Banking Laws’ Modernization and Crisis Preparedness in Tunisia

Project Development Objective (PDO)

The objective of this project is to improve the soundness and safety of the Tunisian banking sector through the modernization of the banking laws and improved crisis preparedness and management capabilities.


The Central Bank of Tunisia (CBT) is seeking to strengthen its banking system to mitigate risks related to high nonpaying loans, tight liquidity, and low solvency, which are further exacerbated by an inadequate legal, regulatory, and supervisory framework. Through this project, Tunisian authorities are hoping to address gaps identified in the 2012 Financial Sector Assessment Program (FSAP), including (a) weak and inadequate crisis management arrangements, (b) protocols and capabilities, and (c) weak legal framework in the banking sector to support banking supervision and regulation.

Specifically, the authorities are seeking to strengthen (a) CBT’s objectives, independence, autonomy, instruments, powers, transparency, accountability, and cooperation; (b) banking supervision and ongoing regulation; and (c) the legal framework for adequate licensing criteria and procedures as well as the legal provisions covering the governance structure of banks. This project is helping provide adequate powers to CBT to handle distressed financial institutions and bank resolution.


The project is supporting the following activities:

1.  Assessing the major roadblocks to be lifted so authorities increase their efficiency in managing a
     financial crisis 

2.  Conducting a crisis simulation exercise 

3.  Providing an action plan to improve crisis preparedness and management

4.  Drafting financial stability protocol between the regulatory agencies

5.  Drafting new provisions of the two relevant banking laws

Expected Outcomes

The main expected outcomes of the project are as follows:

Short to medium term
     1.    Establishing process and instruments and more adequate preparation of authorities for
            handling a crisis

     2.    Providing greater clarity to decision makers in how and when to act in the event of a crisis

     3.    Providing an approved modernized legal framework that allows for more robust supervision
            of the banking sector by CBT

Long-term effect (contribution)
     1.    Increasing financial sector stability, whereby the future legal framework will increase CBT’s
            skills, powers, and independence in managing distressed credit institutions and bank
            supervision in general

     2.    Providing greater knowledge of how to effectively manage or avert a crisis, which will
            contribute to financial stability

     3.    Reducing fiscal cost in managing a crisis