Chamber of commerce:
Chambre de Commerce Palais
BP 100 – Alger le Novembre 6, Bd
Amilar Cabral, Bab El-Oued
Tel: +213 257 4444
Fax: +213 262 9991
Algeria’s new banking laws
Gide Loyrette Nouel
The new banking law was one of the most greatly anticipated reforms following the
various scandals involving the Algerian banking scene over the last two years.
This new banking legislation is laid down in Ordinance No 2003-11 of August 26
2003 (the Banking Act). This legislation is complemented by regulations issued under
the old banking statute, Act No 90-10 of April 14 1990 (Act No 90-10), which was
repealed and replaced by the Banking Act. Article 141 of the Banking Act expressly pro-
vides that the regulations issued under Act No 90-10 will remain in force until they are
replaced by regulations issued under the Banking Act.
The Bank of Algeria
The Bank of Algeria is a national institution with a separate corporate identity, is ﬁnan-
cially independent and is deemed to act as a commercial undertaking in its relationships
with third parties. Unless otherwise provided by the Banking Act, it is governed by the
legislation applicable to commercial undertakings.
The State owns the entire share capital in the Bank of Algeria, and as a result it can
only be dissolved pursuant to an act of parliament. Executive control of the Bank of
Algeria lies in the hands of a governor, assisted by three assistant governors, all appoint-
ed by decree issued by the Algerian president. The Bank of Algeria has a board of direc-
tors responsible for its general management. The members of the board of directors are
the governor chairman, the three assistant governors, and three of the highest-ranking
civil servants appointed by presidential decree on the basis of their skills and experience
in economic and ﬁnancial matters.
The Bank of Algeria is responsible for regulating the money supply, directing and
supervising the distribution of credit, supervising the proper management of ﬁnancial
commitments as regards foreign countries and regulating the foreign exchange market.
The Currency and Credit Council (the Council) is one of the most important bodies in
the Algerian banking system. The Banking Act vests it with wide powers to establish
operational rules and to grant licences, authorizations and so on. The legislature has
decided to delegate wide interpretational and decision-making powers both to the
Council and the Banking Commission (the Commission).
The members of the Council are the members of the board of directors of the Bank
of Algeria, and two high-ranking individuals selected on the basis of their skills and expe-
rience in economic and monetary matters. These two high-ranking individuals are
appointed to the Council by presidential decree. The Council is chaired by the governor,
who calls Council meetings and sets the agenda for those meetings. The Council is
responsible for deﬁning its own internal rules and regulations. Resolutions are voted by
standard majority. In the case of a voting deadlock, the chairman has a casting vote.
As a monetary authority, the Council is vested with very wide The regulation of banks and ﬁnancial institutions
powers, and has jurisdiction in the following areas: Banks and ﬁnancial institutions are required, according to the
• the deﬁnition, direction, supervision and evaluation of mone- rules deﬁned by Council regulations, to comply with manage-
tary policy. To this end, the Council sets monetary objectives, ment norms designed to guarantee their liquidity and solvency as
particularly in terms of developing monetary aggregates and regards depositors and third parties, and to ensure that their
credit. It approves the instruments of monetary policy, estab- ﬁnancial structure maintains its equilibrium.
lishes money market prudential rules and ensures the circu- The Act lays down a number of provisions to regulate bank-
lation of information across the market to avoid the risks of ing business and safeguard the market. Among these are (i) the
default or failure; compulsory membership for banks and ﬁnancial institutions of a
• the operation and security of payment systems; doubtful and bad debt organization (centrale des risques et cen-
• the rules for creating and licensing banks and financial trale des impayés); (ii) a ﬁnancial contribution by the sharehold-
institutions and those for setting up financial networks; ers or founders when the bank’s or institution’s situation so
• the management of foreign exchange reserves; and requires; (iii) the implementation of a market solidarity system;
• the authorization for banks and ﬁnancial institutions to open, and (iv) the setting up of a bank deposit guarantee fund.
change their governing articles and bylaws and the power to The Commission is responsible for ensuring that the banks and
withdraw licences. ﬁnancial institutions comply with the laws and regulations that apply
to them, and for dealing with sanction violations. The Commission
Credit institutions examines the conditions in which the banks and ﬁnancial institutions
There are two types of institutions profession is structured as a do business, and monitors their ﬁnancial standing and stability. It also
global system provided by the Banking Act – banks and ﬁnancial ensures that they comply with professional rules and ethics.
institutions (établissements ﬁnanciers). The Act deﬁnes three cat- If a bank or ﬁnancial institution has violated a law or regula-
egories of banking transaction: the receipt of deposits from the tion applicable to its activities, has not complied with an order or
public; credit transactions; and the supply of means of payment to directive or has not reacted to a warning, the Commission may
customers and the management of those means of payment. impose sanctions, ranging from a simple warning to the with-
The banks routinely engage in these three categories of drawal of the institution’s licence.
transactions, whereas ﬁnancial institutions only engage in credit The Act provides that any bank or ﬁnancial institution governed
transactions. They are no longer entitled to supply customers by Algerian law which has had its licence withdrawn must be placed
with methods of payment and manage them, as was previously in liquidation. To date, two private Algerian banks are in liquidation
allowed under Act No 90-10. as a result of the Commission having withdrawn their licences.
However, both banks and ﬁnancial institutions engage in the Another private bank is in reorganization in bankruptcy proceedings
following related transactions: foreign exchange transactions, following a declaration to the court that it had suspended payments.
transactions involving gold, precious metals and coins, place- This is the ﬁrst time that the reorganization in bankruptcy procedure
ments, subscriptions, purchases, management, custody and sale has been used for a commercial company in Algeria.
of securities or any ﬁnancial products, advice and assistance in
estate and asset management, and ﬁnancial advice, manage- The right of banks and ﬁnancial institutions to
ment and engineering. preferential payment
The creation of any bank and ﬁnancial institution governed by To guarantee payment of the capital, interest and costs connect-
Algerian law requires the authorization of the Council. For autho- ed with all outstanding debts to banks or ﬁnancial institutions, or
rization to be granted, an application must be ﬁled containing, which are offered to them by way of security, and all the notes
among other things, the results of an enquiry into the moral and bills that are assigned or delivered to them by way of pledge,
standing of the institution’s founding members and managerial or to guarantee the honouring of any commitment made to them
staff. To obtain the authorization of the Council, applicants are by way of guarantee, endorsement or security, the banks and
required to submit their business plan, details of the ﬁnancial and ﬁnancial institutions have a right of preference over any assets,
technical resources to be employed, the capacity or standing of claims and account credits belonging to their debtors. This right
those investing funds and the source of those funds. to preferential payment ranks immediately after employees, the
Once authorization has been granted, the company or branch state treasury and social welfare insurance funds.
may be set up and apply for its operating licence issued by the
governor of the Bank of Algeria entitling it to carry on business Exchange control
under the ofﬁcial status of a bank or ﬁnancial institution. The Bank of Algeria regulates the foreign exchange market
Banks and ﬁnancial institutions governed by Algerian law according to the foreign exchange policy decided by the Council
must be incorporated in the form of a joint-stock company in and in compliance with Algeria’s international commitments. The
accordance with the Commercial Code if, indeed, they adopt the dinar cannot be subject to multiple exchange rates. Regulation
form of a company. The share capital, or ﬁnancial endowment in No 95-07 of December 23 1995 regarding exchange control
the case of a branchk, is DZD2 billion ($27.5 million), and governs monetary ﬂows to and from Algeria. Note that since the
DZD600 million for a ﬁnancial institution. introduction of Ordinance No 96-22 of July 9 1996, as amend-
The Council also has the power to authorize the creation of ed in 2003, violations of the exchange control regulations are
banks in the form of mutual societies. punishable by severe criminal law sanctions.