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1. 1 THE 2005 US-ALGERIA BUSINESS COUNCIL BANKING AND FINANCE SYMPOSIUM February, 3 – 4, 2005 Hôtel Saint Régis, New York City Theme : New Roles for Banks in Algeria : The Case of Crédit Populaire d’Algérie Address ; Mr. El Hachemi MEGHAOUI, Chief Executive Officer

2. 2 Contents Preamble Re-setting of the Legal Framework Financing the Economic activities Crédit Populaire d’Algérie (CPA) - The Bank’s Activity The collection of resources Credits Foreign trade Market activity - Modernising the Bank The Information System The Electronic Money Technology The Payment System Training Opening the Capital of CPA

3. 3 Mister Chairman of US – Algeria Business Council, The Representative of Official Institutions, The Representatives of Banks and Financial Institutions,

4. 4 Crédit Populaire d’Algérie Gentlemen, I would like to thank especially the Chairman of US – Algeria Business Council and those who initiate this symposium to give me the opportunity to meet you and to present to you a report, even short, on banking in Algeria and notably Crédit Populaire d’Algérie, the bank of which I am the Chief Executive Officer.

5. 5 Crédit Populaire d’Algérie In addition to the rich report of Minister Abdelhamid Temmar, Advisor to His Excellency President Abdelaziz Bouteflika and Minister Karim Djoudi, Minister of Financial Reforms, I would like to provide you with some information that allows you to be aware of the conditions in which you could do your business with Algeria.

6. 6 This will let us have your reaction and assessment about what is done in Algeria in the banking sector to facilitate the development of the business.

7. 7 Crédit Populaire d’Algérie Preamble The operating rules of the banking and financial sectors are set by the Ordinance of 2003 that supersedes the Law on the Money and the Credit promulgated in 1990 Ordinance of August 26th, 2003. This law provides a deregulation in order to allow free access to credit and foreign trade to all economic operators especially private companies and to allow the Algerian banking sector to experience an important mutation in its shape.

8. 8 Crédit Populaire d’Algérie These amendments have allowed the setting of new operating and financing rules adequate to international banking standards. This situation was supported by the implementation of a streamline process and restructuring of public companies with the target to streamline the banks’ portfolios.

9. 9 Crédit Populaire d’Algérie This situation was supported by the implementation of a streamline process and restructuring of public companies with the target to streamline the banks’ portfolios. The process was achieved through capitalisation of these banks.

10. 10 Crédit Populaire d’Algérie Re-setting of the Legal Framework. These modifications were supported on the legal point by the promulgation and the rewriting of legal rules that come up with The following:

11. 11 Crédit Populaire d’Algérie Softening of the regulation for the exchange control; Deregulation of the banking general conditions (interest rates, commissions…); Introduction of prudential rules.

12. 12 Setting up of a system for the development of investment through the creation of the National Council of Investment (CNI) and the National Agency for the Development of Investment (ANDI), Ordinance 01-03 of August 20, 2001. Rewriting of the Register of Trade that devotes a large scales for the judicial form of the registered companies. Definition of a new legal framework for the privatisation of economic companies including banks (Ordinance 01-04 of August 20, 2001).

13. 13 Crédit Populaire d’Algérie These modifications have allowed the implementation of new operating and financing rules for banks compliant with international standards whose effects are: A free competition in the banking sector by the way of de-specialisation of the banks and the freedom of banking domiciliation; A free establishment of both private banks and foreign banks.

14. 14 Crédit Populaire d’Algérie Financing the Economic activities. Financing of the economy is still realised essentially through budget resources and bank credits. Resource collection as well is done through classical banking products.

15. 15 Crédit Populaire d’Algérie Instruments and systems to finance the financial market are set up: Stock Exchange Operation Control Committee COSOB), Stock Exchange Management Company (SGBV), Stock Exchange Brokerage (operated by banks), phasing out of actual share certificates (operated by the company Algérie Clearing) which is Securities Trustee …

16. 16 Crédit Populaire d’Algérie However even if some companies went to the market to get financing through share issues and bond issues, the market remains to be developed to ease the rigidity of the financing bid and to enhance the resources of financing the economy.

17. 17 Crédit Populaire d’Algérie Crédit Populaire d’Algérie (CPA). CPA is State-owned company established in 1967 from former French banks. As of the year-end 2004, the total assets of the bank was 6.2 billion USD and its own resources amounted to 460 million USD (*). (*) 1 USD = 72.5 DZD as of 31.12.2004

18. 18 CPA ranks nineteenth among the 200 African banks in 2004 according to Eco Finances magazine. The customer portfolio is composed of the industrial sector ( Building materials, Food processing industry, Pharmaceuticals,…), building and Public Works, Tourism, Medical profession, Media and communication.

19. 19 Crédit Populaire d’Algérie Since 1998, the Bank opened upon household customers and private individuals by offering services such as the financing of real estate and recently the consumer credit. The Bank also turned towards major companies who benefited from large project finance provided by the bank itself or through a consortium of banks.

20. 20 In order to modernise and strengthen its position in the market, CPA is planning in its business plan 2004 – 2008 to open up its capital to a first rank international partner.

21. 21 Crédit Populaire d’Algérie The Bank’s Activity. CPA operates as a universal commercial bank. It collects resources through household savings and goes to domestic and foreign markets to meet the needs of the customers (companies and individuals) as concerns financing. The bank also offers diversified services in various fields of banking and financing activities.

22. 22 Crédit Populaire d’Algérie As far as the collection of resources is concerned, it is done in a conventional manner and under different ways: At- sight account for individuals (check accounts) are to receive funds and are available at any time. These accounts are not remunerated. Current accounts for companies and professionals are not remunerated.

23. 23 Crédit Populaire d’Algérie Saving accounts and Housing Saving accounts for individuals are at-sight accounts and are remunerated. Term deposits and certificates of deposit. Loans in the monetary market and through international financial institutions or foreign correspondents. On the other hand, the Bank, as a broker, assists client Companies to raise funds in the market and to be listed (at the Stock Exchange) and to issue bonds.

24. 24 Crédit Populaire d’Algérie As for Credits, the Bank provides loans to customers by respecting the provisions of the rules set as concerns credit risk analysis and prudential rules (capita adequacy, risk concentration…). The financing of companies is operated under several forms Short term loans for the operating needs of the company; Medium and long term loans to finance project investment and equipments in Algerian dinars and foreign currencies;

25. 25 Loans for housing acquisition and construction; Guarantees, collaterals; Participation of the bank in consortium credits to finance both domestic and foreign investors’ projects.

26. 26 Crédit Populaire d’Algérie Financing is also provided to professionals and young investors and to private individuals through: loans to purchase equipment for professional beginners (Doctors Chemists…); credits for young investors to create economic activities within the framework of the State’s helping process.

27. 27 Crédit Populaire d’Algérie Loans for private individuals to purchase, construct or enlarge housing and credits to buy a car. Other financing instruments such as capital risk and leasing are being developed.

28. 28 Crédit Populaire d’Algérie For the foreign trade, and besides conventional operations performed by order and for the account of customers (money deposit in foreign currencies, book transfers, domestic and International payment cards), the Bank offers all services relating to foreign trade activities

29. 29 Crédit Populaire d’Algérie As from 1994, the Algerian regulation allows the commercial convertibility of the Dinar for commercial transactions. As concerns the control over foreign exchange exercised by Bank of Algeria, the latter mandates commercial banks to handle transactions with customers.

30. 30 Crédit Populaire d’Algérie So, CPA offers to its own customers with all services relating to foreign trade such as: Banking domiciliation; Settlement of imports through cash payments or bank-to- bank credit lines. Contracts of services not relating to equipment Supplies (technical assistance, training) must have the prior agreement of Bank of Algeria.

31. 31 Crédit Populaire d’Algérie The Bank opens appropriate accounts to foreign investors operating in Algeria: Accounts called CEDAC to receive funds in foreign currency and to keep the transferable part of contracts… Accounts called INR for non resident customers to keep the non-transferable part of contracts concluded with Algerian operators. Accounts in foreign currency to keep cash deposits in foreign currencies ( to establish a company, to cover the needs for investments in Algeria .

32. 32 Crédit Populaire d’Algérie Money transfer and all the relating transactions are executed through international payment systems such as SWIFT system in which CPA is a member since 1990.

33. 33 Crédit Populaire d’Algérie As concerns the Market activity, CPA is in line with the development process of the capital market for its account or for its customers. The bank operates in the market through its intermediary and brokerage Department (Spécialiste en Valeur du Trésor) for Treasury bonds issues and stock exchange transactions. The bank also acts as broker to assist and coach large companies for their bond issues.

34. 34 Crédit Populaire d’Algérie The bank’s intervention will be more significant with the expected development of the bond market by launching bond issue to finance major companies of different strategic sectors.

35. 35 Crédit Populaire d’Algérie Modernising the Bank: CPA has set up a programme of modernisation and development aiming at a wise use of its personnel as well as the increase of productivity and profitability and the rehabilitation of the commercial function of the bank and retargeting the customer.

36. 36 Crédit Populaire d’Algérie The main actions deal with the following : The Information System: CPA has established a Development and modernisation program based on the information system focused on an important computer technology. The information system is a stage of a deep evolution for the bank who will implement important changes and transformation to improve banking services and products to customers who become more and more strict on quality.

37. 37 Crédit Populaire d’Algérie The 127 branches of the bank will operate under the new version of the information system as from the first half 2005. The performing information system based on a new computer Programme meets the requirements of a rapid and secured process of the transactions and the availability of the information to take adequate decisions. The new computer system allows to implement ‘’remote’’ banking with all the relating facilities.

38. 38 The Electronic Money Technology: CPA occupies a strong position within the electronic money industry through the development of national and international credit cards. Payment cards which constitute a modern instrument of cash withdrawal and payment which enables the bank to clear its desks and give more attention to commercial transactions with customers.

39. 39 Crédit Populaire d’Algérie In this way the bank can devote more time to provide customers with financial assistance and advice. As concerns payment cards at merchants, the technical aspect of the project is completely finalised and is to be launched in the beginning of the year 2005.

40. 40 Crédit Populaire d’Algérie The Payment System: CPA has subscribed in the payment system coached by the Ministry of Finance and supervised by the Prime Minister. The system should allow an electronic clearance by the end of 2005 which means a reduction of time for cheque collection, money transfer and to bring solutions for huge amounts users. The modernisation actions aim at using wisely the human resource, increasing productivity, searching for profitability and to concentrate more on banking services for customers.

41. 41 Crédit Populaire d’Algérie Training Considering the importance of human resources, the Bank’s Efforts are focused on a permanent upgrading of Its personnel’s level of qualification and to adapt it to the new requirements induced by the implementation of a large Programme of modernising and computerising the bank’s activities.

42. 42 Crédit Populaire d’Algérie Besides internal actions, training programs are scheduled in co-operation with specialised institutions such as Ecole Supérieure de Banque (ESB) and Société Interbancaire de Formation (SIBF). An agreement is being concluded with an international institute to provide training modules for CPA’s personnel especially on credit risk analysis, customer management. Training in mortgage loans is also arranged by Canadian firms. The same process is under way for the training of Exchange Dealers in co-operation with Bank of Algeria

43. 43 Crédit Populaire d’Algérie Opening The Capital of The Bank The option of opening the capital of Crédit Populaire d’Algérie has become unavoidable for at least two reasons: First of all, this fact responds to a dynamic evolution of the market and to the need of seeking a confirmed Expertise in operating the different segments of banking. The fact constitutes also the strong willingness of the Algerian state to forge ahead with its plan to achieve the economic reforms sustained by the association Agreement with the European Union and the Agreement of Entry into the World Trade Organisation.

44. 44 Crédit Populaire d’Algérie Then, the need of developing and modernising the Bank which requires a reliable and renowned partnership.

45. 45 Crédit Populaire d’Algérie The objectives set for this matter are as follows: Get know-how and expertise in banking and finance; Establish a financial agency to be managed according to international standards; Create an effect of competitive spirit and stimulating other banks. Put an end the monopole of the public banks which currently account for 90% of the market share; Set competitiveness and improve the quality of financial intermediation;

46. 46 Crédit Populaire d’Algérie In the effect, the shareholder ordered in 2002 a survey of the bank that KPMG was entrusted with. The conclusions and the recommendations brought by KPMG enabled the Bank to launch and / or strengthen its programme to upgrade the Bank to international standards. Consequently a large programme of modernising and upgrading the information system has been launched and would be complete by the end of June 2005.

47. 47 Crédit Populaire d’Algérie Other actions have been taken to streamline assets and accountancy, to improve the methods of process and control and for a better care of the commercial aspect and manage- ment of human resource. It is worth mentioning that these actions are done with the assistance of foreign bureaux and consulting firms : Inforsud, subsidiary of Bull international for the information system, MEDA for some strategic subjects (credit risk analysis, Treasury management, human resource, training…).

48. 48 Crédit Populaire d’Algérie The survey served as a safe base in seeking a reliable and international partner. CPA has got a streamlined accountancy and operates within the Small and Medium-sized Enterprises, individuals and household and occupies a niche in the sector of major companies. The private sector accounts for more than 70% of its portfolio. Today, the Bank has got 15% share in the market. The return on capital is constantly improving. The return on capital is 9% in 2004.

49. 49 Crédit Populaire d’Algérie Implemented actions within the programme through tenders have led to choose in December 2002 a business bank to coach and assist the shareholder in achieving the project. The tender file was presented to six business banks pres- selected on a short list in consultation with the World Bank who planned to finance the project.

50. 50 Crédit Populaire d’Algérie Reference terms communicated to the pre-selected banks provide that the State decided to call for a business bank’s assistance for the opening of the capital of CPA up to 49%. The relating management transfer and control conditions will be set in a shareholding agreement. It should be mentioned that SFI (Société Financière Internationale) has shown its interest in taking part in the operation. The operation was postponed for objective reasons.

51. 51 Crédit Populaire d’Algérie The process is now re-launched mainly as the bank has set to achieve an ambitious business plan 2004 – 2008 in which a partnership constitutes a important leverage to improve the Bank’s efficiency and profitability and to widen its operating sphere.

52. 52 Crédit Populaire d’Algérie Thank you so much for your attention.