IMF Publishes Reports on 2018 Article IV Consultation with Algeria
IMF published its staff report and selected issues report in the context of the 2018 Article IV consultation with Algeria. Directors noted that the banking sector continues to perform relatively well. They highlighted that, given the macroeconomic risks and financial linkages in the public sector, the macro-prudential framework should be strengthened, including through more frequent stress tests and development of a crisis management framework.
The staff report highlights that the banking system remained adequately capitalized and profitable, but bank liquidity continued to decline until monetary financing started. Preliminary data at the end of December 2017 suggest that the banking sector remained adequately capitalized, with an overall solvency ratio of 19.6%. The ratio of solvency to tier 1 capital declined slightly from 16.3% at the end of 2016 to 15.2%, owing to the growth of credit to the economy. Gross nonperforming loans increased slightly from 11.9% to 12.3% of total loans at the end of 2017, partly reflecting the ripple effect of the government’s arrears to its suppliers. Banking sector liquidity declined, but remained sufficient to cover about half of the short-term liabilities of banks. The roll out of the Basel II prudential framework, risk-based supervision, and tighter public bank governance rules has improved resilience of the banking sector. Bank supervisors are monitoring banks closely and running stress tests to assess their resilience, which has been deemed adequate barring a major adverse exogenous shock. Nonetheless, given existing risks, more frequent stress tests are needed.
The staff recommends that, although bank regulation and supervision are satisfactory, the authorities should strengthen the prudential framework. Given the macroeconomic risks, more frequent stress tests are needed and the authorities should develop a systemic-risk analysis and containment framework. The prudential framework could be strengthened with the introduction of a countercyclical capital buffer and macro-prudential measures such as loan-to-value limits. The authorities also need to develop crisis management processes and a clear bank resolution framework. If ample liquidity boosts credit expansion, the authorities could introduce a countercyclical capital buffer to moderate risk-taking and consider macro-prudential measures (such as loan-to-value limits). They should develop a systemic-risk analysis and containment framework. Moreover, the authorities need to develop crisis management processes and a bank resolution framework that clearly define the roles and responsibilities of the various parties involved.
The selected issues report examines ways to improve public spending efficiency to foster more inclusive growth.
Related Links
Keywords: Middle East and Africa, Algeria, Banking, Article IV, FSAP, Basel II, CCyB, IMF
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
EC Statement on Cybersecurity Act and Certification Rules in EURelated Articles
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
BIS Bulletin Examines Cognitive Limits of Large Language Models
The use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.
ECB is Conducting First Cyber Risk Stress Test for Banks
As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats.
EBA Continues Momentum Toward Strengthening Prudential Rules for Banks
A few years down the road from the last global financial crisis, regulators are still issuing rules and monitoring banks to ensure that they comply with the regulations.
EU and UK Agencies Issue Updates on Final Basel III Rules
The European Commission (EC) recently issued an update informing that the European Council and the Parliament have endorsed the Banking Package implementing the final elements of Basel III standards