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Bank with $100m of capital will finance infrastructure projects in Algeria, Libya, Mauritania, Morroco and Tunisia.
King Mohammed says he wants normalisation of relations in order to implement plans for a integrated economic bloc.
Reports say pro-regime supporters attacked protesters and tried to lynch prominent opposition politician in Algiers.
The Arab Maghreb Union (AMU) is a North African Arab regional organisation composed of Algeria, Libya, Mauritania, Morocco, and Tunisia.

Libya has dropped its plan to step down as president of the five-nation Arab Maghreb Union, state news agency Jana said.

Tunisia's president tried to salvage the Arab Maghreb Union in a phone call to Libyan President Muammar al-Qadhafi on Thursday.

A key North African summit due in Algiers on Tuesday and Wednesday has been postponed due to regional disagreements.

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