Financial Crime World

Tunisia’s Financial Services Industry Grapples with Compliance Challenges

The financial services industry in Tunisia is facing significant challenges in ensuring compliance with regulations and international standards. Despite efforts to improve the sector’s performance, banks in Tunisia continue to struggle with non-performing loans (NPLs) and low capital adequacy ratios.

Banking Sector Challenges

  • State-owned banks collectively represent 36.6% of banking assets, 40.3% of banking sector credits, and 29.8% of banking sector deposits.
  • However, these banks are under pressure to improve their performance and balance sheets.

The Central Bank of Tunisia (CBT) has implemented a range of measures aimed at strengthening the banking system’s stability and resilience. These include:

  • Stricter regulations on bank reserves and balance sheets
  • Requirements for financial stability, consumer protection, and emergency liquidity assistance to insolvent banks

Despite these efforts, the Tunisian banking system remains fragile.

Capital Adequacy Ratio and NPLs

  • The overall capital adequacy ratio of the banking system stood at 13.4% in 2021, below the regulatory requirement of 10%.
  • NPLs rose to 13.1% of total loans by value in 2021.

Foreign Exchange Controls

  • Tunisia’s foreign exchange controls have been a source of concern for international investors.
  • Companies or individuals engaging in foreign trade can apply to the CBT for a convertible currency account, but foreign investors may face delays and restrictions when repatriating profits and proceeds from the sale of equity.
  • The Tunisian dinar is convertible for current-account transactions, but other transfers may require Central Bank authorization. Royalty payments must also be approved by relevant government ministries in consultation with the CBT on a case-by-case basis.

Regulations for U.S. Banks Operating in Tunisia

  • U.S. banks operating in Tunisia are subject to similar regulations and restrictions.
  • Citibank is the only U.S. bank with an onshore presence in the country, but it primarily deals with corporate clients.
  • Several Tunisian banks maintain correspondent banking relationships with U.S. banks, while others work with Western Union and Moneygram for international transactions.

Export-Import Bank of the United States (EXIM)

  • The EXIM offers trade financing solutions and support to U.S. businesses exporting goods and services to Tunisia.
  • However, exporters should be aware of the complex regulatory environment in Tunisia and ensure that they comply with local laws and regulations when conducting business in the country.