Financial Crime World

Tunisia Banking Industry Struggles with Compliance Regulations

The Tunisian banking sector, comprising 30 banks, including six state-owned institutions, continues to face challenges in complying with regulations and maintaining stability. This article highlights the current state of the industry and the measures being taken to address these issues.

Regulatory Challenges

The Central Bank of Tunisia (CBT) has implemented various reforms aimed at improving bank performance and balance sheets. These efforts include:

  • Reducing non-performing loan ratios
  • Implementing tighter credit risk controls
  • Upgrading under-developed IT applications
  • Establishing a macro-prudential oversight committee to ensure overall stability

Despite these initiatives, the Tunisian banking system remains fragile. In 2021, the overall capital adequacy ratio stood at 13.4%, exceeding the regulatory requirement of 10%. Non-performing loans (NPLs) also rose to 13.1% of total loans by value in the same year.

Foreign Exchange Controls

Foreign exchange controls are in place, allowing companies and individuals engaging in foreign trade to apply for a convertible currency account through the CBT. Foreign investors can freely repatriate profits and proceeds from the sale of equity, but other transfers may be subject to Central Bank authorization and delays.

  • The Tunisian dinar is convertible for current-account transactions
  • Most trade-related transactions are conducted through letters of credit or bank transfers without difficulty
  • Royalty payments must be approved by relevant government ministries in consultation with the CBT on a case-by-case basis

International Banking Presence

Several US banks operate in Tunisia, including:

  • Citibank, which has both onshore and offshore branches dealing exclusively with onshore corporate clients
  • Other Tunisian banks maintain correspondent banking relationships with one or more US banks
  • Western Union and Moneygram are used for fund transfers

The Export-Import Bank of the United States (EXIM) offers trade financing solutions and support to US businesses exporting goods and services to Tunisia.

Conclusion

The Tunisian banking industry faces challenges in complying with regulations and maintaining stability. While efforts have been made to address these issues, the sector remains fragile. Understanding the regulatory landscape and international banking presence is crucial for businesses operating in or looking to enter the Tunisian market.