Fiscal Year 2025
Capacity Development Activities
Central Bank Operations
Calibrating Open Market Operations
At the urgent request of the Banque d’Algérie METAC reviewed the current practice of calibrating open market operations during 2-4 July. The mission supported the integration of the new liquidity forecasting framework that was delivered by the 2022 Technical Assistance mission, into the calibration of the weekly liquidity operations. The mission was hands-on in nature and improved and adjusted the existing procedures.
Operationalizing an In-House Credit Assessment System
This follow-up mission during 7-10 July is part of a project that assists the Banque d’Algérie in improving their calculation of credit rating and haircuts to support the BA in their objective to protect the central bank balance sheets when accepting collateral in liquidity-providing operations. The project reached a first major milestone with the implementation of an automated internal rating tool for non-financial corporations. The rating methodology will be implemented across the local branches of the Banque d’Algérie where the automated rating will be supplemented with the relevant expert judgement. Initially, the rating will be used internally to calculate haircuts applicable to credit claims when mobilized for central bank liquidity provision operations.
Financial Supervision and Regulation
Developing a Risk Rating Framework for Banks
METAC assisted Banque d’Algerie (BA) during June 10–27 to develop a risk rating framework for banks, representing the last phase of a multi-step project that started in 2020. The project aimed at replacing the existing CAMELS rating system with a new rating system that covers a wider array of risks and is based on a set of quantitative and qualitative indicators. Unlike the CAMELS rating, the new rating will be produced by the off-site function to ensure updated results. The mission (i) finalized the methodological guide that describes the architecture, processes, and procedures of rating; (ii) reviewed the test results and proposed final finetuning to some indicators, weights, and benchmarks; and (iii) developed a guide relating the rating of a bank and its size to the intensity and frequency of supervisory activities. Finally, regulations to further enhance the new rating system and reinforce risk-based supervision were proposed as next steps.
Macroeconomic Frameworks
Extending the Quarterly Projection Model (QPM) to the Fiscal Sector
During 26 May to 6 June, METAC assisted the Bank of Algeria (BA) in extending the Quarterly Projection Model to incorporate the fiscal sector and assess implications on inflation dynamics, the central bank’s reaction function, and the evolution of debt. The mission team provided hands-on training onpreparing the forecasts and various alternative scenarios. Incorporating the effect of fiscal policy, forward-looking expectations, and timely intervention of the Central Bank will help BA in conducting monetary policy and achieving its long-term goals.
Anti-Money Laundering & Combating the Financing of Terrorism (Co-hosted by METAC and financed by the AML/CFT Trust Fund)
Enhancing the ML/TF Risk Understanding of the Supervisors
AML/CFT Regional Advisor Peter El Sharoni participated in a mission comprising a series of virtual CD sessions conducted in May and June to assist the Bank of Algeria in enhancing AML/CFT risk-based supervision of financial institutions under its purview. The sessions focused on the understanding of the main threats affecting the banking sector and that can trigger ML risks for enhancing the risk assessment tools utilized by supervisors, including geographic risks and risks related to the cross-border movements of funds.
