Financial Crime World

Tunisia’s Banking Sector: Progress Made, but Challenges Remain

CAIRO - A recent report by the Bank of Tunisia (BCT) highlights the significant progress made in implementing international banking standards in Tunisia’s banking sector. While several key areas have improved, there are still challenges that need to be addressed.

Improved Risk Management and Data Collection

The BCT has established several information bureaus over the past few years, including:

  • A risk bureau
  • Balance sheet bureau
  • Non-Performing Loans (NPL) bureau

These bureaus provide critical data to credit institutions, enabling them to better assess risk and make informed lending decisions. Additionally, the BCT requires banks to submit annual financial statements, which helps to enrich the database.

External Auditing Requirements

The role of external auditors in the supervisory process is significant. Every year, they must submit several reports to the BCT detailing:

  • Adjustments made to financial statements
  • Internal controls
  • Loan portfolios

The four largest international audit firms audit half of the country’s institutions, but currently, none audits public banks.

Quality of Information Reporting

The quality of information reported by credit institutions varies widely. Some banks provide detailed information on risk exposure, internal control mechanisms, and NPLs, while others fall short. The BCT is considering producing an annual report dedicated to banking supervision, which would provide a comprehensive overview of the sector’s developments and inspections carried out by the authority.

Challenges Remaining

However, there are several areas where Tunisia still needs to improve:

  • No credit bureau that reports the score assigned by lending institutions to a single counterparty
  • No system for identifying problem banks and providing a basis for taking corrective measures
  • Article 41 of Law 2001-65 on credit institutions stipulates that all banks must belong to a deposit guarantee scheme, but such a mechanism has yet to be implemented

Compliance with International Banking Standards

Tunisia has made significant progress in recent years. According to Table 1, more than half of the core principles have been assessed as “compliant” or “largely compliant,” with no principle marked “non-compliant.” However, there are still several areas where Tunisia needs to improve:

  • Credit and provisioning policy
  • Consolidated supervision
  • Remedial measures
  • Supervision of foreign banks

Conclusion

While Tunisia has made progress in implementing international banking standards, there is still much work to be done to address the country’s banking sector challenges. The implementation of the BCT’s circular on internal controls will help to address some of these issues, but the terms on which banks extend loans and insufficient provisioning remain major challenges for the sector.