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Reforms in the banking sector almost complete
Foreign experts have ranked Tunisia as the first banking center in North Africa and one of the largest in the Arab world. Leading foreign banks such as Citibank and Link have established a presence in Tunisia, recognizing that the country offers a stable and dynamic environment.
The banking sector has been the subject of reforms followed closely by the Central Bank and the ministry of finance. Tunisia recognized early on that the country needed a strong banking sector to stimulate the private sector and investments.
Thirteen commercial banks, eight development banks, eight offshore banks, two merchant banks and eight leasing institutions form the banking sector.
The reforms are part of a larger plan to reform the entire financial sector. The structural adjustment program includes the consolidation and restructuring of bad loans to public enterprises, the strengthening of the regulatory and prudential framework and the merger of selected government-owned banks.
The public sector banks in Tunisia, were the arms of the government in undertaking its economic policies. Banks serviced specific sectors such as agriculture, tourism and industry. When a country is relatively young and starting its development, there is an element of risk. The banks had to bear the consequences, which resulted into an important portfolio of bad loans. Because of a different accounting system, the bad loans were kept on books. The government has injected fresh funds ensuring that the banks strengthen their capital bases. The government’s support is strong in Tunisia for both domestic and international banks. When international banks ran into problems, the government stood behind them to make sure they would continue operations and that the depositors would be paid out.
To date, 80 percent of the reforms in the banking sector have been successfully implemented. Among those are the creation of new financial instruments to promote savings, the opening of the market to attract portfolio investments and the modernization of communication networks to allow Tunisia to become an international player. The capital base is mandated to be 8 percent of total assets. In a recent consultation mission, the International Monetary Fund found that “the efforts under way and particularly the measures taken in 1998 and 1999 have considerably strengthened the soundness of the banking system” and that “the adoption of regulatory and tax measures facilitating the recovery of collateral, the write-off of non-performing loans and provisioning have created the conditions for reabsorbing, over time, the burden of these bad loans.”
The reforms will be complete by the end of this year. By then, the sector will have improved banking services, a modernized management style and a better regulatory framework. Additional laws regulating the banking profession will be passed so as to ensure that banks are ready and fully restructured to face the liberalization of banking services to which Tunisia agreed when it signed the WTO agreements.
More foreign banks are expected to establish a presence in Tunisia as trade with the European Union increases.
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