2015
CENTRAL BANK OF TUNISIA
Report on Banking Supervision
December 2016 2015
CENTRAL BANK OF TUNISIA
Report on Banking Supervision
December 2016
REPORT ON BANKING SUPERVISION 2015
CONTENTS
NOTE OF THE GOVERNOR
CHAPTER I: EVOLUTION OF REGULATORY AND OPERATIONAL FRAMEWORK AND BANKING SUPERVISION ACTIVITY
I. EVOLUTION OF REGULATORY FRAMEWORK II. EVOLUTION OF BANKING SUPERVISION OPERATIONAL FRAMEWORK III. BANKING SUPERVISION ACTIVITY
CHAPTER II: THE TUNISIAN BANKING SECTOR
I. EVOLUTION OF THE TUNISIAN BANKING SECTOR STRUCTURES II. LENDING INSTITUTIONS ACTIVITY AND RESULT
ANNEXES
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LISTE OF ANNEXS
Annex 1 Organizational chart of the Banking Supervision Department
Annex 2 The Tunisian banking sector’s main indicators
Resident banks’ Balance sheet, statement of off balance sheet commitments and statements Annex 3 of result
Annex 4 Leasing institutions’ Balance sheet and statement of results
Non-resident banks’ Balance sheet, statement of result and statement of off balance sheet Annex 5 commitments
Annex 6 Trend in average effective rates by category of financing
Annex 7 Trend in TEGS by category of financing and lending institution in 2015
Annex 8 List of authorized operating lending institutions
Annex 9 Breakdown by region, governorate and bank branch network as at 31/12/2015
Annex 10 Breakdown by region, governorate and leasing branch network as at 31/12/2015
Annex 11 Trend in TUNINDEX and TUNBANK INDEXES
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LIST OF ABBREVIATIONS
ARP Assembly of People’s Representatives
ALM Asset Liability Management
APTBEF Tunisian Professional Association of Banks and Financial Institutions
BCG Basel Consulting Group
BCT Central Bank of Tunisia
BVMT Stock Exchange of Tunis
FMC Financial Market Council
RMC Restricted Ministerial Council
DGSB General Direction of Banking Supervision
GFCF Gross Fixed Capital Formation
FMA Arabic Monetary Fund
FMI International Monetary Fund
FSAP Financial Sector Assessment Program
FATF Financial Action Task Force
IHH Indice Herfindhal-Hirshman
IPEC Indicators for the Positioning of Credit Institutions
JORT Official Journal Of The Republic Of Tunisia
LCR Liquidity Coverage Ratio
M$U.S Million American Dollar
MTD Million Tunisian Dinar
mD thousand Dinars
NSFR Net Stable Funding Ratio
ONH National Office of Oil
PME Small and medium enterprises
NPLs Non Performing Loans
NBP Net banking proceeds
TEG Taux Effectif Global : the effective overall rate
MMR Money Market Average Rate
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Note of the governor
Over 2015, Banking activity evolved amidst an environment marked by an ongoing process of banking reform initiated since 2011 despite the challenging economic environment impacted by both Bardo and Sousse terrorist attacks.
Three major reforms marked the banking sector in 2015, namely the Central Bank of Tunisia’s conduct of works to elaborate the draft law on banks and financial institutions, the startup of the three public banks’ restructuring plans with the recapitalization of the STB and BH in September 2015 and the establishment, in August 2015, of the banking supervision five-year activity plan for the 2015-2020 period.
The banking law reform that took place a decade after the last amendment carried out in 2006 concurrently with the amendment of the law on the BCT Articles of Accosiation, over a period of one year and a half and was subject to a large-scale consultation with different Intervening parties.
The goal of this reform is to establish a regulatory law inspired by the best international standards capable of preserving financial stability with the ultimate goal of protecting depositors and consolidating public confidence in the banking sector.
Based on guiding principles, notably taking into account lessons learned from the latest international financial crisis and the feedback capitalization since the entry into force of law n° 2001-65, the banking law reform was structured around 7 main axes related to the banking market reorganization, review of the banking activity access and exercise conditions, strengthening banking governance, boosting the BCT power as a supervisory authority, reviewing the sanctions system, establishing a specific framework for dealing with banks in difficulty by providing intervening parties in banking difficulties management with new tools and strengthened powers and the establishing the guarantee fund for bank deposits as a safety net.
In line with reinforcing banking activity’s legal framework, 2015 is a landmark and decisive year in triggering the process of restructuring and developing the three public banks through the massive recapitalization of the STB for a total amount of 757 MTD, subscribed for the major part by the State and that of the BH for 110 MTD. This recapitalization allowed for a significant improvement in the banking sector’s average solvency ratio, up from 9.4% at the end of 2014 to 12% at the end of 2015, against a regulatory minimum of 10%, as well as the Tier 1 ratio which rose from 7, 6% at the end of 2014 to 9.3% at the end of 2015 against a regulatory minimum of 7%.
Considerable progress has also been made in the governance of the three public banks through the separation between the General Manager and the Chairman of the Executive Board functions and, appointment of new officials in these positions and change of half of the Exective Board members representing the State.
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Achieving these prerequisites, alongside other development areas related to the business strategy, the resolution of non-performing loans, human resources and risk management and internal control facilities will guarantee the required competitiveness and sustainability conditions to these banks to help them to continue financing strategic sectors and to support economic operators in conformity with the strategic orientations of State intervention in the banking sector decided since 2014.
The dynamics of reforms launched a few years ago could not be pursued in the absence of a strategic vision of the supervisory authority that defines the objectives to be reached and the trajectory to be followed on the medium-term. .
Indeed, and as part of a transition process from a compliance approach to a risk-based approach , the BCT set up a five-year action plan for banking supervision in 2015 covering the 2015-2020 period. It aims at ensuring convergence towards the prudential framework of Basel 2 and Basel 3 by undertaking regulatory and operational reforms and ensuring the conditions for a sound supervision of the banking sector through the development of both off-site and on-site monitoring processes and tools. This plan which was communicated to the banking sector will allow banks and financial institutions to have visibility as regards future regulatory evolution that would help them to establish an adequate core funds policy.
The reforms that have been carried out so far in the five-year action plan, with the new banking law as a foundation to build up all the other reforms, establishment ,in January 2015, of a new liquidity ratio as per the Basel Liquidity Coverage Ratio «LCR», the institution, starting from December 2016, of requirements in core funds with respect to the operational risk and the setting up of guidelines for the implementation of counterparts’ rating systems in banks and financial institutions will continue by elaborating texts to implement the banking law which will run until 2017, continuing to reinforce banking supervision’s operational framework by establishing a new prudential and accounting reporting and formalizationing supervisory processes, as well as pursuing the convergence process towards Basel 2 and Basel 3 standards. It is acknowledged that only a frank and unconditional adherence of banks and financial institutions to these reforms would guarantee their success.
Chedly Ayari
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Chapter 1
Evolution of the regulatory and operational framework and banking supervision activity CENTRAL BANK OF TUNISIA
Chapter I: Evolution of the regulatory and operational framework and banking supervision activity
I. Evolution of the regulatory framework 1. Main reforms before 2015
Since 2011, the BCT has initiated a program of banking regulation reforms within a strategic vision that aim at converging towards international standards in order to improve the banking industry’s conditions of, competitiveness, governance and transparency and providing the regulatory authority with the required tools for the effective exercise of its prudential oversight mandate. Key reforms concerned quantitative requirements as regards risk management and coverage and quality requirements in terms of governance and anti-money laundering and terrorism financing.
1.1 Quantitative requirements as regards risk management and coverage
In this framework, the BCT has published three circulars modifying circular n°91-24 related to risk division and coverage and follow up of commitments. • Publication of circular no 2012-20 of December 6, 2012 instituting collective provisions to cover latent risks on current commitments and commitments requiring specific monitoring. • Publication of circular No. 2012-09 of 29 June 2012, which introduced the following reforms: - gradual increase of the minimum solvency ratio to 9% for the end of 2013 and then to 10% starting from the end of 2014; - Establishing a core funds ratio (Tier 1 ratio) of 6% for the end of 2013 and 7% starting from the end of 2014; - Entitling lending institutions, starting from the financial year 2013, to deduce from their core funds declared on an individual basis their shareholdings in other lending institutions - Tightening, starting from the end of 2013, of standards on major risks by decreasing the standard from fivefold to threefold of net core funds for incurred risks exceeding 5% of core funds and the norm from 2 to 1.5 times of net core funds for incurred risks exceeding 15% of net core funds ; and - Reduction, starting from the end of 2013, of the ceiling applied to incurred risks on related parties from 3 times to just one fold of net core funds; • Publication of Circular No. 2013-21 of 30 December 2013 introducing new rules for additional provisioning according to the seniority of assets in class 4. This measure helped to improve the coverage ratio of non- performing loans by provisions, up from 45.7% at the end of 2012 to 56.9% at the end of 2015.
In addition, the BCT published circular No. 2014-14 of 11 November 2014 reviewing the liquidity ratio by introducing a new one which is largely based on the Liquidity Coverage Ratio of Basel 3 The new ratio helps to overcome the shortcomings of the old ratio, which identified the transformation risk rather than the liquidity risk and did not take into account off-balance sheet commitments.
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Box 1: Assessment of the impact of entry into force of circular related to the Liquidity Ratio on the composition of certain balance sheet items during 2015
The LCR is the rate of coverage of total net cash outflows by the outstanding balance of high quality liquid assets HQLA within 30 days in a liquidity crisis situation. The established minimum standard is 60% as of 1 January 2015, 70% starting from 1 January 2016, 80% as of 1 January 2017, 90% starting from 1 January 2018 and 100% starting from 1 January 2019. The entry into force of the LCR introduced changes into certain headings of the banks’ balance sheet: For the asset structure Compared to total assets in% Dec. 2013 Nov. 2014 Dec. 2014 Dec. 2015 June 2016 Share of Treasury bonds 4.8 5.6 5.9 7 7.6 Share of customer loans 67.5 66.8 67.4 66.7 67
Since the new liquidity ratio’s entry into force, , the outstanding balance of treasury bills, which is the most liquid assets and the main component of the ratio’s numerator, rose at an average monthly rate of 2.4% , corresponding to an annual rate of 33%. Consequently, the share of these securities in total assets increased from 5.6% before the ratio’s entry into force to 7.6% at the end of June 2016.
This evolution is attributable to treasury bills acting as «Level 1 liquid assets» at the current ratio with a 100% weighting, which encourages banks to hold these assets to improve their liquidity ratio.
The share of customer loans has maintained its dominant position in the balance sheet with 67% of total assets at the end of June 2016: the same level recorded before the entry into force of the liquidity ratio. This trend proves the absence of an eviction effect of the new liquidity ratio on the financing of the economy. For deposits’ structure by category of depositors in MTD Variation 2013/2014 2014/2015 June 2016/2015 Dec. Dec. Dec. June Amount % Amount % Amount % 2013 2014 2015 2016 institutional 6 819 6 757 5 877 5273 -62 -0.9 -880 -13 -604 -10.3 Deposits Corporate Deposits 10 478 11 444 11 975 12503 966 9.2 531 4.6 527 4.4 Individuals’ 21 960 23 985 26 067 26842 2 024 9.2 2 082 8.7 774 3 Deposits These trends show that the entry into force of the new liquidity ratio has a significant impact on the evolution of deposits. Indeed, deposits labeled as stable (deposits of individuals) posted the best trends compared to institutional deposits and corporate deposits considered more volatile. However, it has to be noted that the sharp drop in institutional deposits can also be due to the tightening of some institutional’ treasury , notably pension funds and social security.
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For the structure of deposits by type of deposits Variation 2014/2013 2015/2014 June 2016/2015 dec- dec- dec- june amount % Amount % amount % 13 14 15 16 Demand deposits 16 272 17 629 19 007 19 531 1 357 8.3 1 378 7.82 525 2.76 Saving deposits 13 022 14 051 15 155 15 656 1 030 7.9 1 103 7.85 501 3.31 Term deposits 9 319 11 796 12 381 12 669 2 477 26.6 585 4.96 288 2.33 Certificates of 5 855 4 808 3 890 3 593 -1 047 -17.9 -918 -19.10 -297 -7.63 deposits Total deposits 44 468 48 284 50 433 51 449 3 816 8.6 2 148 4.45 1 017 2.02
The new liquidity ratio’s entry into force impacted the composition of bank deposits depending on the nature of deposits. Indeed, demand deposits and savings deposits, known as stable deposits, evolved at a rate comparable to that observed before the entry into force of the ratio, despite the difficult economic situation. On the other hand, certificates of deposits labeled as volatile deposits, recorded a sharp decline.
1.2 Qualitative Requirements as regards Governance and Anti-Money Laundering and Terrorism Financing
The main measures taken in this context are as follows:
- Introduction of Circular No. 2011-06 of 20 May 2011 strengthening good governance rules in banks and financial institutions. This text has enacted new obligations based on the Basel Committee principles that aim at rehabilitating the Executive Board’s role by further involving it the risk management process; - Publication of Circular No. 2013-15 of 7 November 2013 requiring banks and financial institutions to set up a comprehensive internal control system for the fight against money laundering based on the FATF recommendations to protect the banking sector against any abusive financial use. 2. Main reforms undertaken in 2015 and 2016
2.1 Exceptional measures to support enterprises operating in tourism sector
Taking into account the difficult economic situation following the attacks of Bardo and Sousse in 2015, The BCT published circular No. 2015-12 of 22 July 2015, which announced exceptional measures for companies operating in the tourism sector. These measures allow banks and financial institutions to : - Defer payment of principal and interest due or accrued in 2015 and 2016 for credits granted to businesses operating in the tourism sector; - Grant new exceptional credits reimbursable over 7 years, including two grace years dedicated to financing the operating needs of tourist enterprises during the 1 July 2015 -31 December 2016 period; - Maintain the chosen classification at the end of December 2014 and freeze seniority in class 4 until the end of 2016.
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Box 2: The impact of the exceptional measures provided for in circular No. 2015-12 as of the end of December 2015 The impact of the exceptional measures provided for by circular No. 2015-12 as reported at the end of December 2015 for a sample made up of 15 banks monopolizing 91% of total assets, is as follows:
• Total commitments kept in current class under circular 2015-12 amounted to 550 MTD. • Not allocated provisions pursuant to the said circular amounts to 75 MTD.
Excluding the Taking into account Impact in circular in% the circular in% percentage point Share of overall NPLs 17.3 16.5 0.8 Rate of coverage of overall NPLs by 53.8 56.8 3 provision Share of tourist NPLs in total tourist 70.1 57.5 13 commitments Rate of coverage of tourist NPLs by 44.2 56.9 13 provisions
2.2 Reform of the banking law The banking law reform which intervened a decade after the last amendment in 2006 has become necessary to meet more than one objective: - Establishing a modern legal framework capable of enriching the banking offer by leveraging the development of banking services and distribution channels to support the economy while improving transparency and fair competitiveness. Preserving financial stability through a better governance of the banking market and a strengthening of micro-prudential supervision with the ultimate goal of depositors’ protection - Contributing to maintaining public confidence in the banking service; - Providing the BCT with policy instruments that enable it to fulfill its prerogatives dictated by its new Articles of Association. Works started up in December 2014 and took place over a period of one year and a half according to the following chronology:
- Launching the banking law reform draft following the constitution in December 2014 of a steering committee co-chaired by the Governor of the BCT and the Minister of Finance and a technical committee within the BCT in charge of proposing the guidelines of the law draft. The work of these two committees culminated in the preparation of a draft that was subject to a wide consultation in May 2015 and in December 2015; - Approval of the draft law by the government (the Restricted Ministerial Board of 22 February 2016 and the Board of Ministers dated 24 February 2016); - Discussion of the draft law at the People’s Representatives Assembly (ARP) by the Finance, , Planning and Development Committee : 13 meetings were held between 17 March 2016 and 5 May 2016 and were devoted to discussing of the law draft;
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- Vote in Plenary session at the ARP: The draft law was approved for the first time on 12 May 2016 and for the second time on 9 June 2016, after the appeal submitted to the Provisional Entity for the Control of Law projects ‘s constitutionality; - Promulgation of the Law on banks and financial Institutions on July 11, 2016 after the rejection of a second appeal by the Entity instance for the Control of the laws’ Constitutionality.
The banking law reform is based on the following principles: - Taking into account the lessons from the 2007-2008 international financial crisis, especially deficiencies in regulatory and supervisory mechanisms. - Leveraging the recommendations of the FSAP 2012 mission to which the banking sector was subject particularly in terms of compliance with the 29 Basel principles for a sound banking supervision. - Converging the Tunisian banking legislation with the best international standards. - Enshrinement of good governance, fair competiveness and transparency in regulating the banking market. - Capitalizing experience feedbacks since the entry into force of law n° 2001-65. - Harmonizing the legal framework governing on-site and off-site banking.
The importance of reform lies in is the substantial changes spanning the whole lifecycle of a bank or a financial institution, from the authorization to exercise activity to the resolution and liquidation process. The main pillars of the reform t are:
a. Reorganizing the banking market mainly through:
- Liberalization of payment means and manual exchange management activities .These activities which have been so far reserved to the banking monopoly could henceforth be carried out by specialized operators (payment institutions) meeting specific conditions to be set by the Central Bank. - Establishment of a specific legal framework governing the conduct of Islamic banking operations as a specialization or in the form of windows provided that banks and conventional financial institutions wishing to carry out these operations through windows obtain authorization from the BCT. - Extension of investment banks’ scope of intervention to make it a true transmission link between the banking market and the capital market (granting financing to companies to strengthen their own funds, bridge loans over one year, portage financing over 5 years.) - Harmonization of the off-site and the on-site .legal framework. - Review of the legal framework governing the branches of foreign banks operating in Tunisia by requiring the new branches to be established in the form of a public limited company. However, branches operating before the publication of the law maintain their status. b. Review of banking activities of access and exercise conditions
The new banking law expanded the scope of operations subject to authorization to encompass any change in the category or nature of activity, any demerger operation and the transfer of major shareholdings in the capital.
In addition, the new banking law provided for the creation of an accreditation committee as a collegial licensing authority presided over by the Governor and composed of four independent members appointed by the BCT Executive Board. This will help to avoid the conflicts of interest arising from the
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State’s intervention as a shareholder, regulator and economic operator. As mentioned above, the Finance Minister is entrusted by the law as an accreditation authority
The new law has also reinforced the accreditation criteria by adding conditions related to the ability of the institution to meet prudential requirements and adopt a sound and cautious management and the absence of potential obstacles to the exercise of the banking supervisory function, and enabling the BCT to request all the necessary information from the judicial authorities and the national and foreign supervisory authorities as part of the authorization file investigation
The new banking law has also reviewed the accreditation process by establishing accreditation in 2 steps (prior approval and final approval) while justifying refusal cases.
As per the new law, the BCT is also entitled to publishing the decision on granting final approval in the Official Journal of the Republic of Tunisia (JORT) and on its website. It is also responsible for keeping a register of banks and authorized financial institutions.
Finally, the minimum Equity capital level was raised from 25 MTD to 50MTD for banks, from 10 MTD to 25 MTD for leasing companies and from 3 MTD to 10 MTD for investment banks, while maintaining the minimum Equity capital of factoring companies at the level of 10 MTD. As for the initial Equity capital level required upon the authorization will depend on the business plan presented by the sponsor. c. Strengthening banking governance
In this context, the banking law: - enacted the provisions of circular No. 2011-06 concerning governance as regards legal requirements (appointment of independent directors and one director representing the interests of minority shareholders, the financial disclosure policy, audit, risks and remuneration committees, rules for combining functions, etc.); - Redefined the notion of small shareholders (are considered small shareholders the public inthe meaning of the legislation organizing the capital market. What is meant public is shareholders holding no more than 0.5% of the Equity capital as per article 39 of Regulation General of the Tunis Stock Exchange Market) - gave up the credit executive committee and established the nomination and remuneration committee; - provided for a streamlined governance for financial institutions whose volume of activity and nature of operations justify it (possibility of accumulation of committees); - Introduced the need to adopt a policy to remunerate managers in line with the fundamental indicators of financial soundness, solvency and profitability; And - Established in the monist governance mode the rule of separation between the functions of Chairman of the Executive Board and of the General Manager (An exception may be granted to financial institutions whose size and nature justify it). d. Strengthening the BCT’s prudential supervision
The purpose of the BCT’s prudential supervision of banks and financial institutions is to preserve the financial soundness of banks and authorized financial institutions and to protect depositors and users of their services. To achieve these objectives, the law has :
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• At the normative level: - extended the BCT’s normative power as regards prudential matters to rules of governance and risk management, including the risks of money laundering and terrorism financing; And - authorized the BCT to impose stricter prudential requirements on banks and financial institutions whose financial situation is considered high risk and specific prudential standards for banks and financial institutions of systemic importance.
• At the operational level : - introduced individual and consolidated supervision and additional supervision for financial conglomerates; - clarified the obligations on banks and on financial institutions in the framework of the control mission organized the on-site supervision missions procedure; - clarified Auditors’ obligations; and - protected supervisors, in the case of civil liability, for acts committed in good faith. e. Preventive intervention and recovery
The new banking law is based on a comprehensive and gradual approach for the recovery and rescue of banks going through difficulty targeting an efficient management of recovery, resolution and liquidation phases by different intervening parties and a differentiation between dealing with banks in difficulty and the ordinary supervision of banks and financial institutions in a sound situation while emphasizing the BCT’s central role in finding out difficulties in the process dealing with problem banks. This role is divided into two phases:
Phase 1: Preventive Intervention This intervention is part of the normal extension of the banking supervision where the BCT is vested with early intervention powers by reacting to financial or management difficulties as soon as they appear in order to remedy problems before they become serious. In this phase, the bank or financial institution in difficulty must establish corrective actions. The measures to be taken and the timetable for their implementation must be submitted to the BCT within one month and may contain the following instruments: - An adjustment of the risk management policy; - A strengthening of core funds, creation of provisions and distribution of dividends; and - Review of the governance facility and internal control. 2nd phase: recovery This phase is initiated when the BCT finds out one of the following conditions: - The bank or the financial institution did not comply with the action plan proposed in the preventive phase; - The governance or internal control facility is marred by substantial shortcomings which could compromise the financial management soundness of the bank or the financial institution and impact its financial balances; - The financial situation of a bank or a financial institution begins to deteriorate as regards the non- compliance with prudential standards, in particular those related to liquidity and solvency.
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After hearing the representative of the bank or the financial institution and elaborating a minute, the BCT can submit it to a recovery plan in which it sets up guidelines to deal with deficiencies and restore its financial balance by providing a wider range of recovery instruments, such as:
- Reviewing the intervention policy and establishing risk exposure limits;
- limiting or prohibiting distribution of dividends;
- constituting additional provisions or increasing capital;
- calling upon the reference shareholder and major shareholders to support the establishment;
- Entry of new shareholders;
- Total or partial suspension of one or several branches of activity;
- Limitating leaders’ premiums and bonuses;
- Removing one or all members of the Board’s management entity Convening a General Assembly whose agenda is set by the BCT. f. Establishment of a resolution and liquidation regime
The new banking law introduced a specific framework for the recovery and resolution of banking difficulties which meet the following objectives:
- Preserving financial stability;
- Ensuring the continuity of critical activities and services the failure of which would have serious consequences for the economy;
- Protecting depositors; and
- Avoid the use of public financial support (taxpayers’ money) as much as possible.
The main orientations in this field included:
- Endowing the BCT with a central role in the recognition of the difficulties in the process of dealing with banks in difficulties.
- The differentiation between dealing with banks under resolution and the ordinary supervision of banks and financial institutions.
- The separation between preventive and curative management of banking difficulties.
- Establishing the principle of cross-border cooperation.
− Resolution phase:
The contribution of the new banking law lies in creating a resolution committee responsible for dealing with the difficulties of an institution in a compromised situation by endowing it with the exceptional tools to accomplish its mission, namely:
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- The decrease in the capital of the institution to absorb cumulative losses by making shareholders bear the responsibility of losses in the first place and secondly holders of subordinated debt securities, as well as holders of shareholding securities and debt securities and similar provided that it is stipulated when they are issued and that they are repayable in case of liquidation after settling priority debts and unsecured debts. - The increase in the capital of the institution, notably through admission of new shareholders and issue of any core fund securities, by allowing a derogation from the Code of Commercial Companies and the legal rules related to the capital market and after consultation of the Capital Market Council - The institution’s bail in by the conversion, whether total or partial, of the bank or the financial institution’s debts into shares or any other capital securities except for claims resulting from a work relationship and claims arising from the supply of goods or services, customers’ deposits , except for deposits held by shareholders, with each one holding more than 10% of the bank’s capital, non- subordinate bond securities and other claims subject to security interests up to the value of such collateral; - The total or partial transfer of assets, liabilities, business branches or subsidiaries; - The establishment or use of a bridge bank; - Partial or total suspension of commitments due to contracts underway with the exception of those required for the proper functioning of the clearing and settlement system. − Liquidation phase: In case the situation of an establishment is turns out to be compromised and the resolution committee found out that the required conditions for liquidation have been met transmit the latter will immediately convey a report to that effect to the Court of First Instance.
The liquidation process is the exclusive prerogative of justice which:
- adjudicates on the liquidation decision based on a justified report drawn up by the resolution committee; - designates the liquidator on the recommendation of the resolution committee; and - approves the liquidation plan, monitors the liquidation and the works of the liquidator. g. Review of the sanctions process
The new sanctions regime is based on the following principles:
- Enshrining the BCT as the infringement detection authority y - Breakdown of competence areas as regards sanctions between the Governor and the Sanctions Committee, depending on the seriousness of the infringement; - Harmonization between the nature of the infringement and the corresponding penalty; - Clarification of the appeal procedure against of the Sanctions Committee’s decisions - Establishment of the sanctions publication principle. h- Establishment of a bank Deposit Guarantee fund
The Deposit Guarantee system constitute, alongside the Lender of Last Resort mechanism and a sound banking supervision, the 3 fundamental components of the safety net. They play the role of a «macro- financial stabilizer»
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This system was designed according to international principles and standards (International Association of Deposit Insurers Core Principles for Effective Deposit Insurance Systems).
As a safety net, two objectives will be assigned to it: protection of depositors and participation in maintaining financial stability. It acts as «PayBox Plus», ie: in addition to the depositors’ indemnisation, the guarantee fund participates in the bank resolution process.
This fund, with ex-ante banks’ contributions will be set up as a public institution with legal personality and financial and administrative autonomy. Its social capital, set at 5 MTD, will be held equally by the State and the BCT.
2-3- Publication of circular to banks and financial institutions No. 2016- 03 on division, risk coverage and monitoring of commitments
The publication of this circular amending certain provisions of circular No. 91-24 concerning the division, risk coverage and monitoring of commitments fits into the framework of achieving the banking supervision five-year action plan for in order to strengthen current prudential facility. This amendment focused on the following axes: a. Introduction of a requirement in core funds with respect to the operational risk
This new requirement is introduced for the following reasons:
- To line up with Basel standards as regards prudential regulation; - To prevent operational risk at the sector level; - To strengthen the current prudential facility related to the operational risk, which is limited to a few qualitative measures enacted by circular 2006-19. regarding internal control To implement this measure, a three-step approach was followed:
- Step 1: A study was conducted by the banking supervision departments in two sets, the study-set with a quantitative impact and the study set of comparative regulations in certain countries comparable to Tunisia.
- Step 2: meetings were held with banks and financial institutions to discuss modalities to establish the requirement in core funds with respect to the operational risk (approaches, financial situation in banks, organization ...) , the impact study results and banks and financial institutions’ degree of readiness for the implementation of the new operational risk requirements.
- Step 3: Consultation of the APTBEF on the circular draft
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Box 3: Requirements in core funds with respect to the Operational Risk with regard to Circular No. 2016-03 Banks and financial institutions must comply at all times with a solvency ratio no less than10%, calculated by the ratio of net core funds and incurred risks measured by the sum of the following aggregates:
- The amount of weighted credit risks,
- The amount of operational risks determined by multiplying by 12.5 the requirement in core funds with respect to the operational risk.
• The requirement in core funds is calculated using the “basic indicator” approach. he two other approaches «standard approach and advanced measurement approach» were rejected taking account of :
• Inability of lending institutions to adopt the advanced measures approach given the requirements and prerequisites that it requires (history of incidents for at least three years, elaboration of key risk indicators, risk mapping, etc.). Moreover, even at the international level, few banks apply this approach.
• The current reviews conducted by the Basel Committee propose to give up the calculation approach based on internal models as they are unnecessarily complex and led to risk-weighted assets by very volatile risks, which alters the reliability of the solvency ratio.
• The standard approach could be given up by the Basel Committee in so far as the breakdown of the requirement in core funds by business line provided for in this approach proved to be irrelevant. In addition, it can impact banks’ business model by favoring the retail sector with the lowest weighting: 12%.
Under the adopted «base indicator» approach , the requirement in core funds with respect to the operational risk is equal to 15% of the average net banking proceed calculated over the last three financial years. When, for a given financial year, the net banking proceed is zero or negative, it is not considered in the calculation of the average over three years. The net average banking proceed is the sum of strictly positive net banking proceeds divided by the number of financial years for which the net banking proceed is strictly positive.
• This measure is expected to enter into force in December 2016.
b- Tightening of the standard regarding related parties
The new provisions provided for by circular no. 2016-03 consist in lowering the exposure limit on related parties from 100% of net core funds currently to 25%. This measure is intended to lining up with the Basel principles which recommend that the limits on related parties be as strict as the standards applicable to the same beneficiary : 25%.
In this context, the BCT has opted for a gradual approach while announcing the measure starting from now through a gradual reduction over 2 years from 100% to 75% at the end of 2017 and to 25% at the end of 2018.
20 REPORT ON BANKING SUPERVISION 2015 c- Excluding sums collected on claims after the closing date of the financial year at the classification and provisioning level with respect to the relevant year
Circular No. 2016-03 provided for banks and financial institutions’ taking account of post- financial statements’ closing dates events as per the accounting standards into force (accounting standard 14 related to contingencies and events after the balance sheet closing date). However, the provisions of the said circular stipulate that collected amounts on claims after the balance sheet closing date must by no means affect the classification of assets and provisions constituted with respect to the financial year.
2-4 Publication of circular to banks and financial institutions related to the counterparts’ rating system
The establishment by banks and financial institutions of a rating system for counterparties has been provided for since 2006 by circular no. 2006-19 on the internal control system. However, these provisions are general and should be made more explicit with regard to the principles and rules related to the conception, structure and governance of the rating system and to the criteria for counterparties ‘rating.
Hence the need to elaborate a comprehensive regulatory framework based on the Basel principles and best practices for the establishment of an internal rating system in banks and financial institutions.
In this context, circular no. 2016-06 of 11 October 2016 came to set and enact minimum requirements in terms of conception, structure, update, use, governance and the rating system control in banks and financial institutions. Compliance with these standards will allow banks and financial institutions to:
- have a preventive credit risk management tool; - have an effective decision-making tool in the process of ,credit-granting risk-adjusted pricing and internal allocation of core funds ; and - get prepared for the implementation of the approach based on internal ratings to determine requirements in core funds with respect to for credit risk in the framework of the transition to Basel II «Internal Rating Based Approach»
Banks and financial institutions must comply with these minimum requirements by the end of December 2017 at the latest. They must submit a roadmap for the implementation of the counterparts’ rating system to the Central Bank of Tunisia by the end of December 2016 at the latest. 3. Progress of reform projects over 2016
3-1- Recapitalization and Restructuring of Public Banks
Over 2013 and 2014, he three State-owned banks (STB, BNA and BH) were subject to full audit operations to determine needs in core funds and identify e main shortcomings and vulnerability sources
Based on full auditing results, both the STB and the BH have determined and approved of their restructuring plans in early 2015 and initiated the execution of these programs. The BNA’s restructuring program, elaborated during the last quarter of 2015, was approved by the BCT.
3-1-1 Recapitalisation
As for recapitalization and following the promulgation of law no. 2015-31 authorizing the State to subscribe to the capital increase of the STB and BH, both banks initiated an increase of their capital for the respective amounts of 757 MTD and 110 MTD.
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Pursuant to article 2 of the said Act, the BCT sent on 1 September 2016 to the People’s Representatives’ Assembly (ARP) a report on monitoring the two State-owned banks restructuring of containing the opinion of the BCT’s two auditors on the soundness of the BCT ‘s monitoring process applied to both relevant banks compared to international standards.
As for the BNA, boosting core funds has been achieved thanks to
- offsetting the incurred risk as a result of obtaining the State guarantee on the commitments of certain public enterprises (notably the Cereals Board and ONH); and
- The capital gain achieved on the transfer of assets (shareholding securities) worth 95 MTD.
Following the recapitalization:
• The solvency ratio and the Tier 1 ratio evolved as follows:
Solvency ratio (in%) Tier Ratio 1(in%) Capital (in MTD) Net core funds (inMTD) 2014 2015 2014 2015 2014 2015 2014 2015 BNA 9.0 9.8 6.0 6.8 293.0 293.0 700.4 725.0 STB -5.2 13.6 -5.2 9.1 124.3 776.9 -320.7 760.6 BH 4.7 10.1 3.8 7.4 90.0 170.0 304.1 597.0
• the shareholding structure evolved as follows:
In % STB BH BNA 2014 2015 2014 2015 2014 2015 State 25.2 71.5 32.6 33.37 23.5 23.5 Public and parapublic enterprises 25.2 11.93 24.4 24.42 40.2 40.2 Tunisian private shareholders 40.7 15.23 36.8 36.8 30.1 30.1 Foreign private shareholders 8.8 1.28 6.87 6.7 5.8 5.8
3-1-2 Governance
- Change of 50% of the three public banks’ Executive Boards (BNA, STB and BH) through a call for applications; - Separation between the General Manager and the Chairman of the Executive Board functions - Appointment at the end of 2015 of the 3 public banks’ general managers 3-1-3- Restructuring plans
The restructuring plans elaborated by the three State banks that are spread over the 2015-2020 period are based on the main following axes:
- A redefinition of strategic orientations and business development and positioning policies;
- An institutional and operational transformation plan related to strengthening modes of governance and control, organization and redesign of the information system;
- A human resources development plan;
- A business plan for the 2015-2020 period based on a core funds boosting , liquidity, NPLs problem- solving , business development and investment plans policies .
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The ultimate goal of the establishment of these restructuring plans is to ensure solidity, sustainability and sound management foundations for the 3 banks.
For the BNA The BNA has submitted an early version of its restructuring plan to the BCT on 13 November 2015. This version was subject to BCT reservations with regard to the absence of a framework clarifying the relationship between the BNA and the State as regards financing public enterprises and the agricultural sector, absence of clear policies for NPLs and liquidity problem solving.
After various exchanges with the BCT to validate the restructuring plan, the BNA presented a reviewed restructuring program that takes into account the BCT’s observations and ensures compliance with prudential standards, particularly in terms of solvency and liquidity over the restructuring Plan period.
For the BH : The BH submitted a coherent and sustainable restructuring plan on the whole in 2015 that was accepted by the BCT.
The associated business plan was reviewed in March 2016 to reflect the impact of trends in the economic situation. The second plan accepted by the BCT ensures compliance with prudential standards, particularly in terms of solvency and liquidity during the restructuring plan period.
The BH is currently working on the preparation of prerequisites for the institutional transformation process: organization reform, establishment of an internal control system and the information system reform.
For the STB: In April 2015, the STB elaborated a restructuring plan which was subject to BCT reservations.
In September 2016, the reviewed restructuring program was submitted by the STB in light of BCT observations. This program was accepted by the BCT in so far as it ensures the bank’s compliance by prudential standards in terms of solvency and liquidity during the restructuring plan period 4. Legal and regulatory reform Projects to be undertaken
The strategic orientation to converge the Tunisian prudential system towards international standards will be based on a comprehensive and harmonious approach within the framework of a five-year plan (2016- 2020). The reforms concern the transition and convergence towards Basel 2 and 3, elaboration of texts to implement the banking law, development of the operational framework for banking supervision and follow-up of the 3 public banks’ restructuring
4-1- Passage and convergence towards the Basel 2 and 3 framework
At the Pillar 1 level, the reforms to be implemented include:
- Establishment of a requirement in core funds with respect to market risk by March 2017;
- Adoption of Basel III standards related to on regulatory core funds in terms of quality, composition, minimum requirements and additional cushions;
- Introduction of prudential standards specific to systemically important banks; and
- Introduction of the structural long-term liquidity ratio (NSFR)
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At the pillar 2 level, a series of reforms is planned, leading banks to:
- Establish an internal «ICAAP» capital adequacy assessment process; and
- Develop stress tests to evaluate the resilience of their core funds to external shocks and their ability to cover risks not taken into account at the pillar 1 level.
At the Pillar 3level, the BCT will work for the establishment of the disclosure rules that aim at introducing requirements as regards financial transparency.
4-2 Texts to implement the Banking Law
Application of provisions of the new law no. 2016-48 of 11 July 2016 related to banks and financial institutions requires the publication of about thirty-five application texts varying between decrees and circulars. These texts include:
- A decree on the organization and operating of the Deposit Guarantee Fund;
- Decrees related to the organization and operating of the Authorizations Committee, the internal regulations of the Resolution Committee and the Sanctions Committee; and
- Circulars with new provisions or modifying previous circulars, namely a circular organizing the exercise of Islamic finance through windows, a circular related to banking governance, the exercise of additional control on financial conglomerates.
4-3-Development of the operational framework for supervision
In a process of transition from a compliance-based supervision to a risk-based supervision and in order to provide banking supervision with a structured and integrated system for assessing «Risk Model» type banks and financial institutions, a structuring project initiated by the BCT since 2013 consists in the combination of 4 components:
- IPEC «of Lending Institutions’ Positioning Indicators» introduced starting from June 2015: this tool consists of a set of indicators related to trends in the situation of each bank, compared to that of the sector providing banks and financial institutions with a benchmark with a view to positioning themselves compared to the sector as a whole;
- The SYNTEC «Tunisian rating system of lending institutions» introduced since March 2016: it is a structured system for rating banks and financial institutions based on a formalized process for assessing the risk profile (credit risk, liquidity risk, etc.) and risk management, core funds adequacy and solvency facilities within a proactive vision. This system aims at rating banks and financial institutions based on quantitative and qualitative criteria with the objective of setting up a monitoring process adapted to the size and rating assigned to each bank or financial institution;
- The Prudential Reporting Project: This is risk-oriented reporting, conceptually standardized, flexible and streamlined in terms of quantity, quality and periodicity. This project is at an advanced stage; and
- The integrated information system project: it ensures reporting management in structured and shareable databases, and covers the whole monitoring process. This project is underway.
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II. Trend in banking supervision operational framework 1. Human resources
The banking supervision staff number totaled 43 staff members in 2015 with a graduated staff ratio of 91% and an average experience of 11 years, against 13 years in 2014. The assignment of eight staff members to the General Department of banking supervision in September 2016, following the public entry competitive examination organized by the Central Bank of Tunisia, will allow for strengthening and rejuvenation the body of supervisors.
The supervision staff ‘s age pyramid as at 31/12/2015 is as follows:
Table 1 : Staff age Pyramid (in%)
Age group 2014 2015 between 25 and 35 years 30 35 between 35 and 45 years 34 30 45 years and more 36 35 Total 100 100
2. Professional training
Considered a fundamental advantage to boost supervisors’ professional qualifications and skills, professional training is one of the pillars of banking supervision ‘s five-year action plan (2015-2020).
2-1 In-house Training
During 2015, 13 supervisors attended 5 training courses. The overall duration of these training activities lasted 68 days : an average duration of nearly 5 days per executive.
The themes of these training courses concerned mainly: operational risk, money laundering risk management , Islamic finance and repo.
2-2 Training abroad
The number of training sessions abroad reached 21 including 5 specific sessions. The number of bank supervisors who attended these sessions amounted to 20 for a total duration of 99 days, with an average of more than one session by bank supervisor for a 5-day period.
Table2: Training courses by age group
2014 2015 Average Average Number of Number of number Number of Number of number Age group participants sessions of days / participants sessions of days / training training between 25 and 35 years 3 3 3 5 5 4 between 35 and 45 years 7 7 4 9 8 6 45 years and more 5 6 3 6 8 4 Total 15 16 4 days 20 21 5 days
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Training sessions abroad attended by supervisors were organized by regional and international institutions ( IMF, AMF, METAC Middle East Technical Assistance Center, Central Bank of Turkey, Bank of Germany (CTCBC), Bank of France, SFI, Central Bank of Qatar, Central Bank of Bahrain, Bank of Spain ….). The main topics were related to recent developments in the banking and financial regulation around the world such as :
• Enhanced supervision of major banks; • Islamic finance; • Macro-prudential supervision of the banking sector; • Risk-based banking supervision of Islamic banks; • Operational risk management; • Financial soundness indicators; • On-site monitoring. 3. International cooperation
The Banking supervision department staff took part in representative missions of the Central Bankof Tunisia in international and regional working groups.
3-1 Participation in the 16th meeting of the Basel Consultative Group (BCG)
The BCT participated in the sixteenth meeting of the Basel Consultative Group on 20 and 21 May 2015 in Basel under the auspices of the Bank for International Settlements.
This meeting, which constitutes a discussion forum between the Basel Committee and the non-member regulatory authorities, is devoted, as usual, to discussing issues related to banking supervision particularly :
- The evolution of the regulatory framework in the BCG member countries ; - Financial inclusion and financial supervision issues; - Anti-Money Laundering; - Review of the standard approach for credit risk assessment. 3-2 Participation in the 17th meeting of the Basel Consultative Group (BCG) The BCT participated in the Consultative Group meeting in Basel on 12 and 13 October 2015 in Kuala Lumpur which dealt with topics related to banking supervision.
3-3 Participation in the 26th meeting of the Arab Committee on Banking Supervision The BCT participated in the 26th meeting of the Arab Committee on Banking Supervision, which was held in Abu Dhabi on 7 and 8 December 2015.
The meeting is devoted to t discussing banking supervision topics:
- The standard approach for credit risk and operational risk; - Disclosure rules; - Securitization issues; - Constitution of cushions to absorb total losses TLAC (Total Loss Absorbing Capacity);
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- The risks of interest rates;
- The minimum capital requirement for the Leverage Ratio.
3-4 Participation in the high-level meeting for the Middle East and North Africa on banking standards
The BCT participated in the high-level meeting for the Middle East and North Africa organized by the Arab Monetary Fund FMA in Abu Dhabi on 9-10 December 2015, which deals with banking standards and the priorities of regulators in Interest rate risk management and preservation of financial stability. III. Banking supervision activity
1 Approvals and authorizations a. Carrying out a banking activity The Banking Supervision departments have examined and investigated two files related to the creation of two leasing establishments in Cote d’Ivoire by two Tunisian leasing companies. Both cases were accepted approved b. Exceeding participation thresholds in banks’ and financial institutions’ capital A case of threshold crossing as regards shareholding in the capital of a financial institution was authorized in 2015. c. Designation of administrators and senior managers Files dealt with in this framework concerned the appointment of six senior managers, two Excutive Board chairmen and 34 Board members. All files were accepted.
As for the appointment of independent administrators, twelve files were processed and accepted. For the appointment of administrators representing minority shareholders, two files were processed and accepted.
2 Control activities a. Permanent monitoring of banks and financial institutions
The operational balance sheet of micro-prudential analysis and assessment of banks and lending institutions’ risk profiles with respect to 2015 is as follows :
Number of lending institutions subject to an annual evaluation report at the end of 2015 30
Number of lending institutions subject to annual meetings dealing with their situations 16
Number of lending institutions which received a notification signed by the Governor of the Central 6 Bank related to the assessment of their situations at the end of 2015 Of which a number of lending institutions that have been requested to convey a recovery plan of 3 their financial situation
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The assessment of lending institutions’ compliance with legal and quantitative prudential standards at the end of 2015 shows the following:
Table 4: statement of lending institutions’ compliance with legal and prudential standards in 2015 :
(In terms of the number of establishments not complying with norms) Resident Financial Offshore banks establishments banks I- Legal norms : I.1 – The 10 % of core funds norm with respect to the capital 1 1 shareholding of the same company I.2 – The 30 % norm with respect of the capital shareholding of non- 6 4 financial companies II – Prudential norms II.1 – Risk coverage ratio (10%) 1 0 1 II.2 – Risk concentration norm (25%) 3 0 2 II.3 – Risk division norm (15%) 1 0 1 II.4 – Riskdivision norm (5%) 1 0 1 II.5 – Risk division norm for related parties 1 0 1 II.6 – Liquidity ratio 3 II.7 – Foreign exchange position 0
3 On- site supervision of lending institutions
In 2015, 12 on-site supervisory missions were conducted. They are divided into three general missions, three thematic missions and six punctual missions on the basis of an annual program approved by the BCT’s governing board and documented terms of reference.
As part of the continuous improvement of the on-site control process, three specific methodological guidelines by control field were elaborated and validated in 2015. The control areas covered by written procedures are tied to the governance system, at the Liquidity risk and the solvency ratio. These guidelines act as a reference for inspectors to harmonize the control process and the diligence to be applied by domain.
2 Circular 91-24 states that the total amount of risks incurred on beneficiaries whose incurred risks exceed or are equal, for each of them, to 15% of the lending institution’s net core funds ,must not exceed 1.5 times of the said net core funds. 3 Circular 91-24 states that the total amount of risks incurred on beneficiaries whose risks of exceed or are equal, for each of them, to 5% of the lending institution’s net core funds must not exceed 3 times the said net core funds.
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4 Main undertaken disciplinary measures
The on-site and off-site control activity led to the following disciplinary sanctions:
• Application of fines for a total amount of 813.7 dinars for infringements related to non-compliance with prudential standards;
• Application of a penalty of 3800 dinars following the delay to convey reporting to the BCT;
These fines and pecuniary sanctions were paid in to the Tunisian Treasury.
Worth of note that as per the new banking law, the names of the sanctioned institutions will henceforth appear in the annual report on banking supervision and on the official website of the BCT.
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CHAPTER 2
The tunisian banking sector CENTRAL BANK OF TUNISIA
Chapter II: The tunisian banking sector
I. Trend in the tunisian banking sector’s structures 1. Changes in the structure of the Tunisian banking sector
At the end of 2014, the number of authorized lending institutions in Tunisia stood at 43 institutions. Depending on the nature of their activity, these establishments are divided into 23 resident banks, 13 financial institutions and 7 non-resident banks.
Table 6: Trend in the number of operating institutions
2013 2014 2015 1-Resident lending institutions 35 36 36 Resident banks 21 224 235 Financial institutions 14 14 13 Leasing companies 9 9 85 Factoring companies 3 3 3 Merchant banks 2 2 2 2- Non resident banks 8 74 7 Total 43 43 43
After its promulgation, law no. 2016-48 of 11 July 2016 related to banks and financial institutions constitutes the legal framework governing the activities of banks and financial institutions, both resident and non- resident.
The code of financial service supply to non-resident promulgated by law no 2009-64 remains applicable to the aspects of foreign exchange, customs and tax regulations
Depending on the nature of their activity, resident establishments are divided into 23 banks, 8 leasing establishments, 3 factoring companies and 2 investment banks.
The banking offer is dominated by traditional banking products that account for more than 95% of banking assets. Islamic products which accounts for just 5% of bank assets at the end of 2015,
Table 7: Indicators of Islamic banks at the end of 2015(*)
Total assets in MTD 4038 Staff 1213 network 107 Total deposits in MTD 2501 Total loans in MTD 1930
(*) 2 banks
4 Following the transformation of Albaraka Bank into a resident bank. 5 Following the transformation of El wifack Leasing into a resident bank
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Box 4: Structure of the banking sector according to the Business Plan According to their business plan, banks that make up the Tunisian banking sector are broken down between 18 universal banks, 2 banks specialized in microcredit and small and medium-sized businesses financing and 3 banks specialized in Islamic banking products.
2. Trend in the banking system’s structure according to the shareholding nature
2.1 Resident banks
Resident banks’ capital amounts to 3117.1 MTD at the end of 2015 broken down between Tunisian private shareholders (28.7%), foreign shareholders (32.4 %) and the Tunisian State (38.9 %).
Compared to 2014, banks’ shareholding structure registered a remarkable increase in the State share by 14.5 percentage points in line with the STB recapitalization carried out as part of its restructuring plan.
Graph1: Structure of resident banks’ capital per shareholding nature
The banking sector’s reference shareholders’ profile is diversified:
•The Tunisian State is presented as a reference shareholder in 75 banks;; • The reference shareholding of 106 banks of the sector is made up of banks. • The reference shareholding of 27 banks of the sector is made up of business groups in the industrial and trade sectors; • The reference shareholding of 38 other banks is shared by the Tunisian State and an Arab State. Table 8: Trend in number of banks according to shareholding status
2013 2014 2015 Public banks 6 6 6 Banks owned by foreigners 8 99 9 Private Tunisian- owned banks 4 4 4 Mixed banks10 3 3 3 Total 21 22 22
5 STB, BNA, BH, BTS, BFPME ,BFT and BZ 6 ATB, ATTIJARI, UBCI, UIB, City Bank, ABC, BTK, QNB, AlBaraka and BT 7 Amen Bank and BIAT. 8 STUSID, BTE et BTL 9 Following the transformation of Al-Baraka Bank from a non-resident bank to a resident bank. 10 Banks the capital of which is owned half by the Tunisian State and an Arab State.
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2-2 non-resident banks
The capital of non-resident banks amounted to 314 MTD at the end of 2015. Non resident banks’ shareholding structure remained unchanged. It is still dominated by foreign shareholders who hold 80.7 % of these banks’ capital but is also marked by the State’s presence in a bank’s capital.
Graph 2: Non resident banks’ capital structure at the end of 2015
2-3 Leasing companies
Leasing companies’ capital amounts to 375 MTD at end 2015. Its breakdown shows predominance of Tunisian private shareholders who own 81.6% of the capital.
Breakdown of capital according to group affiliation demonstrates a strong presence of banking groups which own 45.9 % of the capital followed by private business groups with a 20.1% share. In fact, 7 establishments are affiliated with banking groups and 2 others affiliated with private business groups.
Graph3 : Leasing companies shareholding structure at the end of 2015
According to the nature of the shareholder According to the affiliation group
Table 7: Breakdown of leasing companies according to affiliation groups’ status
Number Establishments affiliated with banking groups11 6 Of which banking group- controlled establishments 5 Establishments affiliated with private groups 2 3. The Banking system’s concentration analysis
Lending institutions’ activity remains primarily focused on resident banks which hold 91. 4% of assets, 92. 6 % of loans and 97.2 % of deposits.
11 Establishments the reference shareholder of which is a banking group
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Table 8: Banking activity concentration according to the establishment’s nature
2013 2014 2015 Total asset (in MTD) 84497 91205 97753 Of which resident banks’ share (in %) 89.8 91.3 91.4 Leasing companies’ share (in %) 6.3 4.7 4.4 Non resident banks’ share (in %) 3.6 3.7 3.9 Factoring companies’ share (in %) 0.2 0.3 0.3 Loans to customers (in MTD) 55562 60541 64366 Resident banks’ share (in %) 92.2 92.7 92.6 Leasing companies’ share (in %) 2.4 1.9 1.7 Non resident banks’ share (in %) 5.0 5.0 5.2 Factoring companies’ share (in %) 0.4 0.4 0.5 Customers deposits (in MTD) 48088 51468 53565 Resident banks’ share (in %) 95.4 96.9 97.2 Non resident banks’ share (in %) 4.6 3.1 2.8
However, an in-depth analysis of the bank market structure per nature of activity helps to provide arguments for moderating this strong concentration. In effect
• On the medium and long term financing segment, leasing companies hold 13.3 % against a 5.2 % contribution in total financing.
• On the non-residents’ segment, non resident banks contribute substantially to non residents’ financing with a share of 41.4% against a share of 1.7% in total funding. As for deposits, nonresident banks raise 17.7 % of non-residents’ deposits against a 2.8 % share in total deposits.
3-1 Concentration at the level of resident banks
The concentration ratio analysis shows a concentration situation in terms of assets, loans or deposits since the share of the first four banks exceeds the 35 % threshold and that of the first eight banks exceeds the 50 % threshold.
Table 9: Resident banks’ activity concentration indicators
Concentration ratio % Horfindhal-hirshman index First 4 banks First 8 banks 2013 2014 2015 2013 2014 2015 2013 2014 2015 Total assets 48.9 47.0 46.5 77.6 75.7 75.5 0.088 0.084 0.083 Loans to customers 50.0 48.6 47.1 79.1 77.5 76.6 0.091 0.088 0.086 Customers’ deposits 49.4 48.4 47.4 81.4 79.9 79.5 0.095 0.092 0.091
Nevertheless, there is no dominant position as shown by the herfindhal-hirshman index close to 0.1. Besides, the share of the first bank came to12. 3 % in terms of assets, 13. 4 % in terms of loans and 15.5 % in terms of deposits.
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Box 5: How to calculate concentration at the banking sector level: Concentration can be calculated with the concentration ratio which reflects the share of operations carried out by the most important establishments with respect to all establishments’ overall situation. It helps to assess the oligopolistic character of the sector. This ratio is generally calculated for the 4 and 8 major establishments. A market is considered concentrated if the share of the 4 major establishments exceeds 35 % or if the share of the 8 major establishments exceeds 50 %. The measurement of the banking sector concentration can be complemented by the Herfindhal- Hirshman index which sums all establishments’ market shares’ squares. It highlights dominant positions in the market .This index is all the more relevant that the considered market is a small-scale one. Regarding its interpretation, a value less than 0.1 shows a weakly concentrated market, a moderately concentrated market when it ranges between 0.1 and 0.18 and a highly concentrated market. when it is above 0.18
The banking activity concentration analysis according to the shareholding nature shows that :
• Public banks’ contribution to banking activity remains the most important one with a market share of 39.1 % in terms of assets, 38.9 % in terms of loans and 34.2 % in terms of deposits; • Banks with Tunisian private capital hold 27.8 % of total assets, 28.7% of loans and 30.8 % of deposits. • Foreign-capital banks hold 30% of assets, 29.6% of loans and 32.7% of deposits and; • Mixed banks hold 3.1% of market shares in terms of assets, 2.8 %.in terms of loans and 2.3 % in terms of deposits. Graph 4 : Breakdown of resident banks’ activity according to the shareholding nature
Breakdown of total assets Breakdown of loans
Breakdown of deposits
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3-2 Concentration at the level of leasing companies
Leasing companies’ activity is characterized by a concentration at the level of assets and enforcements as shown by the share of the first four establishments at end of 2015 which exceeds the 35% threshold. Analysis of the IHH index shows a moderate concentration situation.
Table 10: Leasing companies’ activity concentration indicators
Total assets Enforcements 2013 2014 2015 2013 2014 2015 Part des 4 premiers établissements (%) 63.5 61.7 59.5 59.6 59.9 61.2 Indice Herfindhal-Hirshman 0.135 0.131 0.127 0.126 0.126 0.128
3-3 Concentration at the level of non-resident banks
The concentration ratio shows a strong concentration at the level of loans and to a lesser degree at the deposits’ and total assets’ level.
Table 11: Non- resident banks’ activity concentration indicators
Total assets Loans Deposits 2013 2014 2015 2013 2014 2015 2013 2014 2015 Share of the first 4 non resident banks(%) 78.9 84.0 80.6 89.9 89.9 89.5 87.8 91.8 92.8 Herfindhal-Hirshman index 0.174 0.202 0.194 0.230 0.229 0.220 0.227 0.254 0.257
This concentration tendency is confirmed by the HHI particularly for loans and deposits with an index exceeding 0.18. 4. The use of banking services
The banking network comes to1701 branches at the end of 2015 meaning a branch per 6558 inhabitants.
Graph 5: Network breakdown by governorate
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Worth of note that 10 banks having each a number of branches that exceeds 100 hold 85 % of branches’ network. : .As for leasing companies, the network is made up of 61 branches, 47 of which are located on the coastline.
On the other hand, analysis of the use of banking services in terms of accounts shows that 66.1 % of the population holds bank accounts i.e. an average of 2 accounts per 3 inhabitants.
The number of bank cards issued at the end of 2015 reached 3.1 million cards against 2.7 million at the end of 2014, up by 12.7 %. The number of cash dispensers went up by 8.6%, reaching 2249 ATMs. II. Lending institutions’ activity and results 1. Trend in resident banks’ activity
a. Trend in uses
Banks’ uses grew in 2015 at a slower pace than in 2014 : 7.8% against 11.5 %, reaching 70 billion, up to 68.6%, from lending activity.
Table12 :Trend in resident banks uses
Variation 2013 2014 2015 2014/2013 2015/2014 in MTD in % in MTD in % Loans to customers 51 229 56 116 59 601 4 887 9.5 3 485 6.2 Securities portfolios 6 995 8 816 10 410 1 821 26.0 1 594 18.1 Total uses 58 224 64 932 70 011 6 708 11.5 5 079 7.8
i.Loans to customers
The Outstanding balance of loans grew at a slower pace in 2015, compared to the previous year (6.2% against 9.5%). This slowdown concerned loans falling due and mainly short-term loans, while the outstanding balance of debtor accounts accelerated by 14.5% against 6.1% in 2014.
Table13: Trend in resident banks’ outstanding balance of loans
Variation 2013 2014 2015 2014/2013 2015/2014 in MTD in % in MTD in % Short term loans 12 253 14 366 14 857 2 113 17.2 491 3.4 Medium and long term loans 24 085 25 849 27 211 1 764 7.3 1 362 5.3 Debtor accounts 3 910 4 149 4 752 239 6.1 603 14.5 Others 10 981 11 752 12 781 771 7.0 1 029 8.8 Loans to customers 51 229 56 116 59 601 4 887 9.5 3 485 6.2
Following these trends, the shares of short-term loans and medium- and long-term loans decreased by 0.7 percentage points and 0.4 percentage points respectively to stand at 24.9% and 45.7%. The share of debtor accounts increased by 0.6 percentage points to reach 8%.
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Graph 6: Structure of resident banks’ outstanding balance of loans
By category of beneficiary, the trend in the outstanding balance of loans in 2015 involved, up to 69.7%, loans to professionals and loans to individuals up to 30.3%
Breakdown of the financing effort in 2015, between professional customers and individual customers, shows disparities between banks. In fact:
• 91 % of financing granted by public banks went to professional customers.
• Financing provided by Tunisian private banks is shared equally between professionals and individuals.
• More than 69% of loans granted by foreign banks went to professionals.
• 54% of the financing granted by mixed banks went to individuals.
Graph 7 : breakdown of Loans’ progress in 2015 by group of banks
Public banks Tunisian private banks
Foreign capital banks Mixed Banks
By sector, granted loans are concentrated, as it is the case for 2014, on the industrial and commercial sectors, which account for 27.3% and 15.7% of these loans respectively, while the individuals’ segment accounts for 26.6 % of loans.
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Graph 8 : Sectoral breakdown of loans
Financing of the economy is held, up to 40%, by the first five major banks broken down as follows : 37 % by foreign-capital banks, 33.8 % by public banks, 25.2% by Tunisian private capital banks, and 4% by mixed banks.
Graph9: Breakdown of the financing effort by group of banks
Breakdown according to the category Breakdown according to the size (Total assets)
ii. Securities portfolio
The outstanding balance of securities portfolio grew at a decelerated pace in 2015: 18.1 % or 1594 MTD against 1821MTD or 26 % in 2014.
This development evolution emanates from the slower growth pace of transactions and investment (3.3% vs. 91.6% in 2014) and shareholding securities (7.1% vs. 9% in 2014).
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Table14: Trend in the outstanding balance of resident banks’ securities portfolio
Variation 2013 2014 2015 2014/2013 2015/2014 in MTD in % in MTD in % Shareholding securities12 2 556 2 787 2 969 231 9.0 182 7.1 Transaction and investment securities 346 663 685 317 91.6 22 3.3 Debt securities 4 093 5 366 6 756 1 273 31.1 1 390 25.9 Bonds 261 253 300 -8 -3.1 47 18.6 Treasury bonds 3 832 5 113 6 456 1 281 33.4 1 343 26.3 Securities portfolio 6 995 8 816 10 410 1 821 26,0 1 594 18,1
The outstanding balance of Treasury bonds continued to grow at a significant rate pace (26.3% against 33.4%) because of the large volume of issues.
Taking into account these trends, the share of Treasury bonds and bonds in the securities portfolio increased by 4 percentage points to reach 62% against a decrease in shareholding securities and transaction and investment securities by 3.1 and 0, 9 percentage points respectively.
Graph 10: Trend in resident banks’ securities portfolio structure
b. Trend in resources
Banking resources rose by 4.7% or 2569 MTD in 2015, almost half of the increase recorded in 2014.
This decline in resource mobilization is mainly due to the remarkable decelerated growth pace of deposits (4.4% against. 8.7% in 2014). However, the mobilization of borrowing resources increased by 9.3% or 391 MTD compared to 1.9% or 79 MTD in the previous year.
13 including equity loans, social shares and associated current accounts
41 CENTRAL BANK OF TUNISIA
Table15 : Trend in resident banks resources
Variation 2013 2014 2015 2014/2013 2015/2014 in MTD in % in MTD in % Customers deposits 45 897 49 891 52 069 3 994 8.7 2 178 4.4 Borrowing resources 4 138 4 217 4 608 79 1.9 391 9.3 Total resources 50 035 54 108 56 677 4 073 8.1 2 569 4.7
i. mobilization of deposits
The banking sector’s deposits in 2015 recorded an increased by 4.4% or 2178 against 8.7% or 3994 MTD in 2014, to reaching 52 069 MTD.
Deposits’ slowdown is due to the ongoing decline in the outstanding balance of certificates of deposits, which fell by 19.1% and the weak trend in the outstanding balance of term accounts by 5% against 26, 6% in 2014. However, savings deposits and demand deposits grew at paces comparable to those of 2014 : 7.9% and 7.3%, respectively.
Table 16: Trend in the outstanding balance of resident banks’ deposits
Variation 2013 2014 2015 2014/2013 2015/2014 in MTD in % in MTD in % Demand deposits 17 702 19 236 20 639 1 534 8.7 1 403 7.3 Savings deposits 13 021 14 051 15 159 1 030 7.9 1 108 7.9 of which special savings accounts 11 175 12 061 13 081 886 7.9 1 020 8.5 Term deposits 9 319 11 796 12 381 2 477 26.6 585 5.0 certificates of deposits 5 855 4 808 3 890 -1 047 -17.9 -918 -19.1 Customers deposits 45 897 49 891 52 069 3 994 8.7 2 178 4.4
These trends affected deposits’ structure with a firmed up share of demand deposits (+1 percentage point), savings deposits (+0.9 percentage points) and term deposits (+0.2 percentage point) against a drop in the share of certificates of deposits down to 7.5%.
Graph 11: Trend in the structure of resident banks’ deposits by category of deposits
42 REPORT ON BANKING SUPERVISION 2015
By category of depositors, the share of institutional deposits decreased by 2.3 percentage points to 11.7%. As the share of individuals’ deposits, it increased by 2 percentage points to reach 51.7 %.
Graph12: Trend in the structure of resident banks’ deposits by category of depositors
ii. Borrowings resources
Borrowing resources grew at an accelerated pace : 8.4% or 321 MTD compared to 2.1% or 77 MTD or in 2014, resulting from the increase in the outstanding balance of ordinary Debenture loans by 12.1 % or 104 MTD against a decrease by 6.4% or 59 MTD in 2014, as well as an increase in the outstanding balance of external resources (244 MTD or 8.8% against 175 MTD or 6.7% in 2014).
Table 17: Trend in resident banks ‘borrowings resources
Variation 2013 2014 2015 2014/2013 2015/2014 in MTD in % in MTD in % Special resources 2597 2772 3016 175 6.7 244 8.8 Debenture loans 915 856 960 -59 -6.4 104 12.1 Other borrowings 231 192 165 -39 -16.9 -27 -14.1 Borrowings resources 3 743 3 820 4 141 77 2.1 321 8.4
The structure of resources did not undergo any change compared to 2014, with a share of customers’ deposits exceeding 90%.
Graph 13 : Trend in the structure of resident banks’ resources
43 CENTRAL BANK OF TUNISIA
c. Trend in Liquidity
The deficit of the treasury in dinar worsened by 1463 MTD or 69.1% in 2015 to posting 3,582 MTD, mainly as a result of the slower growth pace of deposits in dinar (3.4% against 7.9 % in 2014).
Table 20 : Trend in resident banks’ treasury in dinars14
2013 2014 2015 Treasury in dinar (1) = (2)-(3) -2 684 -2 119 -3 582 Balance of treasury(2) 976 825 602 BCT intervention (3) 3 660 2 944 4 184
However, currencies treasury recorded a surplus worth 1519 MTD held, up to 29%, at the BCT. This surplus results from deposits in foreign currencies that were not used again. In fact, deposits in foreign currency at the end of 2015 amounted to 8693 MTD or 16.7% of total deposits, 4003 MTD of which were used in the form of loans in foreign currency credits nd 652 MTD in the form of securities in foreign currency.
Table 21 : Trend in resident banks’ treasury in foreign currency15
2013 2014 2015 Treasury in foreign Currency (1)=(2)+(3)+(4)+(5) 3 355 1 200 1 519 Currency Holding (2) 67 78 67 Deposits athe BCT (3) 581 975 1402 Investment and Net Deposits held by Correspondents(4) 385 -405 -384 Placement At The BCT(5) 2 322 552 433
1-2 Liquidity risk
During 2015, the average number of banks in a situation of non-compliance with the minimum liquidity requirement is 4 banks. The average liquidity ratio of the sector is 82.1% with an average liquidity deficit of 628 MTD (compared to the minimum requirement of a liquidity ratio of 60%).
14 data at end of period. 15 data at end of period.
44 REPORT ON BANKING SUPERVISION 2015
1-3 Credit risk The outstanding balance of non-performing loans increased at a faster pace than in 2014, by 10.3% against 3.7% in 2014, reaching 11,580 MTD at the end of 2015. It should be noted that two State banks are holding 44% of the increase in the outstanding balance of non performing loans and 3 private banks accounted for 40% of this increase.
Table 20: Trend in resident banks’ loans portfolio quality indicators
2013 2014 2015 Outstanding balance of non-performing loans (MTD) 10 123 10 496 11 580 Share of NPL in total commitments (%) 16.5 15.8 16.6 Outstanding balance of provisions (MTD) 4 902 5 199 5 626 Rate of coverage of NPL by provisions (%) 56.4 58.0 56.9
Graph14: Trend in the outstanding balance and share of NPL of resident banks
The outstanding balance of non-performing loans remains mainly composed of Class 4 claims that account for 85.1% of these loans. Classes 3 and 2 account for just 8.1% and 6.8% respectively.
Table 21: Resident banks’ outstanding balance of non-performing loans by class
Variation 2013 2014 2015 2014/2013 2015/2014 in MTD in % in MTD in % Class 2 776 710 788 -66 -8.5 78 11.0 Class 3 757 655 932 -102 -13.5 277 42.3 Class 4 8590 9131 9860 541 6.3 729 8.0 Total of non-performing loans 10123 10496 11580 373 3.7 1084 10.3
By sector of activity, NPL focused on the industrial and tourism sectors which account for 27.8% and 20.2% respectively of these loans. The structure of NPLs by sector of activity was as follows:
45 CENTRAL BANK OF TUNISIA
Taking into account the 4.6%, increase in commitments the average share of NPLs went up by 0.8 percentage points compared to 2014 to 16.6% at the end of 2015.
However, this share shows disparities between banks and activity sectors. Indeed:
1- 13 banks holding 58.6% of the sector’s assets have a NPL ratio that is below the sector’s average. Among these 13 banks,9 banks holding 45.1% of the sector’s assets posted an NPL ratio less than 10%. The number of banks with an NPL ratio higher than the sector’s average is 9. These banks hold 41.4% of the banking sector’s total assets.
2- The Tourist and agricultural sectors posted the highest NPL ratio in their total commitments, with rates reaching respectively 54.2% and 37.6%. The real estate sector and the trade sector have NPLs shares below the banking sector average: 14.3% and 14.9%. For individuals, the share of NPLs which is significantly below average continues to rise: 6.5% against 3% in 2011.
Share of NPL in total Sector of activity Commitments (MTD) NPLs (MTD) commitments (%) Agriculture 1810 680 37.6 Industry 19007 3219 16.9 Trade 11000 1640 14.9 Tourism 4317 2339 54.2 Real estate 4317 619 14.3 Individuals 18519 1204 6.5 Other 10722 1878 17.5
The outstanding balance of provisions increased by 8.2% or 427 MTD in 2015: a lower growth pace than the one of the outstanding balance of NPLs. Thus, the coverage ratio of NPLs by provisions decreased by 1.1 percentage points, reaching 56.9%.
Graph15: Trend in the outstanding balance of provisions and in the rate of coverage of NPLs by provisions
Analysis of the rate of coverage by bank shows that 12 banks holding 66% of the sector’s assets post a coverage rate higher than 60% , 8 banks of which that hold 26.2 % of the sector’s assets post a rate of coverage higher than 70 %. The number of banks posting a rate below 60% is 10 banks holding 34% of the sector’s assets.
46 REPORT ON BANKING SUPERVISION 2015
1-4 Trend in profitability and operating results
2015 was marked by a slower growth of the interest margin and the net banking proceed compared to their level of 2014, following the slowdown in banking activity and the significant increase in the outstanding balance of NPLs.
Table22 : Trend in resident banks’ net banking proceeds’ components
Variation 2013 2014 2015 2014/2013 2015/2014 in MTD in % in MTD in % Interest and similar income 3149 3 645 3 830 496 15.8 185 5.1 Incurred interests and charges 1604 1 987 2 128 383 23.9 141 7.1 Interest margin 1545 1 658 1 702 113 7.3 44 2.7 Net commissions 562 640 699 78 13.9 59 9.2 Net gains on trade securities portfolio 399 447 502 48 12.0 55 12.3 Investment portfolio income 118 153 207 35 29.7 54 35.3 Net banking proceeds 2624 2 897 3 110 273 10.4 213 7.4
Indeed, the interest margin increased by only 44 MTD or 2.7%, against 114 MTD or 7.4% in 2014, due to the decelerated growth pace of interests and similar income as well as incurred interests and similar charges.
The evolution of interests and similar income resulted from the combination of the two following effects:
• The effect arising from the increase in the outstanding balance of loans providing additional interests about 249 MTD. • The effect resulting from the 10-base -point decrease in the yield on loans, meaning a loss of i income of about 54 MTD
Table23: Factors underlying trends in interests earned on loans
2015/2014 En MD Volume effect(1) 249.3 Yield effect(2) -53.8 Total 195.5
(1) Variation of the average outstanding balance of loans x yield of 2014 loans (2) Variation in loans’ yield × the average outstanding balance of 2014 loans
As for incurred interests and similar charges, their evolution in 2015 resulted from a combination of three effects:
• An effect related to the decrease of the interest rate by about 16.4 MTD, 18.6 MTD of which are savings in interest on term accounts and certificates of deposits resulting from the drop inthe money market average rate by 12 base points and 3.1 MD savings in interests on borrowings on the money market in Dinars. Financial charges on savings accounts increased 11.1% following the higher average savings remuneration rate , up by 13 base points leading to additional charges of about 12 MTD.
47 CENTRAL BANK OF TUNISIA
• A volume effect of about 63.6 MTD concerning savings accounts (39.8 MTD) and borrowings on the money market (17.2 MTD).
• An overbid effect on term accounts and certificates of deposit by about 42.3 MTD meaningan increase in resource costs by 20 base points (5.9% in 2015 compared to 5.7% in 2014) against a decrease in the average money market rate by 12 points base.
Table24 : Explanatory factors of trends in financial charges
Trend in the average Rate Volume Charges Overbidding outstanding effect1 effect2 trend In % effect balance In (MTD) (MTD) % Savings accounts 8.5 11.1 39.8 12.2 0 Demand accounts 7.4 1.9 9.3 -6.9 0 Term accounts and certificates of deposits -0.3 2.3 -3.2 -18.6 42.3 Money market borrowing in Dinars 6.8 5.5 17.2 -3.1 0
1 outstanding2014 × (cost2015– cost2014) 2 Cost2014× (outstanding2015– outstanding2014)
In relative terms, the intermediation margin decreased by 10 base points posting 2.9% at the end of 2015.
Graph 16 : Trend in resources’ cost and loans’ yield of resident banks
Despite a decelerated growth pace compared to 2014, net commissions evolved, during 2015, at a faster pace than the one of the interests margin.
Net gains on the trade -securities portfolio continued to increase at a sustainable pace, by 55 MTD or 12.3% against 48 MTD or 12% in 2014 Income from the investment portfolio grew at a faster pace (54 MTD or 35.3% against 35 MTD or 29.7% in 2014) respectively.
Taking into account these developments, the GNP increased by 213 MTD or 7.4% in 2015, amounting to 3110 MTD. Its structure was marked by firmed up contribution of income from the investment securities portfolio , gains on the trade securities- portfolio and commissions (1.4 percentage points, 0.7 percentage points and 0.4 percentage points respectively) against a decrease in the interest margin’s contribution by 2.5 percentage points. However, this structure is still dominated by the interest margin that accounts for 54.7% of GNP.
48 REPORT ON BANKING SUPERVISION 2015
Graph17 : Trend in resident banks’ net banking proceeds structure
As for operating charges, they progressed at a higher pace than the net banking proceeds one. The sector’s operating ratio went up by 0.3 percentage points compared to 2014, posting 48.8%.
On the other hand, productivity by agent (Net banking proceed by agent) improved by 6.3%, reaching 153 thousand dinars at the end of 2015.
The rate of coverage of staff costs by commissions improved by 0.8 percentage point, posting 61 %.
Table25: Breakdown of Resident banks’ net banking proceeds
Variation 2013 2014 2015 2014/2013 2015/2014 in MTD in % in MTD in % Net Banking Proceed 2624 2897 3110 273 10,4 213 7,4 (-) Net allocations for provisions 1018 637 595 -381 -37.4 -42 -6.6 (+) Other operating proceeds 37 42 46 5 13.5 4 9.5 (-) Operating charges 1240 1404 1519 164 13.2 115 8.2 of which staff costs 941 1063 1148 122 13.0 85 8.0 (-)Allocations for amortization and for 119 128 134 9 7.6 6 4.7 provisions on fixed assets operating income 284 770 908 486 171.1 138 17.9 (+/-) Other ordinary elements and 17 0 -14 -17 -100.0 -14 - extraordinary elements (-) Tax on profits 142 204 196 62 43.7 -8 -3.9 Net income 159 566 698 407 256.0 132 23.3
Graph 18: Breakdown of resident banks’ net banking proceeds
49 CENTRAL BANK OF TUNISIA
The provisioning effort decreased by 42 MTD compared to 2014, reaching 595 MTD or 19.1% of GDP, down by 3 percentage points compared to 2014 in line with the measures taken in favour of the tourist sector and provided for by circular no 2015-12 of 22 July 2015 related to the exceptional measures to support businesses operating in the tourism sector.
Taking account of these developments, 2015 ended up with a net result of 698 MTD, up by 132 MTD or 23.3% compared to 2014.
Returns on equity declined by 0.5 percentage point, coming to 10.7% at the end of 2015 as a consequence of an increase in core funds that was more significant than the one of net income. The return on assets remained unchanged at 0.9%.
Graph 19 : Trend in resident banks’ profitability indicators
The number of banks that recorded a profit with respect to the financial year 2015 totaled 19 banks with a cumulative profit of 726MTD (against 17 banks with a cumulative profit of 662MTD in 2014).
The number of banks that made a loss with respect to the financial year 2015 totaled 3 banks with losses of 31 MTD (against 5 banks with a loss of 97 MTD in 2014).
Cumulated profits earmarked as reserves totaled 298MTD (53.6%).The remaining part was distributed to shareholders in the form of dividends (258MTD or 46.4 % of total).
Graph 20 : Trend in the breakdown of resident banks’ profits16
1-5 Core funds’ adequacy analysis
At the end of 2015, Tier 1 capital increased substantially by 1258 MTD or 30.2% against 781 MTD or 23.1% in the previous year. This increase comes from a share of the STB and BH capital increases carried out within the framework of their restructuring plans for an amount of 703 MTD with an issue premium of 164 MTD and also profits earmarked as reserves.
16 Excluding deficit results..
50 REPORT ON BANKING SUPERVISION 2015
Tier2 capital increased by 582 MTD or 58.8% in 2015, compared to 165 MTD or 20% in 2014. This increase stems from a share of STB’s Tier2 capital (260 MTD) which were not taken into account in 2014 insofar as Tier 1 capital were negative. On the other hand, there was issue of subordinate debenture loans by 4 banks for an amount of 260 MTD and shareholding securities by a bank for an amount of 47 MTD.
Table 26 : Trend in resident banks’ core funds and incurred risks
Variation 2013 2014 2015 2014/2013 2015/2014 in MTD in % in MTD in % Tier 1 capital 3 388 4 169 5 427 781 23.1 1 258 30.2 Equity capital 2201 2 385 3 117 184 8.4 732 30.7 Reserve 2 960 3 574 4 010 614 20.7 436 12.2 Elements to be deducted 1773 1790 1700 17 1.0 -90 -5.0 Tier 2 capital 825 990 1 572 165 20.0 582 58.8 Net core funds 4212 5 159 6999 947 22.5 1 840 35.7 Incurred risks 51576 54 901 58091 3 325 6.4 3 190 5.8
Core funds’ structure in 2015 is marked by an increase in the share of additional by 3.3 percentage points against a decline in the share of Tier 1 capital.
Graph 21: Trend in resident banks’ core funds’ structure
Following these trends, the solvency ratio improved by 2.6 percentage points compared to 2014, reaching 12% at the end of 2014. Similarly, the tier 1 ratio increased by 1.7 percentage point, posting 9.3%.
Table27: Trend in the solvency ratio and the tier 1 ratio of resident banks
2013 2014 2015 Solvency ratio (in %) 8.2 9.4 12.0 Tier 1 Ratio 6.6 7.6 9.3
It should be noted that all banks, except for a small-sized bank, have a solvency ratio higher than the regulatory minimum of 10% at the end of 2015 and that 14 banks have a solvency ratio higher than 12%.
For the tier1 ratio, two banks do not meet comply with the regulatory minimum level of 7% and 12 banks have a Tier 1 ratio of more than 10%.
51 CENTRAL BANK OF TUNISIA
2. Leasing companies’ results and activity
2-1 Trends in leasing institutions’ activity
The volume of disbursements grew at a slower growth pace (7.1% against 13.8% in 2014), standing at 1726 MTD.
The financing share of leasing institutions in the private GFCF in 2015 amounted to 10.4%: an increase of 0.7 percentage points compared to 2014
Table 28: Trend in the activity of leasing institutions
Variation 2013 2014 2015 2014/2013 2015/2014 In MTD In % In MTD In % Disbursements 1 416 1 612 1 726 196 13.8 114 7.1 Of which : real estate 72 92 99 20 27.8 7 7.6 Average effective rate (in %) 8.6% 9.7% 10.4% - 1.1 - 0.7
In 2015, the share of the building and public works sector and that of agriculture in leasing companies’ disbursements increased by 2 percentage points and 1 percentage point respectively, at the expense of the industrial and service sectors
Graph 22 : Sector -related breakdown of leasing companies’ disbursements
Le volume des mises en forces des établissements de leasing présente une forte concentration sur le leasing mobilier qui accapare 94% des mises en force ; sachant que le leasing mobilier présente une forte concentration sur le financement du matériel roulant qui accapare 86%.
Graph 23 : Breakdown of leasing Graph 24 : Breakdown of institutions’disbursements at the end of 2015 movables leasing at end of 2015
52 REPORT ON BANKING SUPERVISION 2015
The outstanding balance of leasing rose by 10.5 %, reaching 3355 MTD financed, up to 74.9%, by borrowing resources, 46.5% of which are bank borrowings and 38.2% debenture Loans. Worth of note that the leasing sector mobilized 274 MTD of bond resources in 2015 against 195MTD in 2014, up by 40.5%.
Table 29: Trend in the outstanding balance of leasing companies’ core funds and borrowings
Variation 2013 2014 2015 2014/2013 2015/2014 in MTD in % in MTD in % Outstanding balance of leasing companies 2746 3035 3355 289 10.5 320 10.5 Loans’ yield (in %) 8.9 9.1 9.5 - 0.2 - 0.4 Borrowing resources 2136 2412 2512 276 12.9 100 4.1 of which : Bank resources (in %) 46.3 45.2 46.5 - -1.1 - 1.3 Debenture loans (in %) 41.6 39.9 38.2 - -1.7 - -1.7 Cost of borrowing resources (in%) 6.1 6.8 7.1 - 0.7 - 0.3
2-2 Portfolio quality
The outstanding balance of NPLs increased by 2 MTD or 8.9 % compared to 2014, posting 257 MTD at end of 2015. The share of NPLs decreased by 0.2percentage point, reaching 7.4%, as a result of the a more significant increase in commitments than in NPLs.
Graph 25: Trend in the outstanding balance of leasing companies’ share of NPLs
The rate of coverage of NPLs by provisions remained unchanged : 67.6%.
Graph 26 : Trend in provisions on NPLs and leasing companies’ rate of coverage of NPLs
53 CENTRAL BANK OF TUNISIA
2-3 Operating results and profitability indicators
The interest margin and the leasing sector’s net proceeds improved in 2015 compared to 2014 by 11.4% and 9.9% respectively coming to 127 MTD and 144 MTD respectively.
The net income stood at the same level as in 2014: 48 MTD.
Table 30: Trend in leasing companies’ operating account
Variation 2013 2014 2015 2014/2013 2015/2014 in MTD in % in MTD in % Interest margin 109 114 127 5 4.6 13 11.4 Leasing Net proceed 121 131 144 10 8.3 13 9.9 Operating charges 46 53 57 7 15.2 4 7.5 Net allocations to provisions17 16 14 23 -2 -12.5 9 64.3 Operating result 55 60 61 5 9.1 1 1.7 Net income 42 47 48 5 11.9 1 2.1
It should be noted that the net intermediation margin was 2.4% against 2.3% in 2014.
Graph 27: trends in leasing institutions’ resources cost, credit yield and average effective rate
The operating ratio dropped by 1.2 percentage points compared to 2014 , coming to 39.3% at the end of 2015.
Net allocations to provisions increased by 64.3% compared to 2014 , posting 23 MTD, : 16.1% of net proceeds in 2015, against 10.7% in 2014.
The sector’s net result stood at the same level of 2014: 48 MTD 31 MTD or 72% of which were distributed to shareholders.
Graph 28: Trend in the breakdown of leasing companies’ profits
17 Net allocations to provisions and result of correction values on loans and investment portfolio.
54 REPORT ON BANKING SUPERVISION 2015
The return on assets (ROA) stagnated at 1.4% against 1.5% in 2014 and the return on core funds decreased by 2.6 percentage point, reaching 8%.
Table 31: Trend in leasing institutions’ profitability indicators
2013 2014 2015 ROA (in%) 1.5 1.5 1.4 ROE (in%) 10.0 10.6 8.0
2-4 Core funds’ adequacy analysis
Leasing companies’ net core funds increased by 139 MTD or 26.3% in 2015 against an increase by 7 MTD or 1.3% in 2014
Table 32: Trend in leasing companies’ core funds
Variation 2013 2014 2015 2014/2013 2015/2014 in MTD in % in MTD in % Basic net core funds 418 429 553 11 2.6 124 28.9 of which Equity capital 227 228 375 1 0.4 147 64.5 Supplementary core funds 103 99 114 -4 -3.9 15 15.2 Collective provisions 15 16 18 1 6.7 2 12.5 Others 88 83 96 -5 -5.7 13 15.7 Net core funds 521 528 667 7 1.3 139 26.3
Graph 29: Trend in leasing institutions’ core funds’ structure
The solvency ratio increased by 2.4 percentage points to 19.7% with a tier 1 ratio of 17.6%.
Table 33: Trend in leasing institutions’ solvency ratio and Tier I ratio
2013 2014 2015 Solvency ratio (in %) 18.8 17.3 19.7 Tier I ratio 16.0 14.8 17.6
55 CENTRAL BANK OF TUNISIA
3. Non resident banks’ activity and results
3-1 Activity
a- Trend in uses
Non-resident banks’ uses declined by 4.8% or 92 MTD in 2015. This decline was mainly due to a decrease in credits by 66 MTD or 10.5 %.
Table 34: Trend in non-resident banks’ uses
Variation 2013 2014 2015 2014/2013 2015/2014 In M USD In % In M USD In % Treasury operations 1814 1116 1088 -698 -38.5 -28 -2.5 Placements at banks 1390 799 808 -591 -42.5 9 1.1 Based in Tunisia 456 262 271 -194 -42.5 9 3.4 Based abroad 934 537 537 -397 -42.5 0 0.0 Ordinary accounts and cash 424 317 280 -107 -25.2 -37 -11.7 credits 826 628 562 -198 -24.0 -66 -10.5 To residents 474 225 233 -249 -52.5 8 3.6 To non residents 352 403 329 51 14.5 -74 -18.4 Securities portfolio 374 178 180 -196 -52.4 2 1.1 Total uses 3014 1922 1830 -1 092 -36.2 -92 -4.8
Following these trends , the share of treasury operations and that of placements at banks in total uses increased by 1.5 and 0.5 percentage points respectively, posting 59.5% and 9.8%, while the share of credits decreased by 2 percentage points coming to 30.7%.
Graph 30: Trend in the structure of non resident banks’ uses
In 2015, credit portfolio structure registered a decrease in the credit share granted to non- residents, down by 5.7 percentage points, reaching 58.5 %.
56 REPORT ON BANKING SUPERVISION 2015
Table 35: Trend in non resident banks’ surety bonds
Variation 2013 2014 2015 2014/2013 2015/2014 In M USD In % In M USD In % Total surety bonds 946 1016 948 70 7.4 -68 -6.7 of which : Confirmation of documentary credits 425 544 527 119 28.0 -17 -3.1 Opening of documentary credits 180 188 168 8 4.4 -20 -10.6 Guarantees and endorsements 340 251 240 -89 -26.2 -11 -4.4
Surety bonds decreased compared to 2014 due to the decline in the outstanding balance of all forms of commitments b- Trend in resources
Non resident banks’ resources in 2015 pursued the downward trend registered a year earlier (-16.9% or -287 M USD against -35% or -913 M USD in 2014). This decline concerned mainly bank resources (-191 M USD or -22.5%) and deposits of non-residents (-84 M USD or -10.3%).
Table 36 : Trend in non resident banks’ resources
Variation 2013 2014 2015 2014/2013 2015/2014 In M USD In % In M USD In % Bank resources 1281 852 660 -429 -33.5 -191 -22.5 Bank borrowings 1029 743 590 -286 -27.8 -153 -20.6 Based in Tunisia 310 213 144 -97 -31.3 -69 -32.4 Based abroad 719 530 446 -189 -26.3 -84 -15.8 Ordinary accounts 252 109 70 -143 -56.9 -38 -35.2 Customers’ deposits 1331 847 751 -484 -36.4 -96 -11.3 Residents 340 33 21 -307 -90.3 -12 -36.4 Non Residents 991 814 730 -177 -17.9 -84 -10.3 Total resources 2612 1699 1411 -913 -35.0 -287 -16.9
Compared to 2014, the structure of resources registered an increase in the share of customers’ deposits by 3.3 percentage points to stand at 53.2%.
Graph 31: Trend in non-resident banks resources’ structure
57 CENTRAL BANK OF TUNISIA
3-2 Portfolio quality
The outstanding balance of NPLs decreased by 5 M USD or 1.3 % in 2015, down to 366 M USD, 291 M USD or 79.5% of which belong to a bank that is experiencing difficulties related to the regional economic environment. The share of NPLs stood at 39.7%, a worsening by 5.3 percentage points compared to 2014. Excluding this bank, the share of NPLs would be 15.8%.
Graph 32 : Trend in the outstanding balance and the share of NPLs of non-resident banks
NPLs’ coverage ratio by provisions improved by 2.9 percentage points, standing at 70 %.
3-3 Operating results and profitability indicators
Non-resident banks’ interest margin and net banking proceeed continued to decline in 2015 by 17.2 M USD and 59. 4 M USD, respectively.
As a result of the increase in operating expenses, the operating ratio deteriorated, reaching 46.8% against 39% at end of 2014.
Table 37: Trend in non resident banks’ operating account
Variation 2014/2013 2015/2014 2013 2014 2015 In M In M USD In % In USD Interest margin 29.5 19.3 17.2 -10.2 -34.6 -2.1 -10.9 Net commissions 30.5 22.9 22.0 -7.6 -24.9 -0.9 -3.9 Net gains on commercial securities portfolio 20.4 14.5 14.2 -5.8 -28.4 -0.4 -2.7 Income from investment portfolio 7.8 12.3 6.0 4.6 59.0 -6.4 -51.6 Net banking proceeds 88.2 69.0 59.4 -19.2 -21.8 -9.6 -13.9 Operating charges 37.2 26.9 27.8 -10.3 -27.7 0.9 3.3 Net allocations to provisions18 8.6 17.8 12.2 9.2 107.0 -5.6 -31.5 Operating result 40.4 22.3 19.8 -18.1 -44.8 -2.5 -11.2 Net result 39.2 19.8 17.0 -19.4 -49.5 -2.8 -14.1
The NBP structure of non-resident banks remains focused on net commissions and net gains on commercial securities portfolio, which hold 37% and 23.9%respectively . This breakdown is attributable to the important volume of surety bonds which constitute almost half of these banks’ uses.
18 Net allocations to provisions and result of correction values on claims and the investment portfolio
58 REPORT ON BANKING SUPERVISION 2015
Graph 33 : Trend in the NBP structure of non-resident banks
3-4 Analysis of core funds’ adequacy
Non-resident banks’ net core funds increased, by 13.7M USD or 15.7% in 2015.Thus, the solvency ratio deteriorated by 3.2 percentage points, posting 18%.
Table 38: Trend in non resident banks’ core funds and solvency ratio
Variation 2013 2014 2015 2014/2013 2015/2014 in M USD in % in M USD in % Net core funds 196.0 87.3 101.0 -108.7 -55.5 13.7 15.7 Incurred risks 956.1 589.9 561.1 -366.2 -38.3 -28.8 -4.9 Solvency ratio 20.5 14.8 18.0 - -7.0 - 3.2
59
Annexes CENTRAL BANK OF TUNISIA Annex 1 : Organizational chart 1 : Organizational of the BankingAnnex Supervision Department
62 REPORT ON BANKING SUPERVISION 2015
Annex 2 : The Tunisian banking sector’s main indicators19
Size and use of banking services
2014 2015 Total assets in MTD 83273 89304 staff 20108 20346 Management staff rate% 68.1 69.4 network 1625 1701 Number of accounts 7 251 435 7 377 036 Number of ATM & ATM 2070 2249 Number of bank cards 2 721 166 3 066 792 Number of electronic payment transactions 4 729 001 5 547 125 Volume of electronic banking transactions (MTD) 585 625
Activity and operating indicators
2014 2015 Total deposits in MTD 49891 52069 Total loans 56116 59601 GNP (MTD) 2897 3110 Operating ratio% 48,5 48,9 Net income 566 698 ROA (%) 0.9 0.9 ROE (%) 11.2 10.7 (*)data of SMC sent to the BCT
Indicateurs financiers
% 2014 2015 Solvency ratio 9.4 12.1 Tier ratio 1 7.6 9.4 Share of non-performing loans 15.8 16.6 Rate of Coverage of non-performing loans by provisions 58.1 56.6
19 22 resident banks
63 CENTRAL BANK OF TUNISIA
Annex 3 : Balance sheet, Statement of off-balance sheet commitments and statements of result of resident banks 1-BALANCE SHEET (in thousand dinars) 2014 2015 ASSETS 1 - Cash and assets held in the BCT and the CCP 2 185 344 2 257 440 2 - Claims on banking and financial institutions 4 404 427 4 709 726 3 - Customer loans 50 968 071 53 604 896 4 - Commercial securities 5 112 414 6 509 658 5 - Investment Portfolio 3 751 715 4 004 282 6 – Fixed assets 1 064 910 1 154 834 7 – OtherAssets 1 774 333 1 999 052 TOTAL ASSETS 69 261 213 74 239 888 LIABILITIES 1 - Central Bank. CCP 2 035 873 3 276 598 2 - Deposits of banking and financial institutions’ assets 4 110 844 3 940 381 3 - Customer deposits and assets 50 222 238 52 336 757 4 - Borrowings and special resources 5 016 355 5 460 604 5 – OtherLiabilities 2 867 266 2 900 976 TOTAL LIABILITIES 64 252 576 67 915 316 CORE FUNDS 1- Equity capital 2 384 569 3 117 144 2 - Reserves 3 238 076 3 415 081 3 – Own shares -5 066 -5 102 4 – Other equity 103 550 246 157 5- Results carried forward -1 264 183 -1 106 199 6 - Results of the financial year 566 136 656 088 7 - Accounting Changes -14 445 1 403 TOTAL EQUITY 5 008 637 6 324 572 TOTAL LIABILITIES AND EQUITY 69 261 213 74 239 888
64 REPORT ON BANKING SUPERVISION 2015
2- Statement of off -balance sheet commitments (in thousand dinars) 2014 2015 CONTINGENT LIABILITIES Guarantees. endorsements and other guarantees granted to customers 7 178 149 7 217 814 Documentary credits 3 595 496 3 476 314 Pledged assets 1 811 000 2 305 000 Total contingent liabilities 12 584 645 12 999 129 COMMITMENTS GIVEN Financing commitments granted to customers 3 194 639 3 377 043 Commitments on securities 48 693 51 910 Total commitments given 3 243 332 3 428 953 RECEIVED COMMITMENTS Received financing commitments 2 454 124 2 358 741 Receivedguarantees 15 230 506 17 414 491 CONTINGENT LIABILITIES 17 684 629 19 773 232
65 CENTRAL BANK OF TUNISIA
3- Statement of result
(In thousand dinars) 2014 2015 BANKING OPERATING PROCEEDS 4 940 078 5 300 768 (+) Interest and similar income 3 645 068 3 829 944 (+) Commissions 689 212 748 534 (+) Gains on securities portfolio commercial and financial operations 452 836 515 545 (+) Income investment portfolio 152 962 206 745 BANK OPERATING PROCEEDS 2 042 779 2 191 148 (-) Interest and similar expenses 1 987 407 2 127 601 (-) Commissions incurred 49 209 49 229 (-) Losses on securities portfolio and financial operations 6 163 14 318 INTEREST MARGIN 1 657 661 1 702 342 NET BANKING INCOME 2 897 299 3 109 619 (-) Depreciation and provisions and results of value adjustments on loans. Off 592 348 631 015 balance sheet and liability (-) Depreciation and provisions and results of value adjustments on investment 44 898 -35 705 portfolio (+) Other operating proceeds 42 416 46 102 (-) Staff costs 1 062 574 1 147 671 (-) General operating costs 341 653 371 558 (-) Depreciation and provisions on tangible assets 128 204 133 506 OPERATING INCOME 770 038 907 676 Balance in gain (+) / loss (-) from other ordinary elements 365 -13 978 (-) Income taxes 204 630 195 659 RESULT OF ORDINARY ACTIVITIES 565 773 698 040 Balance in gain (+) / loss (-) from extraordinary elements -362 137 NET INCOME OF THE YEAR 566 135 697 903 (+) Accounting changes effect (net of tax) -239 1 410 RESULT AFTER ACCOUNTING CHANGES 565 896 699 313
66 REPORT ON BANKING SUPERVISION 2015
Annex 4: Leasing companies’ balance sheet and statement of results
1- Balance Sheet
(In thousand dinars) 2014 2015 ASSETS 1 - CASH AND CASH EQUIVALENTS 65 678 152 858 2 - LOANS TO CUSTOMERS 2 873 962 3 179 977 3 -SECURITIES PORTFOLIO 24 157 15 408 4 – FIXED ASSETS 114 651 146 530 5-OTHER ASSETS 35 477 41 609 TOTAL ASSETS 3 158 663 3 586 335 LIABILITIES 1 - BANK BORROWINGS AND OTHER FINANCIAL LIABILITIES 10 426 20 845 2 – LOANS DUE TO CUSTOMERS 43 015 43 378 3 - BORROWINGS AND SPECIAL RESOURCES 2 458 161 2 656 111 4 – SUPPLIERS AND TIED ACCOUNTS 127 656 179 360 5 - OTHERLIABILITIES 33 593 52 183 TOTAL LIABILITIES 2 672 851 2 951 878 EQUITY 1 - EQUITY CAPITAL 227 950 374 950 2 - RESERVES 167 612 174 723 3 – RESULTS CARRIED FORWARD 24 896 8 830 4 – OTHER EQUITY -2 814 30 149 5-RESERVE FOR GENERAL RISK -168 -1 815 6-OWN SHARES - 220 7-ACCOUNTING CHANGE -552 -60 8- RESULT OF THE FINANCIAL YEAR 47 058 47 461 TOTAL EQUITY 485 812 634 457 TOTAL EQUITY AND LIABILITIES 3 158 663 3 586 335
67 CENTRAL BANK OF TUNISIA
2- Statement of result (In thousand dinars) 2014 2015 OPERATING PROCEEDS Leasing proceeds and interests 266 437 303 028 interest and other operating proceeds -151 522 -174 383 Investment proceeds 9 082 8 974 Other operating proceeds 7 052 6 921 TOTAL OPERATING PROCEEDS 131 048 144 541 OPERATING COSTS Staff costs 32 868 36 525 Other operating costs 4 146 4 735 Depreciation and amortization 14 599 21 871 Net provisions and result of bad debt -965 818 Provisions for impairment 20 146 19 880 TOTAL OPERATING COSTS 70 794 83 830 OPERATING INCOME 60 254 60 711 Other operating profits 2 655 2 127 Other operating losses -572 -133 PROFIT FROM ORDINARY ACTIVITIES BEFORE TAX 62 337 62 705 Corporate taxes -15 280 -15 244 NET INCOME FOR THE FINANACIAL YEAR 47 058 47 461
68 REPORT ON BANKING SUPERVISION 2015
Annex 5: Non-resident banks’ balance sheet, statement of result and statement of off-balance sheet commitments 1- Balance sheet (In thousand dollars) 2014 2015 ASSETS 1 - Cash and deposits held in the BCT and the CCP 34 861 31 384 2 – loans due to banking and financial institutions 1 301 074 1 105 029 3 - Loans to customers 370 509 300 988 4 - Commercial securities Portfolio 63 078 68 581 5 - Investment Portfolio 115 257 116 121 6 – Fixed assets 17 093 16 271 7 – Other assets 9 787 13 038 TOTAL ASSETS 1 911 658 1 651 412 LIABILITIES 1 - Central Bank and CCP 60 929 12 127 2 - Deposits and assets of banking and financial institutions 649 499 557 502 3 - Customer deposits and assets 843 083 731 327 4 - Borrowings and special resources 54 536 45 690 5 – Other liabilities 68 085 63 699 TOTAL LIABILITIES 1 676 133 1 410 346 EQUITY 1 - Equity capital 156 380 154 831 2 - Reserves 54 477 54 635 3 – Own shares 0 0 4 – Other equity 1 000 1 000 5 – Results carried forward 3 861 13 609 6 - Results of the year 19 808 16 991 7-Accounting Change 0 0 TOTAL EQUITY 235 525 241 066 TOTAL LIABILITIES AND EQUITY 1 911 658 1 651 412
69 CENTRAL BANK OF TUNISIA
2- Statement of off balance sheet commitments (In thousand dollars) 2014 2015 CONTINGENT LIABILITIES Guarantees. endorsements and other guarantees granted to customers 332 769 298 592 Documentary credits 650 864 559 299 Pledged assets 0 0 Total contingent liabilities 983 633 857 891 COMMITMENTS GIVEN 0 0 Financing commitments granted to customers 52 239 21 500 Commitments on securities 0 99 Total commitments given 52 239 21 600 RECEIVED COMMITMENTS 0 0 Receivedfinancingcommitments 5 155 5 155 Receivedguarantees 199 986 259 650 Total commitments received 205 141 264 805
70 REPORT ON BANKING SUPERVISION 2015
3- Statement of result (n thousand dollars) 2014 2015 BANKING OPERATION PROCEEDS 75 498 64 977 (+) Interest and similar income 25 246 21 780 (+) Commissions 23 234 22 058 (+) Gains on commercial securities portfolio and financial operations 14 773 14 588 (+) Income of investment portfolio 12 245 6 551 BANKING EXPENSES 6 501 5 524 (-) Interest incurred and similar expenses 5 956 4 515 (-) Fees incurred 380 349 (-) Losses on securities portfolio commercial and financial operations 166 659 NET BANKING PROCEED 68 997 59 453 (-) Depreciation and provisions and results of value adjustments on loans. Liabilities 17 806 12 186 and off balance sheet (-) Depreciation and provisions and results of value adjustments on investment 0 51 portfolio (+) Other operating proceeds 121 177 (-) Staff costs 16 122 15 442 (-) General operating costs 10 899 10 143 (-) Depreciation and provisions on tangible assets 1 994 1 938 OPERATING INCOME 22 296 19 870 Balance in gain (+) / loss (-) from other common elements 13 15 (-) Income taxes 1 574 1 690 PROFIT FROM ORDINARY ACTIVITIES 20 735 18 195 Balance in gain (+) / loss (-) from extraordinary elements -927 -1 204 NET INCOME OF THE FINANCIAL YEAR 19 808 16 991 (+) ACCOUNTING CHANGE EFFECTS 0 -927 (net of tax) 0 0 PROFIT AFTER ACCOUNTING CHANGES 19808 16 991
71 CENTRAL BANK OF TUNISIA Annex6 : Trend in the average effective rates by category of financing 2005-2015 rates effective in the average Trend : Annex6
72 REPORT ON BANKING SUPERVISION 2015 Annex7: Trend in TEG by categoryTEG by of financing and lending institution in 2015 in Trend Annex7:
73 CENTRAL BANK OF TUNISIA
74 REPORT ON BANKING SUPERVISION 2015
Annex 8: LiST OF AUTHORIZED OPERATING LENDING INSTITUTIONS
1/ BANKS
DATE OF COMPANY NAME ADDRESS TELEPHONE FAX WEB SITE CREATION
ARAB TUNISIAN 9, Rue Hédi NOUIRA 71 342 852 1982 71 351 155 www.atb.com.tn BANK (ATB) 1001 - TUNIS 71 353 140
Cité Ennassim Rue BANQUE Aboubaker Achahid FRANCO- 1879 71 903 755 71 903 910 - Mont Plaisir TUNISIENNE (BFT) Belvédère 1002 Tunis BANQUE Rue Hédi NOUIRA 71 832 807 NATIONALE 1959 71 831 000 www.bna.com.tn 1001 - Tunis 71 830 765 AGRICOLE (BNA)
BANQUE ATTIJARI 95 Avenue de liberté 70 012 606 1968 71 235 636 www.attijaribank.com.tn DE TUNISIE 1002 Tunis 70 012 401
BANQUE DE TUNISIE 2,Rue de Turquie 71 349 743 1884 71 125 500 www.bt.com.tn (B.T) 1001 - Tunis 71 346 877
BANQUE 56, Avenue Mohamed V TUNISIENNE DE 1998 71 844 040 71 845 537 - 1002 Tunis SOLIDARITE (BTS)
Avenue Mohamed V. AMEN - BANK (AB) 1967 71 148 000 71 833 517 www.amenbank.com.tn BP 52 - 1080 Tunis
BANQUE 70 -72, Av. Habib. INTERNATIONALE 71 340 733 1976 BOURGUIBA 71 342 820 www.biat.com.tn ARABE DE TUNISIE 31 311 000 1080 Tunis (BIAT) SOCIETE TUNISIENNE DE Rue Hédi NOUIRA 1957 71 340 477 71 340 009 www.stb.com.tn BANQUE 1001 - TUNIS (STB) UNION BANCAIRE POUR LE 139, Avenue de la 1961 81 100 000 71 842 308 www.ubcinet.net COMMERCE ET Liberté 1002 -Tunis L’INDUSTRIE (UBCI) UNION 65, Av. Habib INTERNATIONALE 1964 BOURGUIBA 81 102 020 71 218 009 www.uib.com.tn DE BANQUES (U I B) 1001 TUNIS
BANQUE DE 18 Avenue Mohamed V 71 784 417 1989 71 126 000 www.bh.com.tn L’HABITAT (BH) Tunis 71 337 957
CITIBANK 55, Avenue Jugurtha (Branche 1989 71 113 300 71 785 556 - BP 72 - TUNIS 1002 ON - SHORE)
75 CENTRAL BANK OF TUNISIA
DATE OF COMPANY NAME ADDRESS TELEPHONE FAX WEB SITE CREATION
ARAB BANKING BP n° 57 Rue CORPORATION 1999 du Lac d’Annecy 71 861 861 71 862 757 www.arabbanking.com (ABC-TUNISIE) 1053 Les berges du Lac BANQUE TUNISO- 10,bis Av. Med. V. 71 343 106 KOWEITIENNE 1981 71 204 000 www.btknet.com BP : 49 -1001 TUNIS 71 343 502 (BTK)
32, R. Hédi Karray STUSID BANK 1981 71 232 133 71 753 233 www.stusidbank.com.tn BP 20 1002 Tunis
QATAR NATIONAL Rue cité des Sciences 1982 71 750 000 71 713 111 www.qnb.com.tn BANK - TUNIS (QNB) BP 320 -1080 TUNIS
BANQUE DE TUNISIE 5 Bis, Rue 71 783 756 & DES EMIRATS 1983 Mohamed BADRA 71 783 600 www.bte.com.tn 71 287 409 (BTE) TUNIS 1002 BANQUE 25, Av. K. PACHA TUNISO-LIBYENNE 1983 71 901 350 71 902 808 www.btl.com.tn 1002 - TUNIS (BTL) BANQUE DE FINANCEMENT 34 RUE Hedi Karray DES PETITES 2005 Centre Urbain Nord- 70 102 200 70 102 202 www.bfpme.com.tn ET MOYENNES Menzah IV 1004 Tunis ENTREPRISES (BFPME)
BANQUE ZITOUNA 2 Boulevard qualité de 71 164 000 2008 71 165 000 www.banquezitouna.com (BZ) vie 2015 le Kram 81 105 555
AL BARAKA BANK 88, Av. Hédi Chaker 71 780 235 1983 71 790 000 www.albarakabank.com.tn TUNISIA 1002 Tunis 71 792 156
Avenue Habib WIFAK bourguiba 75 643 000 INTERNATIONAL 2015 4100-Médenine 75 649 988 www. wib.tn 71 771 322 BANK Rue 8160 Cité Olympique - Tunis
76 REPORT ON BANKING SUPERVISION 2015
2/ FINANCIAL INSTITUTIONS
A/ LEASING INSTITUTIONS
DATE OF COMPANY NAME ADDRESS TELEPHONE FAX WEB SITE CREATION Rue du lac d’annecy ATTIJARI LEASING 1994 1053 les berges du lac 71 862 122 71 861 545 - Tunis Centre Urbain Nord 71 232 020 TUNISIE LEASING 1984 Av Hedi Karray 1082 Cite 70 132 000 www.tunisieleasing.com.tn 71 230 555 Mahrajene TUNIS CIE. 16, Avenue Jean Jaures INTERNATIONALE 1992 71 336 655 71 337 009 - 1001 Tunis DE LEASING Ennour Building centre ARAB TUNISIAN 71 235 050 1993 Urbain Nord 1082 70 135 000 www.atl.com.tn LEASE 71 767 300 El Mahrajene TUNIS ARAB 11 , Rue Hedi Nouira INTERNATIONAL 1996 71 349 100 71 349 940 - BP 280 -1000 Tunis LEASE Immeuble Assurances Salim - LOT AFH-BC 5 MODERN LEASING 1996 71 189 700 71 949 335 www.modernleasing.com.tn Centre Urbain Nord 1082 - Tunis Mahrajene 54, Av Charle Nicole BEST LEASE 1999 71 799 011 71 798 719 - Mutuelleville Rue du lac Malaren 1er étage. Imm Triki HANNIBAL LEASE 2001 71 139 400 71 139 460 www.hannibalease.com.tn Les Berges du lac 1053 Tunis
77 CENTRAL BANK OF TUNISIA
B/ FACTORING INSTITUTIONS
DATE OF COMPANY NAME ADDRESS TELEPHONE FAX WEB SITE CREATION Centre Urbain Nord Av TUNISIE 1999 Hedi Karray 1082 Cite 70 132 000 71 230 280 www.tunisiefactoring.com.tn FACTORING Mahrajene Tunis Ennour Building Centre UNIFACTOR 2000 71 234 000 71 233 300 www.unifactor.com.tn Urbain Nord 1004 Tunis
C/ MERCHANT BANKS
DATE OF COMPANY NAME ADDRESS TELEPHONE FAX WEB SITE CREATION INTERNATIONAL 87, avenue Jugurtha MAGHREB 1995 71 800 266 71 800 410 www.imbank.com.tn 1082 Mutuelleville Tunis MERCHANT BANK BANQUE 10 Bis Rue Mahmoud 71 143 800 D’AFFAIRES DE 1998 El Matri Mutuelleville 71 891 878 - 71 143 801 TUNISIE (BAT) 1002 - Tunis
78 REPORT ON BANKING SUPERVISION 2015
3/ OFFSHORE BANKS ESTABLISHED IN TUNISIA (LAW NO 2009-64 OF 12 AUGUST 2009)
DATE OF COMPANY NAME ADDRESS TELEPHONE FAX WEB SITE CREATION NORTH AFRICA Av. Khereddine Pacha INTERNATIONAL 1983 lotissement Ennassim 71 950 800 71 950 840 www.naibank.com BANK (NAIB) 1002 Tunis ALUBAF INTERNATIONAL BANK (FILIALE Jardins du lac 2 ALUBAF 1985 70 015 600 71 198 000 - 1053 Tunis INTERNATIONAL BANK BAHREIN ) (ALUBAF) TUNISIAN Angle avenue 71 950 016 FOREIGN BANK 1979 Mohamed V et rue 71 950 100 tfbank.fr 71 950 031 (TFB) 8006 Monplaisir TUNIS 18, Av. des ETATS-UNIS 71 782 223 INTERNATIONAL 1982 71 782 411 www.tib.com.tn TUNIS 71 782 479 BANK (TIB) LOAN AND Les Berges du Lac II, INVESTMENT 1980 Zone 5, Lotissement 71 967 200 71 967 145 CO (LINC) Ennakhil, Cité les Pins CITIBANK 55, Av.Jughurtha (Branche off 1976 71 113 300 71 785 556 BP 72 1002 Tunis shore) ARAB BANKING BP 57 Rue du 71 860 921 CORPORATION 1993 Lac d’Annecy 71 861 861 www.arabbanking.com 71 862 757 (ABC) 1053 Les Berges du Lac
79 CENTRAL BANK OF TUNISIA
4/ REPRESENTATIVE OFFICES OF FOREIGN BANKS OPENED IN TUNISIA (Law NO 2009-64 of 12August2009)
DATE OF COMPANY NAME ADDRESS TELEPHONE FAX WEB SITE CREATION Immeuble «La Résidence du Lac» THE ARAB Bloc E 23 71 860 086 INVESTMENT 1982 71 860 012 www.taic.com 1053 Berges du Lac 71 860 778 COMPANY Route de la Marsa 2045 - Tunis CREDIT AGRICOLE- Immeuble A.M.G.,rue du CORPORATE AND 1992 lac Windermere 1053 71 960 019 71 960 029 - INVESTMENT Les Berges du lac - Tunis BANK AGENCE Immeuble Miniar Bloc B FRANCAISE DE 3ème et 4ème étages 1991 71 861 799 71 861 825 www.afd-tunisie.org DEVELOPPEMENT Rue du Lac d’Ourmia ET PROPARCO 1053 Les Berges du Lac Immeuble Msedi Gouiâ BANCA MONTE appt A2.2 2ème étage DEI PASCHI 2000 71 961 060 71 961 381 www.mbs.it sis rue du lac constance DI SIENA les berges du lac CREDIT Imm. Carthage Center INDUSTRIEL ET Rue du Lac 2003 71 962 333 71 961 024 www.cic-banque.fr COMMERCIAL de Constance (CIC-BANQUES) 1053 Les Berges du Lac Immeuble Blue Center Rue du Lac de INTESA 71 965 733 2004 Constance 71 965 923 - SANPAOLO (S.P.A.) 71 965 820 Appartement n°6 Les Berges du Lac 1053 Tunis Immeuble Mazars, 71 904 866 ICCREA Rue du Lac Ghar El Melh 2007 71 903 281 71 904 746 www.iccreabancaimpresa.it BANCAIMPRESA Les Berges du Lac 71 903 488 1053 Tunis 6 rue du lac Toba, AMERICAN Bureau n°23 - 1053 71 960 738 71 961 575 www.americanexpress.com.bh EXPRESS TUNISIE Tunis, les berges du lac 2 Rue Hadrumète NOOR ISLAMIC 71 892 299 mutuelleville - 1002 71 892 356 - BANK 71 893 145 Tunis Belvédère
80 REPORT ON BANKING SUPERVISION 2015 68 30 38 21 67 19 21 27 29 41 24 91 67 29 86 18 14 64 12 17 14 105 120 147 223 103 178 137 698 445 449 1701 TOTAL TOTAL BANKS (1)+(2)+(3) 1 4 6 2 1 0 2 0 0 1 0 3 0 7 5 1 0 1 5 4 0 0 1 0 0 0 5 3 (3) 55 27 14 17 TOTAL TOTAL MIXED BANKS 0 1 1 1 0 0 0 0 0 0 0 1 0 1 1 0 0 0 1 1 0 0 0 0 0 0 2 1 4 1 4 10 BTL 0 1 3 0 0 0 1 0 0 1 0 1 0 3 2 1 0 0 3 1 0 0 0 0 0 0 1 1 7 5 22 13 BTE MIXED BANKS MIXED BANKS 1 2 2 1 1 0 1 0 0 0 0 1 0 3 2 0 0 1 1 2 0 0 1 0 0 0 2 1 6 8 23 10 BANK STUSID 8 5 6 9 9 31 69 79 21 23 11 42 12 11 14 15 26 15 (2) 99 45 39 12 81 55 43 91 145 128 329 510 305 1144 TOTAL TOTAL BANKS PRIVATE PRIVATE 1 3 1 3 1 0 0 0 1 0 0 0 0 0 1 0 0 0 0 2 2 0 0 1 1 2 0 2 7 6 Al Al 23 12 Baraka 0 0 0 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 0 0 0 1 0 0 0 6 9 2 11 ABC 1 2 2 3 1 0 0 1 0 0 0 0 1 0 1 0 0 0 0 5 5 1 0 0 2 1 1 2 34 11 17 11 QNB 0 3 3 3 0 0 0 0 1 0 0 0 0 0 1 0 0 0 0 4 2 0 0 0 4 1 2 2 7 33 13 20 BTK 0 0 0 0 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 1 0 1 1 CITI- BANK 2 7 7 5 2 2 3 2 8 2 0 1 1 3 3 0 2 3 3 8 5 8 8 4 21 13 13 33 11 48 36 UIB 132 1 2 5 9 2 1 1 0 5 1 0 1 2 1 2 0 0 0 1 1 4 7 6 3 16 19 11 28 10 46 37 111 UBCI PRIVATE BANKS PRIVATE 2 5 6 4 6 2 1 8 3 1 2 3 2 2 1 1 1 1 4 8 4 27 11 28 22 11 12 52 16 78 68 196 BIAT 1 3 9 3 4 5 1 1 2 1 1 1 2 0 3 1 1 1 1 4 4 6 16 11 16 11 14 54 13 82 36 154 BANK AMEN AMEN 2 4 7 7 2 3 9 1 1 4 2 1 2 2 4 2 0 0 1 1 8 8 2 9 7 5 9 BT 15 31 47 28 112 2 5 3 4 8 2 1 6 2 1 3 1 3 5 3 4 2 7 8 25 15 12 19 16 16 17 10 52 17 84 47 200 ATTIJARI 0 0 1 1 0 0 0 0 7 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 4 0 6 1 0 BFT 8 1 3 4 8 3 3 3 1 1 7 1 1 1 2 2 6 8 1 1 1 1 9 6 17 14 12 11 37 60 25 ATB 129 7 7 9 6 8 5 9 (1) 41 16 36 73 32 28 17 35 14 27 10 10 23 10 12 14 12 20 45 43 45 502 102 161 127 TOTAL TOTAL BANKS BANKS PUBLIC 0 0 0 0 0 0 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 0 1 1 0 BTS 6 1 3 9 5 7 4 7 0 2 4 1 1 2 1 1 1 0 0 2 3 2 3 1 1 6 2 84 25 10 36 22 ZITOUNA 2 4 7 6 6 1 3 6 1 1 8 1 1 1 2 3 2 5 1 2 1 2 8 9 7 25 13 45 30 18 13 BH 117 PUBLIC BANKS PUBLIC BANKS 2 7 9 7 2 6 2 4 8 3 2 6 2 1 3 2 5 3 6 2 2 1 2 29 10 11 13 33 21 11 39 STB 127 5 9 4 5 9 5 6 7 3 6 5 8 6 5 6 1 1 2 4 8 22 16 11 11 15 40 41 22 25 25 11 172 BNA Annex 9 : Breakdown by region, Governorate and bank branch network as at 31/12/2015 as at network and bank branch Governorate region, by 9 : Breakdown Annex BEJA SFAX SFAX KEBILI TUNIS EL KEF TOTAL TOTAL GABES GAFSA REGION ARIANA SOUSSE SILIANA BIZERTE TOZEUR TOZEUR NABEUL MAHDIA MAHDIA MEDENINE KAIROUAN KAIROUAN MONASTIR MANOUBA KASSERINE JENDOUBA TATAOUINE BEN AROUS SIDI BOUZID TUNIS AREA SOUTH EAST ZAGHOUANE NORTH EAST SOUTH WEST SOUTH NORTH WEST NORTH EASTERN CENTRE EASTERN WESTERN CENTRE WESTERN GOUVERNORATES
81 CENTRAL BANK OF TUNISIA 4 0 0 0 4 5 0 2 4 0 0 1 9 2 6 0 2 0 0 1 9 0 9 0 0 0 0 9 9 10 20 61 TOTAL 0 0 0 0 1 1 0 1 0 0 0 0 2 0 1 0 1 0 0 0 1 0 1 1 0 0 0 0 1 2 7 1 HL 1 0 0 0 2 0 0 0 1 0 0 0 2 0 0 0 0 0 0 0 0 0 1 1 0 0 0 0 1 2 6 1 WL 0 0 0 0 0 1 0 1 0 0 0 1 1 1 1 0 1 0 0 0 3 0 1 1 0 0 1 0 1 2 9 2 BL 0 0 0 0 0 1 0 0 0 0 0 0 1 0 1 0 0 0 0 0 1 0 1 1 0 0 0 0 1 2 5 1 AIL 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 1 0 0 0 0 0 1 1 0 0 0 0 1 2 4 1 ML 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 0 0 1 0 2 2 5 3 ETABLISSEMENTS DE LEASING ETABLISSEMENTS ATTIJ,L 1 0 0 0 1 0 0 0 1 0 0 0 1 1 1 0 0 0 0 0 2 0 1 1 0 0 0 0 1 2 7 1 ATL and leasing branch network at 31/12/2015 at network and leasing branch 1 0 0 0 0 1 0 1 1 0 0 0 1 0 1 0 1 0 0 0 1 0 1 2 0 0 1 0 1 Annex 10 : Breakdown by region, governorates region, by 10 : Breakdown Annex 3 9 2 CIL 1 0 0 0 1 1 0 1 1 0 0 0 2 0 1 0 1 0 0 1 1 0 1 1 0 0 0 0 1 3 9 1 TL REGIONS TUNIS AREA SOUTH EAST NORTH EAST SOUTH WEST SOUTH NORTH WEST NORTH GOUVERNORATS EASTERN CENTRE WESTERN CENTRE GAFSA TOZEUR TOZEUR TATAOUINE KEBILI MEDENINE GABES JENDOUBA BEJA EL KEF SILIANA ZAGHOUANE BIZERTE NABEUL KAIROUAN KAIROUAN KASSERINE SIDI BOUZID MONASTIR MAHDIA MAHDIA SOUSSE SFAX SFAX MANOUBA BEN AROUS ARIANA TUNIS TOTAL TOTAL
82 REPORT ON BANKING SUPERVISION 2015 Annex 11 : Trend in TUNINDEX and TUNBANK INDEXES TUNBANK TUNINDEX and in Trend 11 : Annex
83 CENTRAL BANK OF TUNISIA
TABLE OF CONTENTS
NOTE OF THE GOVERNOR...... 6 CHAPTER I: EVOLUTION OF THE REGULATORY AND OPERATIONAL FRAMEWORK AND BANKING SUPERVISION ACTIVITY...... 9
I. Evolution of regulatory framework...... 10
1. Main reforms before 2015...... 10
2. Main reforms undertaken in 2015 and 2016...... 12
3. Progress of reform projects over 2016...... 21
4. Legal and regulatory reform Projects to be undertaken...... 23
II. Evolution of banking supervision operational framework...... 25
1. Human resources...... 25
2. Professional training...... 25
3. International cooperation...... 26
III. Banking supervision activity...... 27
1. Approvals and authorizations...... 27
2. Monitoring activities...... 28
3. Main undertaken disciplinary measures...... 29
CHAPTER II: THE TUNISIAN BANKING SECTOR...... 31
I. Evolution the tunisian banking sector structures...... 32
1. Trend in the banking sector structure according to activity...... 32
2. Trend in the banking system structure according to the shareholding nature...... 33
3. Banking system concentration analysis...... 34
4. The use of banking services...... 37
II. Lending institutions activity and result...... 38
1. Resident banks’ activity and results...... 38
2. Leasing companies’ activity and results...... 52
3. Non resident banks’ activity and results...... 56
ANNEXES
Annex 1: Organizational chart of the Banking Supervision Department...... 62
Annex 2: The Tunisian banking sector’s main indicators...... 63 Annex 3: Resident banks’ Balance sheet, statement of off balance sheet commitments and statements of result...... 64
Annex 4: Leasing institutions’ Balance sheet and statement of results...... 67 Annex 5: Non-resident banks’ Balance sheet, statement of result and statement of off balance sheet commitments...... 69
Annex 6: Trend in average effective rates by category of financing...... 72
Annex 7: Trend in TEGS by category of financing and lending institution in 2015...... 73
Annex 8: List of authorized operating lending institutions...... 75
Annex 9: Breakdown by region, governorate and bank branch network as at 31/12/2015...... 81
Annex 10: Breakdown by region, governorate and leasing branch network as at 31/12/2015...... 82 Annex 11: Trend in TUNINDEX and TUNBANK INDEXES...... 83
Conception & impression
84 2015
BANQUE CENTRALE DE TUNISIE
Rapport sur la Supervision Bancaire
Décembre 2016