Task List to Implement Recommendations of Basel II Task Force

Final
Target Estimate
Recommandation completi Tasks d Timing
on
date
Basel Core Principles assessment:

1. Perform and document a rigorous, independent and detailed Basel Core Principles assessment.;
2. Identify which individuals will carry out the assessment, and provide them with adequate time and resources to complete;
3. Identify whether additional donor and/or technical assistance is required;
#1 4. Establish protocol for documenting compliance with Core Principles on an on-going basis; this may involve a policy for periodic review;

September 30, 2009

5. Use assessment results to identify gaps in current supervisory practices and routines, and develop an action plan to bring these up to
risk-based standards where indicated.
Bank of Algeria should
ensure that risk-based Bank rating systems establishment, training and communication with banks:
supervision is fully
implemented before 1. Develop a methodology for rating and rank-ordering risk in banks, as well as a composite rating for the institution.
adoption of any part of 2. Identification of individuals responsible for this; management to provide them with sufficient authority to complete assignment (including
Basel II is considered. research of rating system design and practice in other jurisdictions).
3. Training of supervisory staff in application of the rating system, and documentation of implementation through written procedures.
4. Communication of rating methodology and associated procedures to bankers and other interested parties (e.g., other Bank of Algeria
departments, financial media, other financial system regulators, etc).

Risk based supervision :

• Review other areas necessary to support implementation of risk-based supervision, e.g., corporate governance, and bring these up to
international standards (detailed in Basel Committee and OECD guidance).

1
 Staffing requirement
• Identify individual(s) responsible for completion of this recommendation, and provide them with sufficient authority and resources (e.g.,
internet access) to complete as indicated.
#2 Pillars 2 and 3, review and strategy:
1. Review implementation of Pillars 2 and 3 in other countries, with particular emphasis on those with similar characteristics (e.g.,
emerging/transitional markets, presence of foreign bank subsidiaries and PSEs, etc.). Reference may include:

December 31,2009
Any proposed adoption of  Basel II Implementation Group and relevant work streams
Basel II, as well as any  Contact with other supervisors
preparations, should focus  Industry and/or trade associations
on all three pillars in equal 2. Use this knowledge to propose an initial adoption strategy and develop rules of engagement with Algerian banks that are likely to be
measure. subject to Basel II.

(NB: tasks associated with Market discipline and industry comment :

implementation of Pillar 2 are 1. Identify the current level of market discipline in the Algerian context, and establish supervisory expectations through discussion with
captured under relevant parties (bankers, other regulators, investment community, etc).
Recommendation #5) 2. Propose an initial set of disclosures for industry comment and refine as appropriate.

Home supervisor dialog

• Start a dialogue with home country supervisors of the foreign banks, discuss their needs vis a vis their banks’ Algerian operations, and
establish communication protocols and appropriate legal arrangements (e.g., MOUs, information sharing protocols, etc).

Staffing requirement:
• Identify the individual(s) with responsibility for completion of this recommendation, and provide them with sufficient authority and
resources to complete as indicated.

Communication with Banks:

• Determine a protocol for communication with banks:

#3  With whom will communication take place?
 What areas of mutual interest will be discussed?
Bank of Algeria  In what format will discussions occur?
supervisory staff should  How will discussions be documented?
March 31, 2010

initiate on-going  How will this be communicated to Bank of Algeria supervisory management?
discussions with banks to
ascertain their level of Banks IT systems:
• Identify capabilities of various banks’ IT systems to capture and report information that would be necessary under likely Basel II
preparedness to adopt
approaches (Standardized – credit; Standardized – market; Basic Indicator – operational; plus Pillar 2 requirements and Pillar 3
Basel II, and use this
disclosures)
information to steer
implementation efforts. Risk management and measurement practices:

1. Establish and document a baseline of risk management and measurement practices across the banking system to determine
effectiveness of subsequent implementation efforts.
2. Compare risk measurement and management capabilities across the system, e.g., at subsidiaries of foreign banks vs. those that are
state-owned.

Basel II strategy:

• Use this information to propose a Basel II implementation strategy for consideration of supervisory management.

2
 Staffing requirement:
#4
• Identify the individual(s) with responsibility for completion of this recommendation, and provide them with sufficient authority and
resources to complete as indicated.
An impact study should be • Research QIS methodologies and results in other jurisdictions that have implemented Basel II, and discuss with these foreign supervisors
performed prior to as appropriate (requires internet access).
adopting Basel II in order • Use information on risk management and measurement capabilities gained through implementing Recommendations #1, 3, 5 and 6 to
to assess whether the design reporting forms to capture regulatory capital in a hypothetical Basel II environment.
probable impact on capital

March 31, 2012

levels is appropriate. Reporting :
• Analyze results for quality, accuracy, consistency and systemic impact.
(NB: This recommendation • Report results to Bank of Algeria supervisory management and make recommendations regarding scope of Basel II implementation.
has significant task
dependencies, and therefore
cannot begin until certain
other tasks are underway or
have been completed, as
noted below. Task Force
members would be in the
best position to drive such
scheduling.)

Staffing requirement:

• Identify the individual(s) with responsibility for completion of this recommendation, and provide them with sufficient authority and
resources to complete as indicated.

#5 Survey and compare existing practice:

December 31, 2009

• Survey existing risk measurement and capital planning practices in Algerian banks, and document in order to determine effectiveness of
subsequent implementation efforts.
An internal capital • Compare existing practice to international best practice; research risk management literature and discuss practice elsewhere with
adequacy assessment supervisors in other jurisdictions as appropriate.
process (ICAAP) should
be adopted as a precursor Propose industry guidance and publish after comments period:
to adoption of Pillar 2 of
Basel II. • Propose draft guidance to the industry, and seek comments.
• Incorporate these comments into final guidance and publish.

Internal procedure and training :

• Inform and/or train other Bank of Algeria departments on expectations contained in the guidance, and make changes to inspection and
other routines as appropriate.

3
 Staffing requirement:
Tasks necessary to complete implementation:

• Identify the individual(s) with responsibility for completion of this recommendation, and provide them with sufficient authority and
#6 resources to complete as indicated.

Risk measurement Compare existing practice to international best practice :

systems and management 1. Compare existing practice to international best practice; research risk management literature and discuss practice elsewhere with
processes should be supervisors in other jurisdictions as appropriate.
enhanced in all banks that 2. Identify significant gaps in Algerian practice, and discuss with bank management and other relevant parties (e.g., internal and external

December 31, 2009

would be subject to Basel auditors) to determine how best to make improvements
II.
Develop an action and discuss with banks:
(NB: This recommendation
has a significant task • Develop an action plan and discuss with banks; this may require Bank of Algeria intervention in the form of guidance (preferred), further
dependency with regulation, or legislative changes.
Recommendation #5 since
risk measurement is a major
element of capital planning,
hence, most of the same
tasks above are equally
applicable here).

Staffing requirement:
#7 The tasks necessary to complete implementation are mainly under the purview of Bank of Algeria supervisory management. The resources
needed to implement risk-based supervision will also support implementation of Basel II when adequate infrastructure is in place to support this
December 31, 2008

Bank of Algeria in 3-4 years.

management should
carefully plan for the Resources identification and information :
significant additional
resources that would be 1. Identify individuals charged with implementation of risk-based supervision, and provide them with sufficient authority and resources; this
necessary in the event of will likely necessitate certain changes to organizational structure and/or reporting relationships.
changes to either the 2. Arrange for any changes to in organizational structure and/or reporting relationships necessary to support new supervisory routines.
capital or overall 3. Identify additional resources required to support efforts to implement risk-based supervision as a necessary precursor to adoption of
supervisory regime. Basel II, including internet access, attendance at foreign training events, cost of consultants and/or additional technical assistance, etc.
4. Implement changes as indicated to on-going budget and other processes.