BANKING SUPERVISION

Legislation in force

• Law n° 58-90 of 19 September 1958 governing the creation and organization of the Central Bank of Tunisia, as modified by the law n°2006-26 of 15 May 2006 and the law n°2007-69 of 27 December 2007 ;
• Law n° 2001-65 of 10 July 2001 relating to loan establishments as modified and completed by the law n°2006-19 of 2 May 2006 ;
• Law n° 85-108 of 6 December 1985 encouraging financial and banking establishment dealing mainly with non-residents ;
• Law n° 94-89 of 26 July 1994 relating to leasing ;
• Law n° 2005-96 of 18 October 2005 relating to reinforcing security of financial relations.
• Regulating texts of the Central Bank of Tunisia.

Regulation of the loan establishment activity

   Notion of loan establishment

Is considered a loan establishment any business which carries out as a usual activity, the following banking operations:

• Receiving deposits from the public regardless of the period and type;
• Granting all types of loans;
• Carrying out exchange operations as intermediaries;
• Making available to customers payment means and ensuring their management.

The loan establishment can also carry out operations related to its activity (consultancy and assistance with respect to management of property and other financial management ...)

Only banks are entitled to collect deposits from the public regardless of the period and type.

   Granting licences

A licence delivered by the Minister of Finance is mandatory for any loan establishment to carry out its activity.

License applications to carry out Bank or Financial establishment activity are addressed to the central Bank of Tunisia which examines them and conveys to concerned parties the decisions of the Minister of Finance within a deadline of 4 months as of the date of sending the required information.

The licence is granted in light of the applicant's activity programme, the technical and financial means to be implemented, the quality of capital contribution, the competence and respectability of its managers as well as its aptitude to achieve its development objectives in terms compatible with the efficient working of the banking system and the imperative to safeguard deposits.

Loan establishments have to notify, regardless of any deadline, to the Central Bank of Tunisia any modification within the structure of the Board of Directors or the supervision Board as well as any new appointment of the Chief Executive Officier, the Chairman or the Board of Directors or the chairman of the supervision Board, the General Manager or the Chairman of the Directorate. Silence of the Central Bank of Tunisia during one month as of the date of notification means acceptance.

Authorised opening of any subsidiary, branch or periodic office in Tunisia by a loan establishment is subdued to specifications set by the Central Bank of Tunisia. The loan establishments have to inform the Central Bank of Tunisia beforehand about any operation of opening or closing of a subsidiary, branch or periodic office. Opening or closing of a subsidiary or a branch abroad is subdued to a joint authorisation by the Minister of Finance and the Central Bank of Tunisia.

              Circular of BCT to authorised intermediaries n° 2006-05 of 20 June 2006


Licence is also required for the following cases :

• loan establishment merger,
• direct or indirect acquisition of a part of the capital in a loan establishment, that is likely to lead to control over the later and in all cases, any operation leading to the acquisition of the 1/10, 1/5, 1/3, 1/2 or 2/3 of the voting right. The expected deadline for the Central Bank of Tunisia to notify the concerned parties of the decision is brought up to one month,
• any act which can lead to a transfer of an important part of loan establishment assets likely to give rise to a change in its financial structure or in the orientation of its activity.

Any loan establishment with its head office in Tunisia can be created only in the form of a public limited company.

This condition is also applied to any loan establishment with its head office abroad and carrying out its activity in Tunisia through branches or agencies.

When created, the loan establishment must justify a minimum capital fully paid-up of :
- 25 000 000 dinars if approved as a bank ;
- 10 000 000 dinars if approved as a financial institution, excluding merchant banks authorised, before this law comes into force, with a minimum capital of 3 000 000 dinars.

   Licence withdrawal

The licence can be withdrawn by decision of the Minister of Finance :

• On the initiative of the Ministry of finance and on the basis of a report of the Governor of the Central Bank of Tunisia after advice of the professional association of the banks and financial institutions ;
• On request from the loan establishment itself submitted by the Central bank of Tunisia and after advice of the professional association of banks and financial establishments ;
• On request from the Central Bank of Tunisia when the loan establishment :

  - does not use its licence within a deadline of twelve months ;
  - does not meet the operating conditions in terms of which the license was granted ;
  - was granted the licence through wrong declaration or any other illegal means ;
  - no longer proves that assets exceed the liabilities owed to a third party for an amount equal to the minimum capital or the minimum allocation.

Any loan establishment from whom a licence has been withdrawn goes into liquidation.

In this case, the Minister of Finance appoints, on proposal of the Governor of the Central Bank of Tunisia, a liquidator chosen from the chartered accountants registered at the association of the chartered accountants of Tunisia.

The provisions of the common law relating to the liquidation of entreprises are applicable as long as they are not departed from by law n° 2001-65 of 10 July 2001 as modified by the law n° 2006-19 of 2 May 2006.

   Prudential norms

The Central Bank of Tunisia enacts management rules and prudential norms applicable to banks and financial establishments.

Circular n°91-24 of 17 December 1991 as modified by circular to banks n° 2001-04 of 16 February 2001 and circular to banks n° 2001-12 of 4 May 2001.

These norms concern :

• The use of capital stock;
• The ratios between capital stock and liabilities;
• Obligatory reserves;
• Liquidity ratios;
• Loan establishment financing of their branches;
• Risks in general.

   Ratio of risks coverage

   Ratios of risk concentration and division

   Liabilities follow-up

Pursuant to article 2 provisions of circular to banks n°2001-12 of 4 May 2001, banks must, for the follow up of their financial assistance to enterprises the incured risks of which exceed 10% of their capital stock, require an external audit report.

In the same way, these banks must, prior to any commitment, require from their customers :

• whose liabilities to the financial system exceed 5 MTD, the financial statements of the fiscal year that precedes the year of granting the loan as well as the financial statements of the fiscal years following the year of granting the loan certified by a legally entitled auditor.
• who are unlisted on the stock market and whose liabilities to the financial system exceed 25 MTD to provide a recent rating delivered by a rating agency.

   Liquidity Ratio

Banks must always respect a minimum liquidity ratio of 100% calculated by the ratio between achievable assets and current liabilities.

Banking supervision

   External supervision

The law n° 2001-65 of 10 July 2001as modified by law n° 2006-19 of 2 May 2006 has entrusted the Central Bank with the power to control loan establishments. For this purpose, the Central Bank is endowed with the following supervision instruments.

• The right to be informed

Loan establishments must provide the Central Bank with all documents, information, explanations and justifications necessary to the control of their situation and proving their compliance with the regulation governing loan and exchange control and the control of loan establishments.

Loan establishment chartered auditors must hand in to the Central Bank, within six months following the end of the fiscal year, a report concerning the carried out audit as well as a copy of their report intended to the general meeting and to the bodies of the loan establishment they control.

Auditors are also required to inform the Central Bank of Tunisia of any fact which can geopardize the loan establishment or the depositors' interest.

• Control on documents

This audit is carried out on the basis of financial and accounting documents and statistics conveyed periodically by the loan establishment.

• Onsite Control

Onsite control is carried out by missions of overall supervision in keeping with an annual programme set up by the Central Bank of Tunisia. It represents a means of cheking the accuracy of the conveyed information and the evaluation of the organization and the internal functioning of the loan establishment.

The objective of these missions is to make an organizational and financial diagnosis of the supervised loan establishment to prevent different risks inherent in the activity.

Besides this periodic supervision, the onsite control can take the form of an exceptional supervision mission looking like a short-term investigation and dealing with particular operations.

   Internal supervision

Loan establishments and non-resident banks must institute an internal audit committee in charge notably of:

• Seeing to the setting of appropriate mechanism of internal control by the establishment;
• Reviewing and giving its opinion about the annual report including the financial statement of the establishment before their transmission to social bodies for approval;
• Reviewing any statement of the establishment before its submission to supervising authorities;
• Examining any investment or operation which is likely to be harmful to the financial situation of the establishment and conveyed to it by auditors or external auditors.

Circular of BCT to authorised intermediaries n° 2006-07 of 24 July 2006 

These establishments must as well establish a conformity control system approved by the Board of Directors or the supervision Board and reviewed annually. The loan estalishments have to set up in their structure a permanent body of control of conformity in charge, notably, of determining and assessing risks of non-conformity to loans and regulations into force, to rules of appropriate operation of the profession and good practices.

Annual accounts of these establishments issuing public call for savings are subdued to countersigning by two auditors members of Tunisian auditor's council.

             Circular of BCT to authorised intermediaries n° 2006-06 of 24 July 2006 

Preventive and repressive measures

The supervision can lead to either preventive or repressive measures.

• Preventive measures

  • Injunction power towards loan establishments as to notably :
    • Increase the capital,
    • Ban any distribution of dividends,
    • Set up provisions.

Law n° 2001-65 relating to loan establishments provided for a temporary management mechanism to deal with loan establishments facing difficulties. In this framework, the Central Bank appoints a temporary director vested with powers of running, managing and representing the loan establishment. This temporary management expires when the loan establishment suspends payment: In this case, the temporary director suggests the legal liquidation of the aforesaid establishment.

• Intervention power

  If needs be, the Governor of the Central Bank can invite the shareholders to back up their loan establishment and, if necessary, resort to solidarity by arranging for aid from all loan establishments to assist the loan establishment facing difficulties, protect depositors' interest and preserve the reputation of the banking system.

• Repressive measures

The Central Bank is endowed with a disciplinary power it shares with the banking Commission, as to sanction breaches of banking legislation and regulation made by banks and their managers.

These sanctions are of different categories :

• Warning,
• Reprimand,
• A fine, that can amount to five times the amount of the infringement,
• Suspension of any assistance from the Central Bank of Tunisia,
• Warning addressed to loan establishment managers failing to comply with the rules governing the banking profession.

The Central Bank can also forbid either temporarily or permanently any chartered auditor who is in breach of duties cast upon him in the banking Act to carry out his activity.

Other sanctions may be pronounced on the initiative of the Governor of the Central Bank, by a collegial body of juridictional nature called "banking Commission" presided over by a magistrate and made up of representatives of the Central Bank, the Ministry of Finance and Tunisia Professional Association of Banks and financial establishments.

These sanctions are the following :

• Ban to carry out certain operations and any other limitations in the carrying out of activity,
• Withdrawal of the status of chartered intermediary,
• Licence Withdrawal.

This commission can also pronounce against bank managers guilty of breaches of banking legislation and regulation, the following sanctions :

• Temporary suspension of any duty with or without appointment of a provisional director,
• Suspension of duty, with or without appointment of a provisional director,
• A fine that can amount to five times the amount of the infringement.