Bank credit in Algeria: what prudential rules force your bank to calculate about you
📌 In short: Most credit refusals in Algeria are not explained by the quality of the project, but by prudential rules the bank has no power to set aside. Three Bank of Algeria regulations dated 16 February 2014 govern risk division, loan classification and the value recognised for collateral. They impose, among other things: a 25% ceiling on regulatory equity per beneficiary, the aggregation of your connected companies into a single exposure, automatic classification after 90 days of arrears which contaminates all your other commitments, and a mortgage recognised at only 50%. Understanding these mechanisms means understanding what is actually being decided in your file.
Keywords in this article
1. The rules your account manager cannot bypass
When a file is refused, the answer is often vague: "the committee didn't follow", "the file doesn't pass". That vagueness is not always evasion. An Algerian bank applies a binding prudential framework, enforced by the Banking Commission, which decides part of the outcome of your request before the quality of your project even enters the picture.
| Regulation | Subject | What it determines for you |
|---|---|---|
| no. 14-01 of 16/02/2014 | Solvency ratios | Defines the regulatory equity underpinning every limit |
| no. 14-02 of 16/02/2014 | Large exposures and shareholdings | Caps the bank's exposure to you — and to your connected companies |
| no. 14-03 of 16/02/2014 | Loan classification and provisioning | Sets your risk status and the cost you represent to the bank |
All three were published in Official Gazette no. 56 of 2014 and have applied since 1 October 2014.
📌 The change of perspective. A credit file is not assessed in the abstract, but relative to the bank's own position: its equity, its existing exposures, its stock of classified loans. Two banks can legitimately reach opposite decisions on the same file. That is the first reason a refusal is not necessarily a verdict on your business.
2. The 25% ceiling: refused without any criticism of your file
Regulation no. 14-02 requires every bank to observe at all times a maximum ratio of 25% between total net weighted risks on a single beneficiary and its regulatory equity (Art. 4). The Banking Commission may even impose a lower ratio for certain beneficiaries.
Two further thresholds frame the exercise:
- An exposure becomes a "large exposure" once it exceeds 10% of the bank's equity (Art. 2).
- A bank's total large exposures must not exceed eight times its regulatory equity (Art. 5).
This aggregate ceiling explains a situation that baffles many owners: a bank can refuse a sound file simply because it is close to its limit, or because its envelope is already committed to other counterparties. The same file presented elsewhere may pass without difficulty.
Corporate credit weighted at 100%
The regulation sets weightings by type of claim (Art. 11): 0% for the State and the Bank of Algeria, 20% for banks established in Algeria, and 100% for "all credits to companies, individuals and associations, including leases". Your credit therefore consumes the envelope in full — no discount is granted for the quality of the borrower.
Commitments by signature are not neutral
Guarantees, documentary credits and performance bonds also consume the envelope, after conversion into credit-risk equivalent (Art. 12):
| Off-balance-sheet commitment | Conversion factor |
|---|---|
| Overdraft cancellable unconditionally and without notice | 0% |
| Documentary credit where the goods constitute collateral | 20% |
| Documentary credit where they do not | 50% |
| Public procurement bond, performance guarantee, customs and tax commitments | 50% |
| Undrawn irrevocable facility with an initial term > 1 year | 50% |
| Acceptances, irrevocable credit openings, guarantees of distributed credits | 100% |
The practical consequence: an unused line of public procurement bonds continues to weigh on your borrowing capacity. Clearing dormant lines before filing an investment application is not a detail.
⚠️ Above 10% of the bank's equity, Article 15 of Regulation 14-02 requires the bank to hold an external audit report on the risks it carries on your company. Files of that size therefore demand a markedly higher level of financial information — and a longer review period.
3. "Connected persons": your other companies count in your file
This is the most frequently overlooked point, and one of the most consequential for Algerian family groups. Regulation no. 14-02 defines a "single beneficiary" as including connected persons — natural or legal persons linked "in any way whatsoever" such that difficulties affecting one are likely to spread to the others.
The text presumes such links between:
- entities of a group made up of a parent, its subsidiaries and joint ventures;
- persons under common de facto management;
- persons maintaining predominant business relations — subcontracting is expressly cited;
- persons bound by cross-guarantee agreements.
Three limited companies owned by the same shareholders, or two companies where one subcontracts the bulk of its activity to the other, may therefore be aggregated into a single beneficiary. The 25% ceiling is then measured on the whole, not company by company.
Contagion when an incident occurs
Regulation no. 14-03 goes further. Article 6 provides that, for a given counterparty, the downgrading of one claim triggers by contagion the downgrading of all its other claims into the same category, and the reclassification of irrevocable commitments by signature as doubtful commitments.
And crucially: "Where the counterparty belongs to a group, the bank or financial institution assesses the impact of that counterparty's default on the group's position and, where necessary, downgrades all claims on every entity of the group."
🔎 Field observation (our engagements, not a legal text). This is the mechanism that surprises owners most: an arrear on a small entity within the group, dismissed as trivial, can bring down the financing of the main company. Separating activities legally is not enough to separate them in the regulator's eyes — there must also be no common de facto management, no cross-guarantees and no predominant commercial dependence.
4. The 90 / 180 / 360-day calendar that sets your status
Regulation no. 14-03 classifies claims as current or classified. A claim is classified where there is a probable or certain risk of non-recovery, or arrears of more than three months (Art. 5). Downgrading is therefore not a discretionary judgement: it is a calendar mechanism.
| Category | Main trigger | Minimum provision |
|---|---|---|
| Current claims | Full recovery within contractual terms | 1% per year, up to 3% |
| Potential problems | Instalment unpaid for 90 days | 20% |
| High risk | Instalment unpaid for 180 days, judicial administration | 50% |
| Compromised | Instalment unpaid for 360 days, acceleration, bankruptcy, cessation of activity | 100% |
The permanent overdraft trap
Many Algerian SMEs live in structural overdraft without realising they are exposed. The text expressly targets "debit balances on current accounts which, over a period of 90 to 180 days, have not recorded credit movements covering all interest charges and a significant part of those debit balances". An account that never clears slips into the potential-problems category — without a single formal payment incident.
Downgrading without any arrears
Category 1 also covers claims whose recovery becomes uncertain "owing to a deterioration in the counterparty's financial position", citing: a sector in difficulty, a significant fall in turnover, excessive indebtedness, or internal difficulties such as shareholder disputes. A weak financial year can therefore be enough, independently of any late payment.
💡 Why this is expensive even when you are sound. A current claim already carries a general provision of 1% per year up to 3% (Art. 9). Downgrading to category 1 raises that cost to a minimum of 20%. That provision is a charge to the bank: it explains why a single incident, even once regularised, weighs on your banking relationship for a long time.
5. Why your mortgage is worth only half
This is the most counter-intuitive discovery for an owner offering real estate as collateral. Provisioning is calculated "on the gross amount, excluding unrecovered interest and after deduction of eligible collateral" (Art. 11 of Regulation 14-03) — but each guarantee is eligible only up to a fixed proportion.
| Collateral | Eligible proportion |
|---|---|
| Cash and guarantee deposits with the lending bank | 100% |
| Guarantees from the Algerian State and equivalent public institutions and funds | 100% |
| Guarantees from banks, financial institutions and credit-insurance bodies approved in Algeria | 80% |
| Term deposits held with another bank in Algeria | 80% |
| Mortgages and vehicle pledges | 50% |
A mortgage over a property valued at 100 million DZD therefore "covers" only 50 million in the prudential calculation. This is the mechanical explanation for collateral demands that feel disproportionate: the bank is not asking for double out of excessive caution — it asks for double because the regulation recognises only half.
What it takes for collateral merely to be "eligible"
Article 13 sets strict cumulative conditions. Collateral must in particular be:
- unconditional and enforceable on first demand, expressly stipulated as such;
- for mortgages: registered and first-rank — mortgages over commercial buildings are accepted only if the property is completed and ready for operation;
- for pledges: over new standard vehicles, duly registered and readily marketable;
- valued by independent experts, on the basis of observed market prices, with valuations kept up to date;
- covered by adequate damage insurance.
A property under construction, a second-rank mortgage or an accommodating valuation therefore produce no prudential effect — whatever their real value.
The guarantor lever
Article 8 of Regulation no. 14-02 provides that "where a risk is guaranteed by a third party, that risk is deemed to be carried on the guarantor up to the amount of the guarantee received", with the guarantor's weighting applied. This is what makes public guarantee schemes genuinely useful: they do not merely reassure the bank, they shift the exposure outside your own 25% ceiling.
🗓️ The five-year rule. Article 14 provides that five years after first downgrading, classified claims covered by real security must be provisioned in full, without deducting that security. After that point your mortgage is worth nothing in the bank's calculation — hence the pressure to settle or enforce.
6. Rescheduling: what restructuring really costs
Rescheduling is often presented as a neutral solution. Regulation no. 14-03 sets its regulatory price in Article 7.
Twelve months of quarantine
A restructured classified claim must be kept in its category for at least twelve months. Rescheduling does not reset the counter.
A conditional return
After that period, reclassification as a current claim may be considered — provided the new schedule is respected and the related interest is actually collected.
The penalty for a second incident
If a restructured claim falls into arrears, it is downgraded in full to "compromised" after 90 days — a 100% provision, skipping the intermediate categories.
Restructured classified claims above 50,000,000 DZD must also be reported quarterly to the Banking Commission and the Bank of Algeria.
The conclusion is clear: a rescheduling should only be negotiated on a genuinely sustainable schedule. A second incident costs incomparably more than the first.
7. What you can manage before filing an application
Observations from our advisory practice, not regulatory provisions. They follow directly, however, from the mechanisms described above.
- Keep the current account moving. A debit balance recording no significant credit movements for 90 days is a downgrade in the making. It is the easiest point to fix, and the most often neglected.
- Map the perimeter of connected persons. Identify every entity liable to be aggregated — common shareholders, de facto management, predominant subcontracting, cross-guarantees — before the bank does it for you.
- Clear dormant commitments. Unused bonds, documentary lines and irrevocable facilities consume the envelope through conversion factors. Closing them frees up capacity.
- Check that collateral is eligible before offering it. Mortgage rank, completion of a commercial building, independent expert valuation, damage insurance: security that fails Article 13 produces no effect.
- Look for a guarantor rather than more collateral. Shifting exposure to an eligible guarantor is prudentially more effective than an additional mortgage recognised at 50%.
- Choose the bank on its position, not only on its rate. A bank near its limits will refuse a good file. Asking about envelope availability before building the application saves months.
This article sets out the applicable regulatory framework and constitutes neither legal advice, nor investment advice, nor a guarantee that financing will be obtained. Every situation must be examined against the company's actual financial statements and the policy of the bank concerned.
FAQ — Frequently asked questions
🔎 Sources and references
- Regulation no. 14-02 of 16 February 2014 on large exposures and shareholdings (OG 2014-56), Arts. 2, 4, 5, 8, 11, 12, 15 — Bank of Algeria · Verified on 01/08/2026
- Regulation no. 14-03 of 16 February 2014 on the classification and provisioning of claims and commitments by signature (OG 2014-56), Arts. 4 to 14 — Bank of Algeria · Verified on 01/08/2026
- Regulation no. 14-01 of 16 February 2014 on solvency ratios applicable to banks and financial institutions — Bank of Algeria · Verified on 01/08/2026
- Bank of Algeria — 2014 regulations index — Bank of Algeria · Verified on 01/08/2026
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