Global Arab Network | IMF: Tunisian President Ben Ali's program strengthening financial system

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IMF: Tunisian President Ben Ali's program strengthening financial system

Friday, 16 July 2010 12:22

Tunisia (Tunis) - Global Arab Network has received the International Monetary report on Tunisia. According to this report, President Zine El Abidine Ben Ali’s program includes as an objective the strengthening of the financial system . The program focuses on four major themes (consolidation of the fundamentals, increasing banks’ presence in the economy and improving banking services, restructuring the banking system, and promoting the presence of Tunisian banks abroad).
Its objectives include raising the minimum capital requirement for banks to 100 million dinars, and lowering the NPL ratio to less than 7 percent by 2014, by urging banks to increase the efficiency of their loan recovery efforts and to take vigorous action on their portfolio of non-performing loans. In addition, provisioning should be facilitated by a total and definitive tax exemption for provisions introduced in 2010. The authorities have also decided to implement the Basel II framework, starting with the standardized approach, and to establish a deposit guarantee fund financed by the banks.

Tunisian banking system’s profitability and solvency indicators continued to improve in 2009, continuing a trend that has been observed for several years now. The nonperforming loan (NPL) ratio, in particular, dropped to 13.2 percent at end-2009.

This overall situation continues to include widely varying situations of individual banks. The General Directorate of Banking Supervision has adopted an individualized approach aimed at encouraging banks to produce concrete plans for reducing their NPL ratios and increasing their provisioning. For its part, the General Directorate of Financial Stability and Risk Prevention closely monitors loans granted to the level of each sector.
Tunisian_President_Zine_El_Abidine_Ben_Ali

Tunisian_President_Zine_El_Abidine_Ben_Ali

Main thrusts of the President’s program on the component "Tunisia - banking services hub and a regional financial market"

Consolidation of the financial fundamentals of the banking sector

- Raise the minimum capital requirement for banks to 100 million dinars by end-2014.

- Put the banking sector on a solid footing by lowering the NPL ratio to less than 7 percent by 2014.

Increased banks’ presence in the economy and promotion of banking services

- Meet the target of one bank branch for every 7,000 inhabitants by establishing 400 new branches.

- Improve the quality of banking services and build stronger relations between banks and their customers by stepping up the use of the new communication technologies.

- Develop remote services, including mobile phone banking.

Structure of the banking sector

- Creation of a public banking hub "Tunisia Holding." The mission of the hub consists of devising strategies and monitoring the activities of the affiliated public banks.

- Creation of a financial institution specialized in financing small- and medium-sized enterprises (Al Moubadara). This financial institution will be entrusted to manage government equity holdings in the Bank for Financing Small- and Medium-sized Enterprises (BFPME), and the Tunisian Guarantee Company (SOTUGAR) as well as in regional investment companies, while safeguarding the financial and legal autonomy of these entities. The aim of creating this institution is to provide a one-stop-shop offering a complete range of services, including financing, equity holdings, and guarantees, as well as providing financing in the form of leasing and short-term loans for working capital.

Strengthen the presence of Tunisian banks abroad and promote Tunisia as a regional financial center

- Convert the Union of Tunisian Banks into a new banking institution "Tunisian Foreign-Bank," through a restructuring and extension of its branch network in Europe.

- Consolidate the presence of Tunisian banking institutions in the Maghreb and Sub-Saharan Africa.

- Attract internationally reputable banking institutions by promoting Tunisia’s modern regulatory framework and available logistical resources.

IMF mission noted the substantial progress made in the area of banking supervision and overhauling of the financial system and encourages the authorities to continue in that direction. A more forward-looking approach to risk assessment, particularly in the context of the adoption of Basel II standards, would be useful. The mission encourages the relevant banking supervision authorities to formalize and systematize stress-tests in order to better assess the resilience of the Tunisian financial system under adverse scenarios. Upgrading the database, including by developing price indices for different asset classes, would also help the authorities to better identify potential risks.

Global Arab Network

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