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Tunisian Banking Sector Takes Steps Towards Compliance
The Central Bank of Tunisia (BCT) has been working to improve the country’s banking sector, establishing various information bureaus and enhancing supervision processes.
Information Bureaus
To provide credit institutions with accurate and timely information on enterprises’ financial health and indebtedness, the BCT has set up several information bureaus:
- Risk Bureau: monitors the financial statements of companies and identifies potential risks
- Balance Sheet Bureau: provides access to financial statements of companies
- Non-Performing Loans (NPLs) Bureau: will provide data on total NPLs by debtor and classification according to prudential regulations
Additionally, the BCT requires banks to submit annual financial statements for clients with loans above a certain threshold, which will enrich the database.
Supervision Process
The external auditors of credit institutions play a significant role in the supervisory process, submitting reports to the BCT detailing:
- Adjustments made to financial statements
- Internal controls
- Loan portfolios
- Ratios
The four largest international audit firms audit half of the institutions, but none currently audits public banks.
Annual Financial Statements
Most credit institutions publish their annual financial statements, but the quality of information on risk exposure, internal control mechanisms, NPLs, and recovery could be improved. The BCT is considering producing an annual report specifically dedicated to banking supervision, which would include:
- A description of banking developments in the previous year
- Inspections carried out by the BCT
- Sanctions adopted
Basel Committee Principles
According to the BCT’s annual report, Tunisia has made significant progress towards full compliance with the Basel Committee principles. In 2006, more than half of the principles were assessed as “compliant” or “largely compliant,” and no principle was marked “non-compliant.”
However, some principles remain non-compliant, including:
- Credit and provisioning policy
- Consolidated supervision
- Remedial measures
- Supervision of foreign banks
The BCT is working to address these issues, particularly with regards to credit risk monitoring and provisioning.
Challenges Ahead
The Tunisian banking system still faces challenges, including:
- High levels of non-performing loans (NPLs): 20.9% of outstanding loans at the end of 2005
- Insufficient provisioning: most bank loans continue to be granted based on collateral rather than financial analysis
The BCT is working to address these issues and improve the overall stability and resilience of the banking sector.