Moreover, this choice should preserve and strengthen the stability of the Algerian banking system, which has been achieved in particular by strong economic and financial performance since 2001 and the enhanced supervision capacities. The strengthening of these capacities over the past years constitutes a major asset for the Bank of Algeria and should make it possible not only to successfully ensure that Algerian banking regulation and supervision complies with international standards (such as the Basel Committee’s Core Principles for Effective Banking Supervision), but also to efficiently prepare the implementation of Basel II with a good take up of the Accord by Algerian banks. As Governor of the Banque de France and Chairman of the Commission bancaire, I am aware of the extent to which the preparation of the implementation of Basel II requires efforts and resources on the part of both institutions and supervisors. Allow me to illustrate this by briefly presenting initiatives carried out by the Commission bancaire and its General Secretariat for effectively implementing Basel II in France. By 31 December 2007, over 30 on-site inspections will have been conducted in 20 institutions, involving at times up to 100 inspectors at a time. These on-site inspections examined IRB systems for credit risk and advanced operational risk measurement approaches.
The rapid progress of information technology in recent years has brought new risk measurement models to aid in the measurement of market risk. The most widely accepted of these is the ”Value-at-Risk” model, called ”VaR” for short. VaR is the maximum loss that can occur in the value of a portfolio having a certain investment horizon under a certain probability. Since it is a simple and clear-cut concept, the VaR model is widely used for measuring market risk. It permits comparison of the market risk of different investment instruments, so that portfolio performance can be evaluated in terms of the risk undertaken. Especially for measuring  market risk to determine capital adequacy, this model has become a necessity in many countries and financial institutions. Another method widely used for measuring market risk is ”Scenario Analysis”. Scenario Analysis is a technique used to see how the value of a portfolio would be affected by various probable changes in market conditions. A last widely used method for measuring risk is the ”Stress Test” method. The Stress Test is used to estimate how the value of a portfolio would be affected by large, unexpected fluctuations in the markets, such as have been observed during the global crisis which is still with us. Though similar to Scenario Analysis, the Stress Test mainly aims to predict the maximum value that would be lost by a portfolio under certain extraordinary market conditions. The success of this method depends on successfully predicting market conditions.