Tunisian banking system facing a "very high risk", says Standard & Poor's

Oct 02, 2012

Standard & Poor's (S & P) has reviewed the rating of the Tunisian banking sector under its updated BICRA methodology.

Tunisia (BB / Stable / B) was classified in the group '8 ', which includes Lebanon, Egypt, Georgia, Nigeria and Kazakhstan.

A score of '8 'reflects the opinion of the agency that the country faces "very high risk" in its "institutional framework" and "system wide funding" and "high risk" in its "competitive dynamics".

"The poor management of credit, market and liquidity risks ... is one of the main reasons that led S & P to downgrade the banking system," said a banker wishing to remain anonymous, quoted by the newspaper La Presse.

This degradation may affect the cost of credit to individuals and businesses in Tunisia, since the cost of borrowing will be higher for banks, which should then mirror this raise on interest rates.

Experts at S & P believe that the development of Islamic finance in Egypt, Tunisia and Morocco could loosen the financing constraints faced by these economies, Ecofin news agency reports.

They added that economic factors play in favour of the development of Islamic banking in North Africa, provided that regulators, politicians and banks establish a climate of trust.

This type of funding is currently accounting for only five per cent of banking assets in the region.