COMMERCIAL BANKS COMPARATIVE ADVANTAGE COMPETITIVE MARKETS CONTINGENT LIABILITIES CONTRACTUAL SAVINGS CONTRACTUAL SAVINGS INSTITUTIONS CORPORATE GOVERNANCE CREDIT INSURANCE CREDIT RISK CREDIT RISKS DEBT DEFAULT RISK DEPOSIT INSURANCE DEPOSITORS DEPOSITS EFFECTIVE DEMAND EXCESS LIQUIDITY FACTORING FINANCIAL ACCOUNTING FINANCIAL DATA FINANCIAL INFORMATION FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIATION FINANCIAL MARKETS FINANCIAL POLICIES FINANCIAL SERVICES FOREIGN BANKS FOREIGN EXCHANGE HOUSING HOUSING FINANCE INCOME INCOME GROUPS INSPECTIONS INSURANCE INSURANCE COMPANIES INSURANCE FUNDS INSURANCE PRODUCTS INSURERS INTEREST RATES LAWS LEGAL FRAMEWORK LIFE INSURANCE LIFE INSURANCE COMPANIES LIQUIDATION LIQUIDATION VALUE MACROECONOMIC POLICIES MACROECONOMIC STABILIZATION MANAGEMENT CONTROL MARKET RISK MERGERS MICROFINANCE MONETARY AGGREGATES MORTGAGE INSURANCE MOTOR INSURANCE MUNICIPALITIES NET WORTH NEW ENTRANTS NON-LIFE INSURANCE NONPERFORMING LOANS OIL OPERATING COSTS OPERATING EXPENSES PENALTIES PENSION FUNDS PORTFOLIOS PREMIUMS PRIVATE BANKS PRIVATIZATION PRODUCTIVITY PROFITABILITY PROGRAMS PROPERTY RIGHTS PRUDENTIAL REGULATION PRUDENTIAL REGULATIONS PRUDENTIAL REQUIREMENTS PUBLIC DEBT PUBLIC ENTERPRISES REGULATORY FRAMEWORK REINSURANCE RESOURCE ALLOCATION SAVINGS SECURITIES SECURITIES MARKETS SETTLEMENT SYSTEMS SHAREHOLDERS SMALL BANKS SOCIAL SERVICES SOLVENCY STATE BANKS STATE GUARANTEES STOCK PRICES TAXATION TRADING TRANSACTION COSTS TRANSPARENCY VOLATILITY WORKING CAPITAL FINANCIAL SECTOR REFORM STATE-OWNED BANKS STATE-OWNED ENTERPRISES PRIVATIZATION HYDROCARBON RESOURCES PUBLIC SECTOR MANAGEMENT BANKING SYSTEMS BANKING RISK MANAGEMENT BANK SUPERVISION BANKING REGULATIONS PUBLIC FINANCE GUARANTEES SUBSIDIES OPERATIONAL INTERVENTIONS RESTRUCTURING FINANCIAL MANAGEMENT PRUDENTIAL REGULATIONS PUBLIC DEBT PUBLIC EXPENDITURES REGULATORY FRAMEWORK OIL SUBSIDIES BANK LIQUIDITY CREDIT RISK PREMIUM INSTITUTIONAL FRAMEWORK
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Washington, DC
Middle East and North Africa | Algeria
2013-09-30T21:40:12Z | 2013-09-30T21:40:12Z | 2004-06

Over the past decade, Algeria has courageously attempted to modernize its financial system, despite social strife, and unique challenges posed by the large hydrocarbon sector. However, lending by state-owned banks, mostly to public entities, still dominates financial intermediation, financial markets remain in their infancy, and, implementation of regulatory reforms is lagging. And, because of hydrocarbon-funded state support to borrowers and lenders alike, the financial system appears stable, although this "stability" carries high costs, and distorts risk pricing and governance. The report emphasizes that to alter these patterns, the authorities should push on several, mutually reinforcing policy fronts: privatization of all public banks over the medium term; improvements in the banking system, namely banking operations, to cut intermediation costs; stimulate a strong institutional framework, and regulation of hydrocarbon-induced liquidity and credit cycles, that curtail banks' risk-taking; and, undertake longer-term reforms to stimulate the non-bank financial sector. Nevertheless, the report also stipulates that privatization should not attempt to recoup past budgetary outlays, but prevent future ones, and let new owners decide on investments, and cost cuts. Direct budgetary support should replace lending to non-viable State-owned enterprises (SOEs) and financial support to public programs, such as housing or agriculture. Instead, the government should consider replacing the current guarantee subsidies, with direct budgetary financing of public entities, whereas in managing their housing and agriculture finance programs, the authorities should consider alternative methods. Banking supervision, and prudential regulation need strengthening in many core areas. The Bank of Algeria (BA) as supervisor, can play a useful role in the operational restructuring of public banks by enforcing regulation to gain a firm handle on bank profitability. But, while the ordinance on Money and Credit of October 2003 contain some improvements, other provisions could undermine BA's financial, and operational autonomy. Financial system stability and development in Algeria, have strong overtones of public debt, and expenditure management, because of the policies that regulate the effects of the oil cycle on bank liquidity, and credit risks.

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