Financial Crime World

Tunisia Struggles with Banking Regulations Compliance Amid Fragile Financial System

Despite efforts to reform its banking sector, Tunisia continues to face challenges related to compliance with banking regulations and foreign exchange controls.

The State of the Tunisian Banking Sector

According to the Central Bank of Tunisia (CBT), state-owned banks account for:

  • 36.6% of banking assets
  • 40.3% of credits
  • 29.8% of deposits, highlighting their significant presence in the market

The CBT has been pushing these banks to improve their performance and balance sheets.

Recent Reforms

Recent reforms have aimed to strengthen financial stability, consumer protection, and emergency liquidity assistance for insolvent banks. These include:

  • The new Central Bank Statute adopted in May 2016
  • Laws regarding recapitalization of Banque de l’Habitat (BH) and Société Tunisienne de Banque (STB) in August 2015

Fragile Banking System

However, the Tunisian banking system remains fragile, with an overall capital adequacy ratio of:

  • 13.4% in 2021
  • Exceeding the regulatory requirement of 10%

Non-performing loans (NPLs) have also risen to:

  • 13.1% of total loans by value

Regulatory Compliance

The CBT strictly regulates the country’s banks, insisting that bank reserves and balance sheets comply with international standards. This has led to efforts from Tunisian banks to:

  • Reduce NPL ratios
  • Implement tighter credit risk controls
  • Enhance recovery procedures
  • Upgrade underdeveloped IT applications

Foreign Exchange and Investment

Foreign investors can repatriate profits and proceeds from the sale of equity freely, but other transfers may be subject to CBT authorization and could result in delays. Trade-related transactions are generally conducted through:

  • Letters of credit
  • Bank transfers
  • Without difficulty, except for royalty payments which require approval from relevant government ministries and the CBT on a case-by-case basis

US Banking Presence

US banks operating in Tunisia include:

  • Citibank, with both onshore and offshore branches with offices in Tunis and Sfax
  • Most Tunisian banks maintain correspondent banking relationships with US banks
  • Some also work with Western Union and Moneygram for fund transfers

Trade Financing Solutions

The Export-Import Bank of the United States (EXIM) offers trade financing solutions and support to US businesses exporting goods and services to Tunisia. For more information, visit https://www.exim.gov/.