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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.

Featured on Al Jazeera
More than one-quarter of Gaza's population has been displaced, causing a humanitarian crisis.
Ministers and MPs caught on camera sleeping through important speeches have sparked criticism that they are not working.
Muslim charities claim discrimination after major UK banks began closing their accounts.
Italy struggles to deal with growing flood of migrants willing to risk their lives to reach the nearest European shores.
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