Several factors weaken banks’ incentives to compete in the markets on which this study focuses. Common shareholders and indirect interlocking directorates reduce banks’ incentives to compete and increase the risks of co‑ordination. This is exacerbated by legal provisions and market practices that facilitate the sharing of commercially sensitive information among members of the banking association. State‑owned banks seem unable to vigorously compete with other lenders. Stakeholders indicated that state‑owned banks remain subject to political influence, and that they are used to provide finance to state‑owned enterprises.
Competition Market Study of Tunisia's Retail Banking Sector
3. Factors weakening competition in Tunisia’s retail banking sector
Abstract
This chapter describes several issues in Tunisia’s retail banking sector that may weaken competition in the markets on which this study focuses, and provides the background for an analysis of banking services. These issues include the presence of state‑owned financial institutions (Section 3.1), the ties between large Tunisian industrial groups and banks (Section 3.2), the connections among listed banks via common shareholders and board directorships (Section 3.3), the banking association (Section 3.4), the mediation mechanism (Section 3.5) and the limited co‑operation between Tunisia’s financial regulator and competition authority (Section 3.6). Each of these factors has the potential to weaken the incentives of banks to compete and thus negatively affect outcomes for consumers.
3.1. Role of state‑owned financial institutions
Many Tunisian financial institutions are owned by the state. This section describes the role of state‑owned financial institutions and its potential impact on market dynamics.
3.1.1. Involvement of the state in financial services
As of the end of 2022, five of Tunisia’s 22 domestic banks were state‑owned. Two – the Banque Tunisienne de Solidarité (BTS) and the Banque de Financement des Petites et Moyennes Entreprises (BFPME) – have a mandate to provide credit to micro, small and medium-sized enterprises (MSMEs). The remaining three are the second-, third- and fourth-largest commercial banks in the country based on total assets (see Section 2.2.1).
The state also owns La Poste Tunisienne, which even without a banking licence is a major player in the retail banking sector and the country’s largest provider of current accounts and savings accounts to individuals (see Chapter 4). Three other banks are mixed, jointly owned by the Tunisian state and by another Arab country.
Although state‑owned banks with specific public policy mandates are common internationally and may be used to mitigate certain market failures by, for instance, improving MSMEs’ access to finance amid information asymmetries, it is unclear why Tunisia’s government needs to control almost one‑third of the country’s banking assets.
3.1.2. Potential effects on competition
The existence of universal state‑owned banks in Tunisia creates risks both in the financial sector and the broader economy.
First, the state has the potential to act as the unique owner of state‑owned institutions and co‑ordinate their strategies. This is not necessarily an anti-competitive practice, but given the combined size of state‑owned entities, the state is able to affect market dynamics. Table 3.1 shows that the three largest state‑owned banks account for around 30% of all banking assets in Tunisia and around 46% of business loans. Combined with La Poste, state‑owned entities account for around 44% of personal current accounts (PCAs) and 24% of business current accounts (BCAs).
Table 3.1. State‑owned banking sector entities’ shares of selected market segments
Note: Business loans include four types of loans (overdrafts, short-term, medium-term and long-term loans). Total assets as of the end of 2021; shares of PCA and BCA segments as of 2022; shares of business loans as of the end of 2021.
Source: OECD consumer survey; OECD MSME survey; BCT data; OECD calculations.
Second, competition in the finance sector may be affected by state‑owned banks as they may have fewer incentives to improve efficiency and innovate if management is insulated from standard marketplace incentives such as pressure to reduce costs and increase profits. This is consistent with the findings on overall profitability presented in Section 2.2.1, showing that state‑owned banks are less profitable than other listed banks although the OECD understands that the profitability issue is also the result of other constraints set by the State.
Third, the role of the state as both the owner of the largest banks and the financial regulator may create significant conflicts of interest and result in preferential treatment that may distort market dynamics. For example, state‑owned banks may be allowed to have higher shares of non-performing loans (NPLs), as shown in Table 3.2. NPL levels are high for three main reasons. The first is that the government has historically attempted, through state‑owned banks, to expand Tunisia’s tourism sector. This has left state lenders exposed to the sector, which has faced a number of difficulties and in which revenues have been decreasing, especially after the 2011 revolution and the 2015 terrorist attacks in Bardo and Sousse (OECD, 2023[1]). The second is that state‑owned banks used to grant easy credit to borrowers connected with former President Zine El Abidine Ben Ali. It is estimated that nearly 30% of that credit was provided with no guarantees of repayment (Morsy, Kamar and Selim, 2018[2]) and (World Bank, 2014[3]). The third is that law no. 89-9 on public holdings, companies and establishments restricts the ability of management to negotiate and resolve NPLs.
Table 3.2. Tunisian listed banks’ non-performing loans
Note: Simple average of proportion of NPLs.
Source: Listed banks’ annual reports 2018‑21.
Fourth, state‑owned banks may also affect competition in non-finance parts of the economy, for example if state‑owned banks suffer from political interference and are used by the government to direct funding to state‑owned enterprises or other connected businesses. The (World Bank, 2014[3]) found that Tunisia’s state‑owned banks were not independent of political interference and that the role of the state as the largest finance provider and largest borrower, in addition to its role as the regulator of the financial sector, created significant conflicts of interest, resulting in poor financial performance. Several stakeholders interviewed by the OECD stated that state‑owned banks are still subject to political influence, a situation exacerbated by the current context where the country is experiencing an unprecedented budget deficit and all major public companies are facing serious financial disequilibrium.
3.1.3. Conclusions
The vast presence of state‑owned companies in the financial sector poses risks to competition in both Tunisia’s finance and non-finance sectors. Evidence suggests that state‑owned banks account for a large proportion of Tunisia’s financial markets, that they tend to be less efficient and are subject to political influence, and that they are used to facilitate access to finance for state‑owned enterprises. The level of exposure shown in 2022 by a major public bank towards a state-owned company - considered as a related party within the meaning of the Banking Act - in breach of Circular No. 2018-06 is probably an edifying illustration of this influence (see section 5.2.3).
3.2. Ties between large industrial groups and the banking sector
Since independence in 1956, the state has played an important role in Tunisia’s economy. The objective of the country’s industrial policy was to develop certain sectors and create large enterprises and state‑owned banks. Several waves of privatisation in the mid‑1980s and in 2006‑07 have consolidated the economic power in the hands of a few big industrial groups that control large swathes of the Tunisian economy (OECD, 2018[4]). The 2022 OECD Peer Review of Competition Law and Policy in Tunisia found that in 2019, five industrial groups controlled more than 60% of the turnover of the most important private companies in Tunisia. These industrial groups have some connections in different markets, but each is controlled by a different majority shareholder. These five industrial groups also have direct links to banks (OECD, 2022[5]).
The participation of private Tunisian investors – namely the country’s large industrial groups – has increased in seven among Tunisia’s 12 listed banks. Figure 3.1 shows the most recent available breakdown of listed banks’ shareholders. The figure considers four types of investors: the government, private Tunisian investors, foreign investors, and small investors with stakes of less than 5%. Banks are ordered from the largest (left) to the smallest (right), based on total assets at the end of 2021.
Figure 3.1. Ownership of Tunisia’s listed banks
Note: Data are expressed as a share of total shareholder equity outstanding by type of shareholder. Data for UIB, STB Bank and WIFAK Bank were not available for 2015, so more recent data have been used. Banks are ranked by total assets, from left to right, as of the end of 2021.
Source: Refinitiv; OECD calculations.
Evidence suggests that the influence of large industrial groups on the finance sector has a negative impact on competition in Tunisia’s financial and non-financial markets alike. Stakeholders interviewed by the OECD expressed concerns over the governance of large banks controlled by private Tunisian investors. Stakeholders said informal decision-making mechanisms at banks could reduce the importance of boards and increase the ability of industrial groups to influence decisions, and that the process of selecting independent boards of directors remains ineffective despite the independence criteria set out Circular No. 2021-5, possibly resulting in banks lacking truly independent directors. This is an important context within which to consider the competitive landscape of Tunisia’s banking sector. Poor governance structures increase the influence that large industrial groups have over banks and pose risks to the ability of smaller businesses without such connections to access bank finance. These risks are discussed in Section 5.2.3.
Finally, the analysis finds that some of Tunisia’s large industrial groups have ownership stakes in several listed banks (data for non-listed banks was not available). This raises competition concerns across all the markets in the scope of this study. These concerns are discussed in Section 3.3.
3.3. Common ownership and interlocking directorates
Several banks in Tunisia are connected via either common shareholders or directors linked to common shareholders. This may reduce incentives to compete and may facilitate co‑ordination among banks. This section describes the potential risks to competition arising generally from common ownership and interlocking directorates, and describes the specific situation in Tunisia. The OECD’s analysis is based on publicly available information.
While the literature has typically focused on common shareholders that manage passive index funds, such as large institutional investors, in Tunisia common shareholders are represented by large domestic industrial groups that are family-owned and which hold minority equity shares in the country’s banks.
Common ownership refers to a situation in which firms competing in a market have shareholders in common, typically investors that hold minority equity stakes. One way in which minority shareholders can exert influence over companies is by voting on the selection of their boards of directors (OECD (2017[6]) discusses other ways shareholders may influence management). This may result in competing firms having individuals connected to the same shareholder sitting on their boards. The literature refers to this situation using the term “interlocking directorates”. Interlocks may be direct if the same person sits on the boards of two competing companies, or indirect if the two companies are linked to different people who are related in some way (for example, because they are part of the same family) to the same shareholder (OECD, 2008[7]). The effects of interlocking directorates may reinforce the effects of common ownership.
3.3.1. Potential effects on competition
There is growing debate on the effects of common ownership and interlocking directorates on competition, and the extent to which common minority shareholders exert influence over firms [see OECD (2017[6]) and (2008[7])]. This section briefly presents the theoretical effects on competition. Box 3.1 presents a selection of empirical work to assess the impact of common ownership and interlocking directorates on competition.
First, a shareholder with holdings in several competing firms may find it profitable if a controlled firm unilaterally increases prices. Given that a price increase may result in some customers switching to rivals, the common shareholder will benefit from both the increased price paid by customers staying with the current provider and from the increased sales of the rival firm. In other words, the cost of losing customers to rivals is mitigated for the common shareholder if the shareholder also has equity shares in rival companies that acquire new customers. Interlocking directorates may strengthen these effects, especially if board membership comes attached to financial interests and remuneration is tied to the firm’s performance (as may be the case if a director is linked to a shareholder also holding shares in the firm).
Second, common ownership may facilitate co‑ordination among firms in investors’ portfolios. Common shareholders may facilitate the transmission of information between rival firms and monitor compliance, allowing them to sustain a jointly profit-maximising position. As for the unilateral effects described above, co‑ordination may be strengthened by the existence of common board members. In fact, board members are aware of and can influence strategic and commercial information on rival banks that can facilitate tacit or explicit co‑ordination. Information shared in a board meeting at one bank can affect the decisions taken in a board meeting at a rival bank sharing the same board members. In addition, interlocking directorates can be a monitoring tool to prevent deviation from co‑ordinated behaviours, as well as potentially undermining incentives to compete more generally, for example to innovate (OECD, 2017[6]).
Finally, the existence of common ownership and interlocking directorates has implications for measuring market concentration. The measurement of the concentration in a market is an important means of assessing how competition works, as the structure of a market may affect firms’ incentives to compete, and increased concentration may be associated with higher mark-ups and increased market power. Two of the most widely used metrics to measure concentration are the Herfindahl-Hirschman Index (HHI) and concentration ratios (CRs) [see for example OECD (2018[8]) and (2021[9])]. Measures such as the HHI and CRs assume firms behave independently from one another. However, when one shareholder owns shares in, or exerts influence over, several companies competing in the same market, this may not be true.1
Box 3.1. Empirical evidence on the effects of common ownership and interlocking directorates
Several empirical studies have investigated whether firms act on incentives to dampen competition created by common ownership and interlocking directorates. However, the literature is still at a nascent stage and there is no consensus on whether common ownership reduces competition.
For example Azar, Schmalz & Tecu (2018[10]) and Park & Seo (2019[11]) found that common ownership measured using the Modified Herfindahl-Hirschman Index (MHHI) increased prices in the US airline industry. Dennis, Gerardi & Schenone (2022[12]) challenged these results, noting that the correlation between MHHI and ticket prices arose from the market share component of the MHHI rather than the ownership and control components.
Azar, Raina & Schmalz (2022[13]) developed a Generalised HHI that captured both the degree to which banks were commonly owned by third-party investors and the extent to which banks owned shares in one another. They found that retail banking fees across US states were positively correlated with the prevalence of common shareholders but not with measures of concentration that did not take connections into account.
In 2011, Italy banned interlocking directorates in the financial sector, preventing members of boards of directors, members of internal control bodies and top managers at banking, insurance and other finance businesses from holding other such positions at competing companies. Before the introduction of the ban, 18 of the 25 largest banking groups in Italy were connected to at least one other banking group via interlocking directorates (Ghezzi and Picciau, 2022[14]). Barone, Schivardi & Sette (2020[15]) assessed the effects of the ban on interlocking directorates and found that the reform had reduced interest rates charged by banks that were previously interlocked by between 10 and 30 basis points.
3.3.2. Common ownership and interlocking directorates in Tunisia’s banking sector
This section presents the relevant regulatory framework and the prevalence of common ownership and interlocking directorates in the banking sector in Tunisia.
Legislation
Regulation limits interlocking directorates in Tunisia’s banking sector. Article 57 of Law No. 2016‑48 prescribes that no individual can be a member of a board or of a supervisory board at more than one bank or “financial institution of the same category” (this means, for example, that an individual can be on the board of a bank and also the board of an insurance company).2
Circular No. 2021-5 sets out the conditions to be met by board members in the selection process and throughout their term of office. The BCT may also oppose the appointment of individuals for such positions based on qualifications, integrity and reputational criteria prescribed in Article 56 of Law No. 2016‑48. Listed banks must notify changes in the equity owned by shareholders with stakes of more than 5% to the Bourse des Valuers Mobiliéres de Tunis and the BCT.3
Prevalence of connections between Tunisia’s listed banks
This section describes the prevalence of common shareholders and indirect interlocking directorates at Tunisia’s listed banks using the latest data available, from either April 2022 or April 2023.4
Based on the most recent available data, most listed banks were connected with at least one other bank, either via board membership or common shareholders or both.
Figure 3.2. Common shareholders at Tunisia’s listed banks, 2022‑23
Notes: Green circles indicate state‑owned banks (including BTE, which is a mixed bank), blue circles indicate banks controlled by private Tunisian investors and grey circles indicate foreign-owned banks. The size of the bubble indicates the size of the bank. Lines between two banks indicate the existence of at least a shareholder in common.
Source: Based on Bourse des Valuers Mobiliéres de Tunis (2023[16]), Listed companies, https://www.bvmt.com.tn/fr/entreprises/list.
Figure 3.2 illustrates such connections. Green circles indicate state‑owned banks, blue circles indicate banks controlled by private Tunisian investors and grey circles indicate foreign-owned banks. The size of the bank indicates the size of the bank. Lines between two banks indicate the existence of at least a shareholder in common. The OECD validated these connections with the BCT. The OECD also notes the existence of links via the board of directors, either because of indirect interlocks, who are linked the same family or industrial group or because a director is linked to a family or industrial group who is also a shareholder in another bank. The OECD identified a number of such connections but could not validate them at the time of writing. For this reason, the number of connections shown in Figure 3.2 might be an underestimate of the links between banks. Figure 3.2 also shows that larger banks have more connections than smaller banks, potentially exacerbating the risks.
3.3.3. Conclusions
The analysis above shows the prevalence of common shareholders at Tunisia’s listed banks. Most listed private banks were connected with at least another bank, either via common shareholders or via board members. The number of indirect interlocking directors identified by the OECD is relatively low and did not represent the majority on the boards at any of the listed banks, even if linked directors were counted together. However, this might be an underestimate due to the prevalence of informal connections that the OECD was informed about but was not able to identify precisely and the fact that the information available did not include banks not listed on the stock exchange.
The OECD’s analysis was based on publicly available information and the OECD was not able to assess the extent to which common ownership and interlocking directorates in retail banking in Tunisia are worsening competition. However, connections among banks, together with certain legal provisions and market practices (see Section 3.4) increase the risk of weakening incentives to compete and of co‑ordinated behaviour.
3.4. Tunisia’s banking association: the Conseil Bancaire et Financier
Banking associations, like other trade associations, represent the interests of their members. Banking associations perform important functions not only for the sector, but for the wider economy. They engage with stakeholders such as regulators and customers to advocate the interests of their membership and can provide valuable input to inform legislative decisions. They are also key for the development and implementation of guidelines and codes of conduct to ensure compliance, and for the dissemination of best practices among members. Trade associations can also play a beneficial role by, for instance, establishing industry standards.
However, case law across various jurisdictions shows that business associations often play a significant role in the development or facilitation of collusive and other anti-competitive practices (Autorité de la Concurrence, 2021[17]). For instance, the exchange, processing, and dissemination of information within an association – for example, through the collection of business data from its members – can lead to collusive practices. Other practices raising antitrust concerns relate to restrictions on access to certain activities, the implementation of unduly restrictive standards, and the misuse of an association’s role in the representation of the interests of its members. In light of these risks, business associations must be particularly careful when it comes to their internal exchanges and organisational rules.
3.4.1. Regulatory framework
Article 186 of Law No. 2016‑48 (and previously Article 31 of Law No. 2001‑65), describe the purpose of the Association Professionnelle Tunisienne des Banques et des Etablissements Financiers (APTBEF), which in May 2022 was renamed the Conseil Bancaire et Financier (CBF). The CBF currently comprises 22 universal banks, two offshore banks, two investment banks, eight leasing companies and two factoring companies (Conseil Bancaire et Financier, 2023[18]).
Among its other activities, the CBF acts as an intermediary between its members and public authorities, including the BCT. Pursuant to Article 2 of its statute (Association Professionnelle Tunisienne des Banques et des Etablissement Financiers, 2001[19]), it also ensures that its members comply with applicable regulations and aims to maintain regular relations between its members and to harmonise their internal rules. The general assembly of the CBF usually meets once a year and it appoints a council of 12 representatives (eight from banks and four from other financial institutions, all from among its members). The council meets every quarter and decisions are reached by a simple majority.
3.4.2. Risk of co‑ordinated behaviour
Although the law recognises the CBF’s intermediary role, evidence suggests that, without the appropriate safeguards, the association may facilitate co‑ordination and reduce competition among its members. In fact, stakeholders indicated that, in several instances, discussions within the CBF aimed to reach agreements on commercial terms applicable to the provision of banking services.
Certain legal provisions may facilitate co‑ordination via the CBF. Article 34 of Circular No. 1991‑22 requires that new fees are subject to consultation within the CBF, which then liaises with the BCT. This increases the risks of co‑ordinated behaviour and of exchanges of commercially sensitive price information. For example, consultations with a number of stakeholders revealed the existence of discussions within the CBF in 2020 aimed at reaching a “gentlemen agreement” on commercial terms applicable to the provision of savings accounts.5 Moreover, Article 2 (13) of the CBF's statutes states that the Council "shall study questions relating to the practice of the profession and shall bring about agreements on such questions (...)". The sharing of such commercially sensitive information among competitors is incompatible with the functioning of a competitive market. Information on future commercial behaviour, such as pricing strategies, raises particularly significant risks. The purpose of this report is not to assess these allegations, but they should be considered by the appropriate authorities.
Moreover, in 2017 the APTBEF developed three codes de deontologie, or codes of conduct, regulating interbank relationships and banks’ relationships with clients and employees. The code of conduct regulating interbank relationships reaffirms the principle of fair competition, essentially prescribing that banks should refrain from unfair commercial practices vis-à-vis other banks [see Article 7 of Association Professionnelle Tunisienne des Banques et des Etablissement Financiers (2017[20])]. The CBF is currently developing a code of corporate governance for its members.
Restrictions from hiring personnel employed by rival banks
Article 11 of the code of conduct regulating interbank relationships establishes restrictions on banks’ ability to recruit personnel already employed by other banks. These restrictions include: 1) a requirement to inform the bank whose personnel have been hired away (referred to as the “affected” bank in the code of conduct) immediately after recruitment; 2) a requirement to co‑ordinate among banks before an employee moves to another bank; 3) a requirement to refrain from assigning executives or operational managers to the same areas in which they previously worked for the other bank for a period of two years, unless agreed by the former employer; and 4) a requirement not to harm the interests of the “affected” bank by soliciting clients when recruiting portfolio managers.
These provisions can have two main effects:
First, they may weaken competition between banks by preventing them from hiring their rivals’ staff. They artificially reduce workers’ mobility and – in particular by limiting new hires’ ability to operate in certain areas and to solicit customers of their previous employers – can restrict competition among banks and negatively impact consumers.
Second, they may weaken competition in banking labour markets (see, for example, OECD (2022[21])]. Several competition authorities have investigated labour market practices and developed guidelines in this area in the past few years. One type of collusive practice involves agreements through which companies agree to refrain from (or agree on strict conditions for) recruiting one another’s employees, essentially restricting competition for employees’ labour. With such agreements, companies deprive workers of job opportunities, and of the potential to increase their salaries and improve their working conditions.
3.4.3. Past and ongoing antitrust investigations in Tunisia’s financial sector
The OECD is aware of two instances in which interactions among banks facilitated by the banking association resulted in alleged or actual co‑ordinated conduct.
In 2004, the Conseil de la Concurrence fined 19 banks over an anti-competitive agreement on fees charged for electronic cheque clearance. The conseil also fined the banking association for facilitating and monitoring the agreement (see Decision No. 3 150 of 25 June 2004).
In June 2021, the Conseil launched an investigation of a potential anti-competitive agreement among banks on how to restructure loan payments during the COVID‑19 pandemic. The conseil is investigating the role of the banking association. As of June 2023, the Conseil had not reached a decision.
In 2020, several banks filed a complaint to the BCT about an attempt to reach an agreement on capping the interest rate offered on savings accounts. Several stakeholders told the OECD that the CBF played a prominent role in negotiating this alleged agreement.6 However, the OECD understands that these complaints did not result in a formal investigation.
3.4.4. Conclusions
The banking association is an important means of protecting its members’ interests and can aid the efficient functioning of the banking system. However, without the appropriate safeguards to mitigate the risks of anti-competitive conduct, such as exchanges of information, the CBF, in its intermediary role conferred by Tunisia’s legal framework, may facilitate collusive practices and reduce competition among its members. The analysis found that existing regulation and codes of conduct may weaken competition and facilitate co‑ordination. This is consistent with practices and attempts to reach anti-competitive agreements described by stakeholders to the OECD.
3.5. The mediation mechanism in Tunisia’s retail banking sector
Mediation is an alternative dispute resolution mechanism whereby parties try to reach agreements on disputes, guided by a mediator. Countries offer various types of mediation services under different frameworks (e.g. service providers can be courts or private) and for a wide range of disputes, including disputes of a commercial or contractual nature. Mediation can be an efficient, flexible, and non-adversarial alternative to formal judicial proceedings, which in many countries tend to be slow and costly.
An effective mediation mechanism improves both consumer protection and competition. It protects consumer rights and has the potential to build trust and create incentives for consumers to be more engaged. An effective tool to lodge complaints helps consumers to exert pressure on suppliers, especially where firms enjoy market power, for example because of high switching costs. Ensuring that the mediator is – and is perceived to be – impartial and independent of any of the parties involved (including any bank) is crucial to customers’ ability to use this mechanism on a regular basis. This section describes the mediation mechanism in Tunisia’s banking sector and its effectiveness.
3.5.1. Regulatory framework
With the objectives of protecting customers and ensuring the swift resolution of disputes that may arise between banks and customers, Article 187 of Law No. 2016‑48 prescribes that the banking association shall establish a mediation body, and that each bank may appoint one or more mediators. It also prescribes that mediators should formulate resolution proposals within two months of receiving complaints, and that banks must duly inform customers of the possibility of, and procedures for, accessing mediation. Finally, Article 187 of the law refers to a government decree to regulate the conditions under which the mediation body would operate. However, the OECD understands that, as of May 2023, no decree has yet been adopted and no mediation body has been established.
Circular No. 2022‑08, introduced in October 2022, sets minimum standards for mediation services offered by banks and other financial institutions. The circular introduces a requirement to notify customers of the receipt of complaints and to provide reasons for complaints being partly or wholly rejected.
3.5.2. How the mediation mechanism works in practice
Stakeholders interviewed by the OECD suggested that Tunisia’s bank mediation mechanism is ineffective. Banks do not always inform customers about the service and mediators are not independent but are appointed and paid by banks. The process is lengthy and resolution rates are very low (approximately 17%) compared to other countries (OIF, 2020[22]). The Observatoire de l’Inclusion Financière (OIF) has called on banks to consider the establishment of a better functioning system beyond one merely complying with their legal obligation.
A report the OIF published in December 20217 shows that 301 complaints were filed in 2020 regarding lending (37.9%), payment services (20.7%) and current accounts (20.2%, two‑thirds of which involved procedures for closing accounts). Table 3.3 shows the annual number of complaints in Tunisia between 2018 and 2020. Individuals made 222 of the 301 complaints in 2020 and firms filed 71.8
Table 3.3. Complaints against Tunisian banks
Source: OIF (2020[22]), Rapport Annuel de la Médiation Bancaire : Année 2020.
The low number of complaints might be seen as an indication that the market is functioning well, but the OECD’s consumer survey shows that this is unlikely the case, as 70% of consumers9 were not even aware of the existence of a mediation process. Among those who were aware of the service, the main reasons for not using it were because they said they were satisfied (three in four), because they did not expect any benefit (one in five) and because the process was cumbersome (one in six).10
3.5.3. Conclusions
The OIF report, alongside information received from stakeholders and the survey results, indicates that the current mediation mechanism is not working well and remains largely unused by customers. This may be explained by the fact that customers are not aware of the service and by the lack of actual or perceived independence of mediators, which are appointed and paid by banks. Moreover, in cases where customers decide to opt for mediation, only a few disputes are resolved, which indicates that the system is ineffective.
3.6. Regulatory set-up in financial services
Prudential regulation, competition policy and financial consumer protection are necessary ingredients for the effective regulation of financial services. (OECD, 2022[5]) identified several areas in which the existing regulatory set-up and practices in Tunisia do not foster co‑operation between Conseil de la Concurrence and the BCT:
Financial services are subject to a special merger control regime, and the BCT’s Commission d’Agréments has the power to approve mergers based on a report prepared by the BCT. The Conseil de la Concurrence does not have powers regarding mergers in the finance sector.
The Commission d’Agréments is composed of the governor of the BCT or their representative (who acts as chair) and four independent members recognised for their integrity and competence in the financial, banking or economic fields who are appointed by the BCT’s board. The Conseil de la Concurrence is not represented on the commission.
The BCT does not consult the Conseil de la Concurrence when introducing new regulation.
The Conseil de la Concurrence is not particularly active in financial services.
In addition to this, the BCT, which is responsible for both prudential supervision and consumer protection, seems to dedicate limited resources to the OIF, the team within the BCT that leads on financial consumer protection.
The limited co‑operation between Conseil de la Concurrence and the BCT hinders the ability of the competition authority to stop potentially anti-competitive practices, limits its advocacy role when new regulation is introduced, and ultimately risks reducing compliance with competition law.
3.7. Conclusions
This chapter describes several aspects of Tunisia’s retail banking sector that negatively affect competition for consumers and small businesses across the three markets in focus. It highlights a number of factors that weaken banks’ incentives to compete and which in fact facilitate co‑ordination.
Common shareholders and interlocking directorates reduce incentives for banks to compete and increase the risks of co‑ordination. This is exacerbated by legal provisions and market practices that facilitate the sharing of commercially sensitive information among members of the banking association. Weak incentives to compete result in poor outcomes for consumers and small businesses, such as high prices and low levels of innovation (see Chapters 4, 5 and 6 for a description of market outcomes).
State‑owned banks, despite having fewer shareholders and directors linked to other listed banks, do not seem to be able to compete vigorously with other banks. Stakeholders indicated that they are still subject to political influence and are used to provide finance to state‑owned enterprises. In addition, consumers do not have the tools to exert competitive pressure on banks. Section 3.5 shows that the tools to make complaints are ineffective and unused.
To address these issues and improve competition, the OECD recommends a package of measures to reform the banking association and the mediation mechanism, and to strengthen banks’ corporate governance and the role of the Conseil de la Concurrence in financial services. The OECD also recommends considering the role of the state in financial services and the divestiture of state‑owned banks through an open and transparent process (see Chapter 9 for a detailed description of the recommendations).
References
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Notes
← 1. Alternative measures have been developed to take into account these linkages [see for example Salop and O’brien (2000[23]) and Azar, Raina and Schmalz (2022[13])].
← 2. More stringent rules apply to the general manager, the deputy general manager or a member of the management board of a bank or financial institution. Such individuals may not exercise these functions in another bank, financial institution, insurance company, stock insurance company, stock exchange intermediation firm, securities portfolio management company or investment company. The same restrictions on board and supervisory board members already applied before 2016, on the basis of Article 17 of Circular No. 2011‑06.
← 3. Décision de la Commission d’Agrément No. 2017‑04, relative aux procédures de dépôt des demandes d’agrément, in particular Annexe 8: Agrément pour le changement de l’actionnaire de référence suite à la cession de sa participation dans le capital d’une banque ou d’un établissement financier. Also for : Annexe 3: Agrément pour une opération de fusion ou de scission, Annexe 5: Agrément pour la réduction du capital d’une banque ou d’un établissement financier, Annexe 7: Agrément pour l’action de concert entre actionnaires d’une banque ou d’un établissement financier entraînant le dépassement de l’un des seuils prévus à l’Article 34 de la Loi No. 2016‑48.
← 4. The analysis is based on information available on the website of the Bourse des Valeurs Mobiliéres de Tunis. The information from the exchange is more recent but includes only shareholders with more than 5% shares as of April 2023 for all banks except Amen, BH, STB and UBCI for which the most recent information available is from April 2022. Given that the only information available is that published on the website of the exchange, the analysis focuses only on listed banks. The BCT did not provide information beyond what was publicly available.
← 5. It is not the role of this report to assess these allegations, but the OECD recommends that these should be considered by the appropriate authorities.
← 6. These comments were picked up by the local media: https://africanmanager.com/la-guerre-des-depots-fait-rage-entre-les-banques-et-letat-en-veut-sa-part/
← 7. Pursuant to Article 187, the mediation body and mediators shall submit annual reports to the OIF.
← 8. The remaining eight complaints were made by professionals and associations.
← 9. OECD consumer survey (Q13, N=1 089).
← 10. OECD consumer survey (Q14, N=324).