What is being done to further modernise the sector and converge with international standards?
CHEDLI AYARI: The new banking law is better aligned with international banking practices in terms of resolution, security, recovery, governance and risk management. Regarding governance, it is the first time that banks are required to put measures of good governance in place, so a culture of best practices is developing. However, there are new risks that need to be addressed, such as market risk and money laundering risk, among others.
With regards to converging with international standards, the BCT put in place a five-year plan in 2015 to implement Basel III by the end of 2020. At the banking level, there are two main challenges associated with the implementation of these laws: the first is the information system for banks, and the second is banks’ internal mechanisms for risk management. Regarding the latter challenge, in 2016 the BCT started requiring that banks establish internal counterpart ratings systems. This would allow banks to take a proactive perspective, closer to Basel II standards, and it would also prepare them to take a rational, studied approach to risk. The BCT’s current focus on risk management emphasises two points: restraining new risk, and resolving the stock of non-performing loans that have accumulated in the last few years – particularly in the case of public banks.
Does the current economic situation in Tunisia allow for the liberalisation of its capital account?
AYARI: Liberalising the capital account requires solid economic fundamentals such as a strong banking system and developed financial markets. We have already made some strides to increase the country’s financial integration with the global economy. For example, the convertibility of capital operations for non-Tunisian residents is practically liberalised. International investors also have freely convertible capital in the form of foreign direct investments and investment in equities. However, there are restrictions on Tunisian residents’ on capital movement to foreign countries when it comes to studying overseas, obtaining health services abroad and tourism, which are all limited. For example, Tunisians have a limit of TD6000 (€550.60) per year for international tourism, and we are maintaining these limits to prevent excessive outflows of capital.
Furthermore, we have achieved almost total convertibility of the country’s capital account. Tunisian companies oriented towards international markets already benefit from this convertibility as they can now open accounts in foreign currencies, facilitating exports. Companies on the stock exchange can also obtain medium- to long-term financing – of up to TD10m (€926,000) without BCT authorisation – from international markets. For unlisted companies, they can borrow up to TD3m (€277,800) without BCT approval.
After implementing the necessary reforms in the banking system and currency market, and developing the bond market, we will be able to liberalise the capital account down the line. We want to attract stable capital, but we also want to minimise risk before fully liberalising. The current banking system reforms are essential to solidifying the sector and preparing it for an eventual capital account deregulation.
What will be the role of financial innovation in the future development of the Tunisian economy?
AYARI: Financial innovation is key to increasing financial inclusion, and the BCT has implemented a programme steered by the World Bank to increase financial inclusion through innovation. The banking sector is the principal actor in the Tunisian financial sector, and financial innovation would include new information technologies for financial services, such as financial technology solutions. Private banks are more dynamic in this sense, and they have started implementing digital banking products, such as mobile payment methods and virtual agencies. For public banks, a key part of their restructuring is the development of digital banking.
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