In common with supervisors in the more developed markets, we face the challenge of limited internal resources and expertise with which to implement the IRB Approach. Moreover, banks and supervisors are often competing between themselves for the relevant expertise. In addition, the support to supervisors in Asia from external parties, such as academia, vendors, consulting firms and rating agencies, is more limited than in the developed markets. Finally, both banks and supervisors face a very steep learning curve in familiarising themselves with  2  BIS Review 120/2007  the basic concepts and techniques on which the IRB Approach relies, and need to become more conversant with these types of risk management technique. A particularly important issue to consider that is highly relevant to today’s event is the standards that bank supervisors will apply in deciding whether or not to approve a bank to use the IRB Approach. To ensure that the capital charges computed by the IRB systems are sufficient for banks to withstand the credit risks they have incurred and to absorb the potential losses resulting from borrower defaults, the estimates of the risk components must be accurate in capturing the relevant aspects of risk. As a consequence, validation of banks’ estimates of the risk components, and the underlying internal rating systems, is crucial to the implementation of the IRB Approach. This is one of the greatest implementation challenges confronting bank supervisors in Asia, where the development and understanding of the IRB Approach by banks is generally still at an early stage.
Foreign direct investment in Algeria is a relatively recent development and has notably followed the achievement of balance of payments viability. For the past six years (2003–2008), total FDIs amounted $ billion 8.7, of which 47.3% from EU countries and  BIS Review 168/2009  3  25.2% from Asian and Middle-Eastern and North African countries. The share of FDIs in the hydrocarbon sector in total FDIs, which reached 55% in 2005, has gradually declined to 42% on average during the recent years. Non-hydrocarbon sectors which attracted FDIs include the banking sector, chemical industry, food industry, electricity sector, water desalination, and construction material. The exchange rate policy is conducted by the Bank of Algeria in the context of a managed float regime of the dinar vis-à-vis the currencies of Algeria’s main trade partners. Since 2004, with a real effective exchange rate (REER) around the equilibrium level as determined by the economy’s fundamentals, exchange rate policy is well in line with external stability, the latter being anchored to a notably strong net external financial position. In operational terms, the Bank of Algeria intervenes in the interbank market to ensure that movements in the nominal exchange rate do not affect the long term equilibrium of the real effective exchange rate of the dinar.