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Tunisia’s Banking Sector: Progress and Challenges

From 2004 Financial Statements to Basel Committee Principles

Tunis, [Date] - Tunisia’s banking sector has made significant progress in recent years, but still faces challenges in implementing international standards. According to a report by the Bank of Tunisia (BCT), the country’s financial institutions have complied with most principles set out by the Basel Committee on Banking Supervision.

Progress towards Compliance

The BCT report highlights that as of 2006, more than half of the core principles had been assessed as “compliant” or “largely compliant,” with no instances of non-compliance. The assessment also notes that Tunisia has made considerable progress toward full compliance with the Basel Committee principles.

Areas for Improvement

However, the report also identifies areas where further improvement is needed:

  • Credit and Provisioning Policy: Principles 7 and 8 still require attention, with concerns regarding credit risk monitoring and provisioning practices.
  • Consolidated Supervision: Principle 20 needs to be fully implemented to ensure effective supervision of banking institutions.
  • Remedial Measures: Principle 22 requires improvement to address weaknesses in bank supervision.
  • Supervision of Foreign Banks: Principle 25 needs attention to ensure that foreign banks operating in Tunisia are adequately supervised.

Challenges ahead

The report notes that there is still a need for more robust credit risk monitoring, as non-performing loans (NPLs) still account for 20.9 percent of outstanding loans at end-2005. Additionally, provisioning rules do not take into account the time frame for recovering sums owed by debtors.

Reforms and Progress

Despite these challenges, Tunisia’s banking sector has made significant progress in recent years. The country has implemented various reforms aimed at strengthening its regulatory framework and improving bank supervision.

Conclusion

The BCT report concludes that while there are still areas where improvement is needed, Tunisia’s banking sector has made considerable progress toward full compliance with international standards. The country is committed to continuing its efforts to strengthen the sector and ensure its stability and growth.

Key Findings

  • As of 2006, more than half of the core principles had been assessed as “compliant” or “largely compliant.”
  • Tunisia has made considerable progress toward full compliance with the Basel Committee principles.
  • Areas for improvement include credit and provisioning policy (Principles 7 and 8), consolidated supervision (Principle 20), remedial measures (Principle 22), and supervision of foreign banks (Principle 25).
  • NPLs still account for 20.9 percent of outstanding loans at end-2005.
  • Banks continue to grant loans largely based on collateral rather than thorough financial analysis.
  • Provisioning rules do not take into account the time frame for recovering sums owed by debtors.

Source: Bank of Tunisia (BCT) Report, 2006