Financial Crime World

Tunisian Banking Sector Report: Economic and Financial Performance (2016-2020)

Overview of the Banking Sector

The Tunisian banking sector has been facing significant challenges due to the COVID-19 pandemic. Key indicators such as net banking revenues, non-performing loans (NPLs), and margins have been negatively impacted.

  • Decrease in Net Banking Revenues: The pandemic has led to a decline in net banking revenues.
  • Increase in Non-Performing Loans: NPLs have increased, indicating potential vulnerabilities within the sector.
  • Pressure on Margins: The pandemic has put pressure on margins for banks in Tunisia.

Regulatory Measures

In response to these challenges, regulatory bodies such as the Central Bank of Tunisia (CBT) and the government have implemented measures aimed at supporting the sector:

  • Suspension of Dividend Payments: Banks were directed to suspend dividend payments for 2019.
  • Excess Buffer Requirements: Banks are required to maintain excess buffers to protect their capital.
  • State Guarantees for New Credits: The government has introduced state guarantees for new credits to support lending.
  • Investment Fund for the Sector: An investment fund has been established to provide support to the sector.

Banking Sector Indicators

Key indicators for the Tunisian banking sector from 2016 through Q3 2020 are provided below:

NPLs and Provisions

  • NPLs to Total Loans: This ratio shows a trend of stability but also highlights increasing vulnerabilities.
  • Specific Provisions to NPLs: This indicator provides insights into the provisioning practices of banks.
  • Net NPLs to Total Loans: This ratio indicates the proportion of non-performing loans in relation to total loans.

Capital Adequacy and Liquidity

  • Capital Adequacy Ratio: This ratio assesses a bank’s capital adequacy in relation to its risk-weighted assets.
  • Tier 1 Ratio: This indicator measures a bank’s core equity capital in relation to its total risk-weighted assets.
  • Loans to Deposits Ratio: This ratio provides insights into a bank’s lending and deposit activities.

Profitability

  • Average Spread Between Loans and Deposits: This indicator assesses the profitability of a bank’s lending and deposit activities.
  • Return on Assets (ROA): This ratio measures a bank’s profit in relation to its total assets.
  • Return on Equity (ROE): This ratio assesses a bank’s profit in relation to its shareholder equity.

Future Initiatives

The report highlights the importance of implementing IFRS-9, which will increase provisioning charges due to forward-looking provisioning. Additionally, there is a need for an economic recovery plan based on innovative financing mechanisms to support companies affected by the pandemic:

  • Implementation of IFRS-9: Banks are expected to implement IFRS-9 starting from year-end 2021.
  • Economic Recovery Plan: A comprehensive plan is required to address the challenges faced by the sector and support economic recovery.