A political 'earthquake' has shaken the foundation of Tunisia’s banking dictatorship

At the same time, these plans have raised fears among experts who warned of the danger of adopting "revolutionary" amendments without realistic analysis and study – even if these amendments bear the signature of a president who came to power without financial dependence on any party.

(The cost of the electoral vote for Saied in the 2019 presidential election is equal to 30 Tunisian millimes, which is less than one US cent, according to an official report.)

The Central Bank's weakness

Information on the amendments the president intends to introduce to the banking system is scarce.

The main amendment will inevitably strip the Central Bank of its autonomy – Saied made this clear during his visits to the bank's headquarters – and granting loans without collateral will likely be "criminalised".

In addition, the "ownership of banks" by families who have turned them into "mafia cartels," according to popular belief, will be reconsidered.

Meanwhile, Ahmed El Karm, honourary president of  L'Association  Tunisienne pour la Promotion de La Culture Financiere (ATCF) and former chairman and general manager of the privately-held Amen Bank, mocked the controversy over the influence of banks.

He rejected accusations that likened them to mafias or cartels.

El Karm, who spoke to a local radio station, offered a weak defence, especially since his only argument is that two bodies monitor the banks, the Central Bank and the Ministry of Finance.

In 2021, a report issued by the Court of Auditors confirmed the meek supervisory role played by the Central Bank. The report also raised suspicions of collusion between the Central Bank and other banks due to several shortcomings that mar the former's reputation. Most notable was its failure to publish the details of the sanctions it imposes on banks, contrary to what is required by banking law.

In addition, it missed out on financial penalties, first regarding governance, amounting to DT 123mn (about $39mn), and others regarding combating money laundering, amounting to DT 47.8mn ($15mn).

As per the report, the Central Bank failed to activate the Sanctions Committee, which is an autonomous entity that has the power to impose penalties when there is intentional disclosure of incorrect data or when the agreements that regulate the total effective interest rate and its compliance with legal requirements are not clear, resulting in inaccuracies in the percentage figures that the banks report to the Central Bank.

Banking dictatorship

Over the last few years, events have led to what Tunisians, 40% of whom don't have a bank account, described as a banking dictatorship.

The failure of banks to comply with the provision of 14 free services approved by the Central Bank highlighted a lack of effective regulation.

Despite criticism, the public agency Conseil de la Concurrence could not take meaningful action. Since the 2016 legislative amendments, which targeted the Basic Law on the Central Bank, the council has been stripped of its banking control mechanism. However, upcoming amendments are expected to restore this power to the council.

The Basic Law of the Central Bank enabled banks to boost their revenues to record levels.

The legislation prevented the Central Bank from lending to the state directly. At the moment, this process is being carried out through banks.

In a report issued at the end of August, l'Association de Lutte contre l'Économie de Rente (ALERT) found that the banks' profits from long-term lending to the state increased by 58.12% over the past decade, which is six times higher than France, and twice as high as Morocco.

Additionally, the banks were able to generate high revenues thanks to subscriptions to treasury bonds. They also took advantage of the state's urgent need for liquidity, which witnessed an unprecedented increase in recent years and was directed towards financing the state's budget deficit.

According to the Ministry of Finance data, the deficit rose from 3.1% of the GDP in 2011 to 7.6% in 2022.

Wide-spread devastation

These policies have been more than catastrophic for consumers and business owners.

The investment climate took a hit, access to loans was disrupted, and thousands of small and medium enterprises collapsed.

This spanned 140,000 businesses, according to Abdul Razzaq Hawas, spokesman for the National Association of Small and Medium Enterprises, who also pointed out that nearly half a million company managers were being investigated over bad cheques.

In addition, bank interest rates continued to rise. They exceeded 8% in June 2023, making banks more like markets for lenders and speculators, especially with the illegal rise in bank commissions.

Tunisia has 23 domestic banks and seven foreign banks. Twelve domestic banks are listed on the stock exchange. Three are state-held: Banque nationale gricole, Banque de l'habitat, and Société tunisienne de banque.

The private banks are Amen Bank, Attijari Bank, Arab Tunisian Bank, Banque internationale arabe de Tunisie, Banque tuniso-émiratie, Banque de Tunisie, Union internationale de banques, Union bancaire pour le commerce et l'industrie, and Wifak Bank.

The net output of all these banks for 2022 is estimated at DT 6.225bn (about $2bn), an increase of 12% compared to the previous year.

The state owns more than 50% in the Banque nationale agricole and the Banque de l'habitat, and more than 70% in the Société tunisienne de banque.

Meanwhile, families control the rest of the banks – mainly the families of Horchani, Mabrouk, Mzabi, Ben Yedder, and Tamarzesti (which own shares in most banks), in addition to Ben Sedrine, Driss, Ben Ayed, Bousbiaâ, and Miled, each of whom can be found on various banks' boards of directors.

Scandal of the century

The recent prosecution of banking professionals, businessmen, and officials isn't even the biggest in Tunisian history. This is simply the straw that broke the camel's back.

Tunisian banks have undergone several scandals, the most serious of which was that of the French-Tunisian Bank, where financial fraud intersected with political, administrative, procedural, and judicial corruption.

The case was called the "scandal of the century," while the government of Youssef Chahed said in 2019 that it was "the largest corruption case in Tunisia's history."

It marked the first bank bankruptcy in the country's history but also constituted the costliest case to the state treasury.

The case has been subject to disputes since 1983. It involved losing funds estimated at DT 750mn (about $236mn). International court rulings are expected to occur before this year's end. Experts expect compensation to reach DT 3bn (about $1bn).

The history of Tunisian bank scandals also includes a vindictive presidential decision to confiscate the Banque Internationale Arabe de Tunisie.

Today, the bank ranks number one, with a net banking output of DT 1267.2mn ($409.7mn). But in 1993, the bank witnessed an unprecedented withdrawal of state deposits, resulting in a loss of more than DT 107mn (about $34mn) in a single day.

Around that time, debates about this incident were rampant in political and financial circles. It was said that then-President Zine El Abidine Ben Ali took over the bank to undermine the political ambitions of Mansour Moalla, one of the bank's founders.

Moalla spoke after the fall of the Ben Ali regime about what he experienced during that period. In an interview with a local newspaper on 18 April 2011, he said that the bank had succeeded in generating massive revenue within three years.

But after Moalla refused to join the regime, the bank had a target on its back. This prompted Moalla to sell his shares in the bank before it was taken over by Ben Ali's in-laws, the Mabrouk family.

Indeed, Ben Ali's two sons-in-law both operated banks during his rule – Marouane Mabrouk had Banque Internationale Arabe de Tunisie, and Sakher El Materi had Banque Zitouna.

The former bank sustained itself with record revenues yearly, while the second bank was confiscated before it became wholly owned by Qatar's Majda Group.

But this is just the tip of the iceberg.

The banking system, which took its first faltering steps after independence, witnessed the most serious mismanagement during Ben Ali's rule.

At the time, it granted DT 430mn ($136mn) in what it classified as bad debts.

More than half of the money was put towards financing the projects of four companies belonging to relatives of the late president, according to a 2011 statement by then Central Bank Governor Mustapha Kamel Nabli.

Ending the 'family' influence

A lot has changed with regards to banks (and businessmen) and their involvement in so-called financial crimes, which constitute time and again one of the most important issues for the public.

After the shocks of the early post-revolution years – and accompanying narratives of "extortions and settlements," which took place under the table in the case of more than 450 businessmen – the wealthy and the bankers have now gained an influential foothold in shaping financial policies in Parliament, specifically through party financing.

The upcoming amendments aim to end the influence of families over banks in one way or another. They could also drag them into settlements based on the Penal Reconciliation Decree, which is also known as the Law of Reconciliation with Corrupt Businessmen.

Saied estimates the amount of looted funds at DT 13bn ($4.2bn), almost two and a half times the value of a tough and stalled IMF loan ($1.9bn). "The billions of billions," as the Tunisian president's famous phrase goes, seem to be at the centre of recent developments.

Fears of politicisation

Months ago, the Tunisian judiciary took measures against the businessman Bassam El-Wakil, including a travel ban, three years after a bankruptcy that even the most pessimistic of observers didn't expect.

El-Wakil lost his Citroen dealership. Most of his companies, which received loans totalling TD 750mn ($236mn) – primarily from public banks – collapsed.

Hearings are now being held involving bankers and regarding how the businessman obtained the loans without sufficient guarantees.

Today, all eyes are on the three remaining public banks – Banque de l'habitat, Banque nationale agricole, and Société tunisienne de banque.

Their case began with a report from the Court of Auditors almost three years ago.

Its concerns included the granting of loans without sufficient collateral, classifying debts as bad without taking any expenses, granting loans without feasibility studies, failing to monitor the completion of projects, granting loans to buy lands set for housing development without owners having actual projects, miscalculating interest rates, and failing to impose fines estimated at TD 170mn ($54mn).

The proposed amendments to the Basic Law have prompted fear over the potential "politicisation" of the Central Bank, especially with the upcoming 2024 presidential election.

These amendments would allow for direct financing of the budget by the Central Bank while also allowing complete control of the banking system and taking advantage of the public's frustration with its policies.