Reports on Observance of Standards and
1. The successful progression of Tunisia toward a modern market economy is due in large part to its prudent macroeconomic management and high degree of social cohesion, made possible by substantial improvements in social indicators. Although the government has retained a large degree of control over economic activity, its action has generally been carried out by sound institutions and within the rule of law. While Tunisia has already made progress towards strengthening the transparency of its economic policy, the gradual disengagement of the state from productive activities and from direct economic intervention presently under way will further enhance the clarity and the transparency of the government's economic action.
2. The authorities have recently embarked on a broad-based set of actions to increase the transparency of policies, which has included participation in other IMF transparency initiatives besides this one (i.e., decision to publish the mission's preliminary conclusions and the staff report for the 1999 Article IV consultation, and intention to subscribe to the IMF's Special Data Dissemination Standards by 2000). On the domestic front, the authorities adopted a new and modern law on statistics in April 1999, which provides for, among other things, statistical secrecy, transparency, and harmonization with international methods and concepts. They have also improved the dissemination of statistical and policy information on the worldwide web, including information on privatizations, and central bank regulations on banking and exchange practices.
3. In the context of this experimental report, the staff have considered the authorities' practices against a set of internationally accepted standards. In the area of data dissemination, fiscal transparency, and monetary and financial policy transparency, Tunisian practices have been evaluated mainly against the Fund's Special Data Dissemination Standards (SDDS), its Code of Good Practices on Fiscal Transparency, the Code of Good Practices on Transparency in Monetary and Financial Policies. Regarding the transparency aspects of banking supervision, the reference document that has been used is the IMF's Guidance Note for the Monitoring of Financial Systems Under Article IV Surveillance.
4. In the staff's view, Tunisia has made important strides toward transparency and, with its forthcoming subscription to the SDDS, is on its way to achieving a relatively high degree of transparency in the areas covered by this report. Still, transparency could be improved in the following areas:Fiscal policies
5. While Tunisia has not yet subscribed to the Special Data Dissemination Standard (SDDS), the authorities have indicated to Fund staff that they intend to subscribe in 2000. To this end, a Fund staff mission went to Tunisia in May 1999 to assess its statistical compilation and dissemination practices and their consistency with the SDDS.
6. The main transparency standards for the dissemination of macroeconomic data are the IMF's SDDS and General Data Dissemination System (GDDS). The SDDS was established in April 1996 to guide members that have, or that might seek, access to international capital markets in the provision of their economic and financial data to the public. The objectives of the SDDS are to enhance the availability of timely and comprehensive statistics and therefore contribute to the pursuit of sound macroeconomic policies. The GDDS was established in December 1997. The primary focus of the GDDS is on improvement in data quality. This stands in contrast with the SDDS, where the focus is on dissemination in countries that generally already meet high data quality standards.
7. The SDDS is a "good statistical practices" standard by which a country's dissemination methods can be measured. It covers four sectors of the economy (real, fiscal, financial, and external), as well as population, and comprises four dimensions: the data (coverage, periodicity, and timeliness) access by the public, integrity, and quality.
8. A subscribing member is expected to submit information about its data and its dissemination practices--its metadata--to the IMF for presentation on the electronic bulletin board (DSBB) at http://dsbb.imf.org. Subscribing countries must also operate an Internet site, called the National Summary Data Page (NSDP), which must present the data and components covered by the SDDS, and provide a hyperlink to the DSBB. Each subscribing country must have created a NSDP by the end of 1999.
9. Monitoring by Fund staff of observance of the SDDS is limited to coverage, periodicity, and timeliness, as well as the advance release calendars. Countries subscribing to the SDDS must fully observe the SDDS according to an implementation timetable throughout 1999.1
10. A new statistics law of April 13, 1999 covering the government statistical structures was recently adopted in Tunisia. It defines the basic principles of statistics gathering, and the mission and units making up the comprehensive statistical system. The principles defined by the law are: statistical secrecy, obligation to respond to questionnaires, transparency, respect of statistical periodicity and timeliness requirements, and harmonization with international methods and concepts. For the statistical secrecy of censuses and surveys conducted by government statistical units, the law prescribes that individual data collected in the statistical surveys defined by the law may be used only for statistical purposes.2
11. The National Statistics Institute (INS), which is part of the Ministry of Economic Development, is the central executive body of the statistics system and is responsible for the technical coordination of statistical activities. Specifically, the INS is responsible for the compilation and publication of data on the real (or nonfinancial) sector, social and labor market, foreign trade, and population.
12. The Directorate General of the Treasury, which is part of the Ministry of Finance, is responsible for the compilation of fiscal data (central government operations and public debt operations). Apart from the final budget accounting law (loi de rglement) published in the Journal Officiel de la Rpublique de Tunisie (Official Gazette), the Directorate General of the Treasury has no legal obligation to publish fiscal data. Monthly data on the operations of the central government and public debt operations are disseminated only for the internal needs of the government.
13. The Central Bank of Tunisia (BCT) is responsible for the compilation and publication of data on the financial sector, balance of payments, international reserves, interest rates, and exchange rates. The BCT is governed by Organic Law No. 58-90 of September 19, 1958. According to this law, the BCT must publish its accounting statement in the Official Gazette every ten days. The monthly data on the position of the central bank and international reserves are prepared on the basis of the 10-day statement for the end of the reference month. The accounting statements of the deposit money banks are reported periodically to the BCT in accordance with Circular 93-08 of July 10, 1993, which guarantees the confidentiality of the data reported. The data needed to calculate the average interbank exchange rates are collected in accordance with Circular 97-07.
14. As indicated above, Tunisia wishes to subscribe to the SDDS and an IMF staff mission went to Tunisia in May 1999 to assess the country's statistical data compilation and dissemination practices, and their consistency with the SDDS. The mission's assessment is summarized as follows:
15. The authorities' desire to use the SDDS framework and to make the necessary improvements to ensure that the statistical compilation and dissemination practices will be in compliance with the SDDS is encouraging. As far as the statistical compilation practices are concerned, the main challenge involves developing a methodology for the production of quarterly national accounts. Although the May 1999 Fund's technical assistance mission concluded that the project was feasible and well underway, it recommended that additional resources be assigned to it. Work is also required for the production of consolidated general government data and labor market statistics (employment, unemployment, and wages/earnings) that are in compliance with the SDDS.
16. Dissemination practices also need to be adjusted to meet the criteria of the SDDS.7 The data that have until now been disseminated only within the government (such as central government operations and debt) must be disseminated to the general public. The publication lags for a number of statistics must also be shortened to meet the SDDS requirement. Finally, the publication and the observance of a release calendar for all data covered by the SDDS require changes in the statistical procedures currently in force.
17. Clarity of roles and responsibilities: The government sector, as defined by the Constitution and by law, is consistent with the System of National Accounts; its boundaries vis--vis the rest of the economy are therefore well defined. Government involvement in the economy is pervasive, but generally based on explicit regulation (covering, for example, investment promotion, price controls, external and domestic trade) or on legal monopolies (for example, telecommunications, public utilities, and imports of sugar and tea). Government equity holdings can be identified but they are not published. There is a large nonfinancial public enterprise sector, and government ownership of the banking sector is extensive. In the past, sizable quasi-fiscal activities by public enterprises and public banks, added to shortcomings in prudential regulation and bankruptcy procedures, contributed to an accumulation of public enterprise debt and nonperforming loans in the banks' portfolios, all of which carried an implicit public guarantee. As a result, in 1999, the government took over public enterprise debt valued at over TD 700 million (face value) (3.3 percent of GDP). Steps have also been taken to resolve the problem of nonperforming loans to the private sector (22 percent of GDP at end-1998) without additional budgetary contributions; and government guarantees have been eliminated, except for exchange rate guarantees that are due to expire in 2000.
18. With fiscal responsibilities concentrated at the central level, the responsibilities of local governments are limited and clearly defined. Local government budgets are approved by the central government--when expenditure exceeds a certain level--and executed within the treasury. There are numerous extrabudgetary funds, representing about 5 percent of central government budgetary spending. Although these funds are not subject to strict annual appropriations, they have been included in the budget presentation since 1997 and remain under the control of the Ministry of Finance. Autonomous state entities like colleges and hospitals that collect fees have separate budgets (although they remain subject to public accounting rules), and their activities are only reflected in an annex to the state budget.
19. The budget identifies and quantifies subsidies or transfers to public enterprises or public banks performing quasi-fiscal activities (e.g., special transportation fares for students, loans to small enterprises) as well as profits transferred by public enterprises to the budget. However, the cost of some quasi-fiscal activities, such as the provision of credit to insolvent farmers, is still borne by public banks and only assumed by the budget ex-post when the loans are forgiven. The arrears and nonperforming bank loans linked to the noncommercial and quasi-fiscal activities of the Cereals and Edible Oil Agencies and of public enterprises were explicitly recognized and taken over by the government in two separate operations in 1996 and 1999, respectively. Another such operation has been announced with regard to nonperforming loans to small farmers. The cost of the 1996 operation was actually financed by the central bank and was explicitly reflected in its operating statement, its balance sheet, and in the amount of profit transferred to the budget.
20. The legal and administrative framework for fiscal management is generally appropriate. The budget law and the public accounting law are comprehensive. Accounting procedures allow an effective monitoring of the financial activities of the state. The annual budget law authorizes spending appropriations and revenue collection, and provides estimates for extrabudgetary funds. Expenditures on utilities in excess of appropriations have taken place in the past; the authorities have recently started to identify the payments arrears accumulated on account of these expenditures, and intend to reintegrate them in to the budget and to settle them over the next few years. Supplementary budgets, which have to be approved by the National Assembly, are rarely used. The modest contingency fund included in the budget (1 percent of central government budgetary expenditure) is intended for urgent or difficult to forecast expenditure under the control of the Ministry of Finance, and its use is disclosed ex post; it is typically used in full for urgent new programs, cost adjustments to existing programs, and for public wage adjustments.
21. Although regulations for all major taxes have been recently modernized, there are numerous extrabudgetary taxes and fees that complicate tax administration and compliance, and result in a growing number of disputes. In addition, there are shortcomings in appeal procedures, which the authorities have begun to address. The law on civil service clearly states the obligations of civil servants.
22. Public Availability of Information: Tunisia reports annual data in the IMF's Government Finance Statistics (GFS) format for the central government with a two year lag, including social security funds and extrabudgetary accounts, but excluding local governments. As noted, Tunisia plans to subscribe to the SDDS. The release of fiscal information has improved markedly in recent years. In the near future, with the subscription to the SDDS, a statement of fiscal reporting practices will be published, and an advance release date calendar announced. In reaction to past concerns about the transparency of privatization, the authorities have greatly increased dissemination of information on the privatization process and its legal framework, including through a dedicated website.
23. Fiscal activity of the government is published and widely discussed in the context of the five-year Economic Development Plan. Budget documents include figures for the preceding year, and set a ceiling for government guarantees. However, while the coverage of central government transactions includes extrabudgetary funds and some autonomous entities, social security is not included in budget documents and little is published on local government budgets and accounts. Thus, no information is provided on "general government." No comprehensive information is published on tax expenditures, contingent liabilities, and quasi-fiscal activities. Although some data on public debt and financial assets is provided to the National Assembly, no detailed information is published.
24. Open Budget Preparation, Execution, and Reporting: Fiscal policy is designed within the five-year Economic Development Plan, which sets a clear macroeconomic framework and specifies explicit fiscal objectives in terms of tax ratio, central government deficit, debt ratio, public investment, and public employment. The annual budget derives from this framework, and from the macroeconomic assumptions and forecasts contained in the annual Economic Budget, and is consistent with the Plan. Medium-term sustainability is evaluated within this framework. However, the Plan is not a rolling plan but a fixed-period plan and, thus, does not fully constitute a medium-term budget framework. Long-term strategic studies are conducted in specific areas (social security, health, education, and civil service) but are not published. During the internal budget preparation, new policies are clearly separated from existing commitments, although not in the budget documents. Some fiscal risks--like those arising from variations in the weather and tourism--are identified but not quantified. Net lending is systematically underestimated in the budget. The overall balance is not specifically reported in budget documents going to the National Assembly, because these include borrowing as revenue and amortization as expenditure.
25. Tunisia has a modern and effective budgetary and accounting system that follows the French system. The classification of central government budgetary revenues and expenditures is compatible with the GFS guidelines, and is also used for extrabudgetary funds and autonomous entities. Accounting is on a cash basis. Budget execution is controlled internally by different entities at the various stages of expenditure (commitment, payment order, and payment). The accounting framework can identify arrears between the commitment and payment order stages. Explicit procedures for procurement and employment exist and are followed in practice.
26. Aggregate data on the budget outcome are generated monthly in a timely manner, but they are not published. The final central government budget accounts reflect high standards of coverage and reliability; they are reconciled with budget appropriations; and are audited by the national audit institution (Cour des comptes). However, the final report is presented to the National Assembly more than a year after the end of the accounting period. Output and outcomes of government programs are assessed in detail in the context of the annual report on the execution of the Economic Development Plan.
27. Independent Assurances of Integrity: The Cour des comptes is recognized as performing high quality auditing. It was established in the constitution and its head is appointed by the President alone. Although the Cour organizes itself autonomously, it is not institutionally independent from the executive branch. Its budget and staffing are determined within the normal budget procedure. The Cour reports directly to both the President (who transmits the report to the government) and the National Assembly. It can bring matters to ordinary courts on its own initiative. Recently, a High Committee of Administrative and Financial Control has also been appointed by law to supervise the activities of all internal auditing bodies of the administration, as well as the implementation of the recommendations of the Cour, and to report to the President. Macroeconomic forecasts for the year ahead are presented and discussed every year, but in general are not subject to independent scrutiny. The national statistics institute has technical independence, but is accountable to the Ministry of Economic Development.
28. Based upon the description of practices provided by the authorities and summarized above, Tunisia has achieved a considerable degree of transparency in fiscal management. Recent improvements have enhanced the coverage of the state budget by including extrabudgetary funds; tax laws have been modernized; and quasi-fiscal activities by public banks have been reduced. The ongoing economic liberalization and privatization processes should enhance the separation between public and private activities. In addition, the takeover by the state budget of a large part of public enterprise debt is an important step toward identifying, and eventually clearing, contingent liabilities of the government. Further improvements in data preparation and dissemination are expected as the authorities are in the process of subscribing to the SDDS by 2000.
29. However, while fiscal management practices meet many of the requirements of the Code, there remain a number of important areas where improvement is needed. These are listed below:
30. Clarity of roles and responsibilities. The Central Bank of Tunisia (BCT) is, in practice, responsible for the formulation and conduct of monetary policy. The Law which established the Central Bank of Tunisia on September 19, 1958, and which was modified on November 3, 1988, indicates that "the central bank's general mission is to defend the value of the currency and to watch over its stability. In this regard, it controls currency in circulation and credit distribution [...]."
31. The central bank law specifies that, with a view to controlling the volume of credit and regulating the money market, the central bank may, under the terms fixed by the BCT Board of Directors, buy from banks negotiable short-term government securities with less than six months to maturity and private paper listed by the Board, or conclude repurchase agreements with banks, using the same securities and private paper as collateral. Instruments used in the conduct of monetary policy, as defined in BCT Circular 89-14 setting out the organization of the money market, are market-based refinancing mechanisms (central bank credit auctions, repurchase agreements, and open market operations). The Law of September 1958 specifies that the BCT Board of Directors shall establish discount and repo rates for the central bank, as well as the characteristics of these operations.
32. The monetary management and the lender-of-last-resort functions are not explicitly distinguished. There is no clear distinction between urgent liquidity support and normal course of business financing facilities among the central bank's instruments to provide liquidity to commercial banks.
33. The BCT charter clearly and precisely defines the circumstances in which the treasury may seek credit from the central bank; in practice, such credit is granted rarely and only in exceptional circumstances (currently there is a standing advance of TD 25 million bearing interest at the annual rate of 0.5 percent per year and an additional advance of TD 17.5 million repayable over 40 years, including a grace period of five years, for which the first principal repayment fell due on July 1, 1975 and the last one on July 1, 2009).
34. The BCT charter provides for administration of the exchange regulation and empowers it to manage foreign currency assets. However, no legislation or regulation explicitly defines the respective role of the Ministry of Finance and the central bank regarding foreign exchange policy.
35. The central bank charter also provides for it to ensure, free of charge, "the safekeeping and management of securities belonging to the state; the public offering of government or government-guaranteed securities; the payment, in conjunction with government revenue offices, of interest on securities issued or guaranteed by the state." In addition, the charter indicates that the Board of Directors of the central bank "shall give its opinion on the terms under which the treasury shall issue all short-, medium-, and long-term securities." In practice, the role of the central bank regarding government securities is limited. There is no official coordination between the Ministry of Finance and the BCT on the issuance of treasury bills. Part of the stock of government securities is deposited with the central securities depository and the stock exchange, and treasury bill auctions are organized by the Treasury without the involvement of the central bank.
36. Money market. Under the September 1958 Law, the central bank is required to regulate the money market; the BCT circular of May 17, 1989 describes the procedures followed by the bank in supervising and intervening in this market. The BCT publishes, in its quarterly bulletin, the stocks of negotiable short-term debt instruments (certificates of deposit, commercial paper, and treasury bills), the volume of operations and the interest rates.
37. Payments system. The payments system is made up of clearing houses, where all transactions are paper-based. The Law of September 1958 gives the BCT responsibility for setting up and managing the clearinghouses and for centralizing the banks' cash accounts. Clearing house operations are governed by a central bank circular, and data relating to clearing operations (number and value of operations, in total, and by instrument) are published every quarter in the BCT financial statistics bulletin. A project has just been launched to set up an automated interbank payment system and should be completed in 2000. The shareholders of the clearing houses will create a new company, which will be in charge of the implementation of the new system and which will delegate its management to a new structure (Centre de compensation lectronique (CCE)).
38. Process for formulating monetary policy. Monetary policy in Tunisia aims at preserving the value of the national currency by maintaining the inflation rate at a level close to that observed by the country's commercial partners and competitors. Money supply growth is used as an intermediate target. The nominal effective exchange rate is adjusted daily to achieve the stability of the real exchange rate. These general targets are posted on the BCT's website; however, the annual targets (inflation rate and money supply growth) are not made public before June of the year to which they relate.
39. The BCT Board of Directors, which meets at least once a month according to the BCT law, sets the reference rates, maturities, and eligibility terms for the central bank's refinancing facilities. Its advance meeting schedule is not disclosed and the minutes of its meetings are not published. The last reduction in reference rates, in February 1999, was announced, not by the central bank, but by the President of the Republic. No arrangements exist for official consultation with the market participants during the monetary policy formulation process. The most important monetary policy decisions are communicated to the public by press releases and are posted on the central bank's website. Central bank circulars that concern services provided by banks to their customers are usually published in the Journal Officiel. The conduct of monetary policy is presented in a monthly central bank publication (Priodique de Conjoncture) and in the BCT Annual Report which is published with a lag of about six months.
40. Public availability of information on monetary policy: There is currently no pre-announced fixed calendar of publication and dissemination of central bank data. The central bank's 10-day report (situation dcadaire), which includes data on foreign exchange reserves, is published in the Journal Officiel and posted on the BCT's website with a 3-4 month lag. Monthly central bank and aggregate banking system balance sheets are published in the BCT's quarterly financial statistics bulletin (Statistiques Financires), as well as data on external debt, public and private. Monthly data on money supply, total credit to the economy, and net exchange reserves are published monthly with an average lag of six weeks, in the Priodique de Conjoncture. Various interest rates and monetary and prudential policy developments, the banking legislation, and selected central bank circulars can be accessed on the BCT website.
41. The terms of BCT's credit to the treasury are made public. However, there are no provisions for the central bank to publish information on the emergency financial assistance granted to banks within the framework of its role as lender of last resort.
42. Accountability and assurance of integrity of the central bank: Pursuant to the Law of September 1958, the Governor of the BCT reports every year to the President of the Republic by submitting the central bank's Annual Report approved by the Board of Directors. This report is then published and posted on the BCT's website. Under Law 67-50 on the National Credit Council (Conseil national du crdit--CNC), the central bank is required to report to the CNC annually, but this provision is no longer implemented. In addition, review of monetary policy is covered in the debate in the National Assembly on the annual report on the economic budget.
43. A government controller (censeur), appointed by decree by the President of the Republic, is responsible for general surveillance of the central bank's operations and its accounts, to be carried out through ad hoc and ex post inspections of the bank's cash offices, registers, and portfolios. The controller also approves the central bank's annual financial statements, which are published in the Journal Officiel, and reports to the Minister of Finance in a report which is copied to the Governor and included in the published annual report of the central bank. The annual balance sheet and profit and loss accounts of the BCT are published in the Journal Officiel, at the latest one month after their submission to the President of the Republic. However, the accounting policies and internal management procedures of the central bank are not made public, and there is no legal requirement that the BCT's accounts be prepared in compliance with publicly documented accounting standards. BCT staff members are subject to rules contained in a professional code of ethics, described in the BCT staff manual (Statuts du Personnel), which reiterates the general civil service staff rules and regulations; the latter are published in the Journal Officiel.
44. The 1988 revised law of the central bank specified further the role of the BCT regarding monetary policy. This law would benefit from a better clarification of the sharing of responsibilities between the government and the central bank with respect to exchange policy and public debt management.
45. A large volume of information on monetary policy is made public, either on the central bank's website, which is updated regularly, or in monthly and quarterly publications. However, the publication of the annual monetary targets (inflation rate and money supply growth) early in the year and of the schedules and minutes of meetings of the BCT Board of Directors would make monetary policy more transparent. Similarly, the announcement by the central bank itself of changes in the reference rates would clarify the bank's role and lend it further credibility in the conduct of monetary policy.
46. A clearer distinction between monetary policy operations and lender-of-last-resort operations, in the regulation as well as in disclosed data, would provide a more transparent view of the type of interventions made by the central bank.
47. Since the central bank does not report annually to the CNC as required by Law 67-50, the law should be amended accordingly.
48. The modernization of the payment system should be accompanied by new regulations compliant with international standards, clarifying the distribution of responsibilities and explaining how the system functions.
49. Regular audits of the central bank's accounts by an independent auditor and the publication of its accounting and governance procedures would enhance the transparency of central bank activities.
50. Legal framework and enforcement measures. The existing legislation (Banking Law of December 1967) unequivocally places the responsibility for banking supervision with the Central Bank of Tunisia. Also, the BCT can autonomously issue general and specific regulations relating to the prudential supervision of banks.
51. The supervisory agency (BCT) does not have the exclusive authority to license banks, since the issuance of banking licenses and the merger or acquisition of banks are authorized by the Ministry of Finance, after consultation with the CNC, based on a report from the BCT.
52. The Law provides for the prosecution of anyone violating the legislation or the banking regulations. This authority rests with the Governor of the BCT, who may apply sanctions and go as far as to suspend access to central bank refinancing. Whenever the situation of a bank so warrants, the central bank may issue directives to it to increase its capital, suspend the distribution of dividends, or increase its provisions. The central bank also has the power to place a bank in temporary receivership.
53. In cases of serious breach of the legislation or banking regulations, a special commission called the Banking Commission, composed of a magistrate (Chairman of the Commission), a representative of the Ministry of Finance, a representative of the BCT, and the Secretary General of the Professional Association of Banks, may impose the following restrictions: prohibition to carry out certain operations; withdrawal of the capacity to act as a licensed intermediary; withdrawal of a banking license and sanctions against bank directors and managers. In all other cases, a decision to withdraw a bank's license is taken by the Minister of Finance, at the initiative of either the BCT, the bank in question, or the Minister of Finance, after consultation with the CNC and on the advice of the central bank.
54. Measurement of capital adequacy and liquidity. The required minimum risk-weighted capital/asset ratio is currently 5 percent of tier one capital and will be modified to 8 percent tier one and tier two capital at end-1999; it will then be consistent with the Basle Committee capital adequacy recommendations. There is no minimum ratio of capital over total nonrisk weighted assets, nor is there any capital requirements against market risks. In addition, there is no minimum ratio between demand liabilities and highly liquid assets, nor a minimum ratio between total liability and total liquid assets.
55. Loan classification and provisioning. Banks must review loan classification on a quarterly basis and apply a level of provisioning according to categories of classification, as clearly specified in a BCT circular. The central bank can require banks to increase provisions when they are not in compliance with bank regulation. While some banks do not meet their provision requirements, the situation is improving in this regard under the close supervision of the central bank.
56. Bank reporting requirements and financial disclosure: Financial institutions must submit quarterly financial statements to the central bank in addition to monthly balance sheets. The quarterly statements include assessments of bank asset quality in accordance with the prudential rules described in BCT circulars. The annual and semi-annual statements of banks are audited by an auditor who must be a member of the Tunisian Board of Professional Accountants. Appointment of a bank's external auditor does not require approval by the central bank. The external auditor is required to pass on to the central bank any information that has a negative impact on the respective bank's financial stability. The auditor's annual report is submitted to the central bank and to the bank's general meeting of shareholders.
57. Bank accounting standards and principles are set by the BCT. Bank financial statements are not currently prepared on a consolidated basis, and accounting standards are not yet fully in line with international accounting standards (IAS). The introduction of consolidated bank financial statements and of improved bank accounting standards closely in line with international practices is planned for fiscal year 2000.
58. Banking regulations require that banks publish their annual statements in the Journal Officiel in a format established by the BCT. Starting in fiscal year 1999, such statements will include the findings of the external auditor on compliance with accounting standards and prudential regulations, and any information deemed to be significant. The banks' consolidated monthly data are published quarterly by the BCT (Statistiques Financires). The time allowed for submitting reports is relatively long: 25 days, 45 days, and 6 months respectively for monthly, quarterly, and annual reports.
59. The BCT carries out unscheduled on-site bank inspections, in addition to inspections on specific topics (e.g., Y2K issues), for which it may use the services of outside experts. On-site inspection results and recommendations are sent to the bank's Board of Directors and its auditors. External bank auditors are required to include in their annual report the findings of the central bank's on-site inspection report, if such a report was prepared during the fiscal year.
60. The responsibilities of the central bank and the Ministry of Finance are clearly established. The Ministry of Finance grants licenses with BCT's advice and imposes administrative sanctions, while the BCT regulates and supervises the banks.
61. The publication of auditors' opinions on the annual accounts of the banks, scheduled to start from fiscal year 1999, is likely to stimulate competition among banks and provide better information to nonfinancial agents on the situation of their bank.
62. The new banking chart of accounts, scheduled to take effect from 2000, should make the accounting standards of the Tunisian banking system fully compliant with pertinent international standards, particularly as regards the obligation to present consolidated accounts.
63. The criteria upon which sanctions are applied to banks violating the regulation or legislation should be clearly established and available to the public. This would improve the accountability and transparency of the supervisors.
64. The implementation of a minimum ratio of capital over total nonrisk weighted assets, some capital requirements against market risks, a minimum ratio between demand liabilities and highly liquid assets, and a minimum ratio between total liability and total liquid assets would improve the supervision of the banking system.
65. Clarity of roles, responsibilities, and objectives. The regulation of public offerings of securities and the role and responsibilities of the Financial Market Board (Conseil du March Financier--CMF), market intermediaries, the Tunisian Stock Exchange (Bourse des Valeurs Mobilires de Tunisie--BVMT), and the Tunisian Interprofessional Clearing Company and Securities Depository (Socit Tunisienne Interprofessionnelle de Compensation et de Dpt de Valeurs Mobilires--STICODEVAM) are defined in a single law passed in November 1994 (law 94-117 regulating securities operations).
66. The CMF ensures the protection of savings invested in securities, exchange-traded financial products, and any other instrument available to the public. In this context, it issues regulations on the organization and functioning of the capital markets and the professional rules applicable to persons accepting deposits from the public, stock exchange intermediaries, persons responsible for the joint or individual management of portfolios, and STICODEVAM. It is also responsible for supervision of capital market participants (market intermediaries, fund managers, and mutual funds, the BVMT, STICODEVAM) and is responsible for licensing agents, enforcing regulations and applying sanctions. It is an autonomous legal entity with its own financial resources (fees set by Order of the Minister of Finance, collected from the BVMT, the STICODEVAM, mutual funds, issuers, etc.).
67. Although the stock exchange has some self-regulatory authority, a government commissioner appointed by the Minister of Finance as a full-fledged member of the stock exchange has the role of monitoring compliance with the regulations and bylaws of the stock exchange. He can suspend any decision or measure adopted by the stock exchange within three days of the decision. He then informs the CMF which decides if an intervention is needed. He notifies the CMF of any irregularity related to market operators.
68. Open process for formulating and reporting securities market policies. In accordance with capital market regulations, the professional association of market intermediaries may make proposals on the development of capital markets. Draft laws and draft regulations on capital markets are generally submitted for discussion to market participants. There is no formal procedure for information sharing and consultation between financial agencies, either domestic, or international. Nevertheless, the CMF is a member of the International Organization of Securities Commissions (IOSCO) and has the authority to provide information to its foreign counterparts when needed.
69. The fees charged by CMF and BVMT to financial institutions are publicly disclosed, since they are set by order of the Minister of Finances, published in the Journal Officiel.
70. Public availability of information on securities market policies: CMF publications include the Annual Report and a daily official bulletin. The Law does not indicate whether the Annual Report is to be made public and the CMF did not publish one in 1997--a 1998 Annual Report had not yet been issued in June 1999. Regulations issued by the CMF are published in the Journal Officiel, and its decisions are made public in the daily official bulletin, after clearance by the Ministry of Finance. The CMF will soon have a website.
71. The regulations on securities require that banks and other companies registered on the stock exchange submit semi-annual financial statements and publish their annual financial statements in the press. Consolidated market data are published in the CMF daily official bulletin and in the BCT monthly bulletin, the Périodique de Conjoncture. Company-specific market data are published in the BVMT daily bulletin.
72. There is no investor protection fund against malpractice, fraud, clearing and settlement risks, or bankruptcy of market intermediaries, but plans to introduce such a fund are under preparation. Nevertheless, a securities market guarantee fund was established for the protection of securities firms against default in their transactions among themselves. This fund is managed by the stock exchange and must report to the CMF any support it provides.
73. Accountability and assurance of integrity by securities market regulatory agencies: The President of the CMF is required to report annually to the President of the Republic. CMF staff members are required to declare their ownership of any exchange-traded securities or financial instruments. They are subject to the rules--published in the Journal Officiel--applicable to civil servants in the conduct of their official duties. The General Regulations of the Stock Exchange (Réglement Général de la Bourse), March 1996, which are published, contain a professional code of ethics for stock exchange staff. The CMF does not publish its financial statements but plans to do so in the near future. They will be audited by an independent auditor.
74. Appeals may be lodged before the Tunis Court of Appeals against disciplinary decisions of the CMF.
75. Each provider of financial services8 is supervised and regulated either by the central bank or by the CMF, and the distribution of roles between these two entities is clearly defined. With the development of the money market, it will become necessary to clarify the central bank's responsibility with respect to the activities of the central securities depository (STICODEVAM), whether they involve transactions on the money market between intermediaries or monetary policy operations.
76. However, the independence of the regulatory authorities is not yet fully operational, insofar as all decisions of the regulatory authorities, including the licensing of market intermediaries and the issuance of clearance for public offerings of securities, are submitted for the approval of the Minister of Finance before publication in the CMF's Official Bulletin. In addition, the functions assigned to the government-appointed commissioner in monitoring the operations of the stock exchange creates ambiguity as regards the CMF's authority and oversight responsibilities defined in the securities market legislation. This ambiguity could be removed by indicating specifically in what circumstances the commissioner should intervene.
77. Progress towards full, timely and accurate disclosure of financial results by issuers of securities has been made lately. However, a number of listed companies do not meet the prescribed deadline for the disclosure of their semi-annual financial statements, and the number of companies that are not in full compliance with dissemination standards, in particular the requirement to publish annual financial statements in the press, remains relatively high. Financial reporting requirements for market intermediaries need to be more precisely defined; a decree of the Minister of Finance is being prepared to address this issue. Also, the CMF should be able to present its annual report within a shorter space of time and should make it public as a matter of routine.
78. The regulations to promote the transparency of financial transactions and deter price manipulation and other unfair trading practices should also be improved. In particular, current stock price stabilization agreements (contrats de liquidité) between issuers and intermediaries in the market do not seem adequately regulated. Similarly, insofar as the equity market is very concentrated (banks account for more than 60 percent of market capitalization), it would be advisable to strengthen the regulations on nonarm's-length placements, trading, and management of securities among related parties, especially among banks, market intermediaries, and mutual funds linked by common ownership interests.