9. Recommendations
The OECD proposes four packages of recommendations. First, a package of measures to strengthen incentives for banks to compete. This includes recommendations to reform the banking association, to strengthen the role of the Conseil de la Concurrence, to increase the independence of banks’ board members and to reconsider the role of the state in the retail banking sector. Second, a package of measures to increase customer engagement. This includes recommendations to empower customers to access, assess and act on information, and to reform the mediation mechanism to provide consumers and businesses with an effective means of making complaints. Third, a package of measures to improve competition in the market for MSME finance. This includes recommendations to increase MSMEs’ ability to make informed decisions about loan products and to increase banks’ ability to assess and price risk, reducing risk aversion. Finally, the OECD proposes a package of measures to eliminate unnecessary regulatory provisions that stifle competition in the payment services sector.
Competition in Tunisia’s finance sector should be encouraged. Effective competition is vital to markets working well and a well-functioning banking sector is critically important to consumers and businesses. Competition in the retail banking sector needs to be effective to promote financial inclusion and to support private sector investment. However, the findings of this report highlight several areas in which competition is not working as well as it could for consumers.
This chapter sets out the OECD’s recommendations to address the underlying drivers of market outcomes described in the previous chapter. The expected benefits arising from the recommendations amount to around EUR 325 million annually in terms of lower prices and interest rates for consumers and businesses, which corresponds to around 0.8% of Tunisia’s 2021 GDP. These figures likely underestimate the full benefits because it was not possible to quantify the effects of all individual recommendations due to the limited availability of detailed data. They also exclude the dynamic benefits of competition, which can be substantial, but which are difficult to estimate.
The OECD’s recommendations are grouped into several packages aimed at improving competition in Tunisia’s retail banking sector. Sub-optimal market outcomes arise from a combination of many drivers, and it is the interaction between market practices, consumer behaviour and regulation that determines outcomes for consumers. Thus, the packages of recommendations tackle these different elements. The recommendations are based on the OECD’s understanding of how the market works and rely on extensive discussions with Tunisian and international stakeholders.
The OECD recognises that some of the recommended measures will be easier and quicker to implement than others, which may require complex trade-offs between, for example, competition and other public policy objectives. Similarly, some recommendations are likely to deliver more significant benefits for consumers than others.
The recommendations in each package are therefore listed in order of suggested priority, starting with those that can generate the most significant consumer benefits. However, recommendations of lower suggested priority still have the potential to deliver substantial benefits for consumers. Some of the recommendations are mutually reinforcing, making it important to emphasise that many of their benefits will be realised only when they are implemented together, and it is therefore strongly advisable to consider all of the packages holistically. The order of the packages of recommendations does not reflect their relative importance.
To make its recommendations, the OECD followed the following broad principles:
Businesses should have the ability and the incentives to compete.
Individuals and small businesses should be able to shop around easily, compare current accounts, and make informed decisions to stay with their providers or switch to new ones as easily as possible. Similarly, small businesses should be able to shop around and compare financial products among lenders.
Regulation should be proportionate to address market failures without creating unintended consequences that hinder competition.
Building on these principles, the next sections present the four packages of recommendations:
Measures to strengthen banks’ incentives to compete. These include recommendations to reform the CBF, to strengthen the role of the Competition Council, to strengthen the independence of banks’ board members, to reconsider the role of the state in the retail banking sector, and to strengthen regulatory oversight throughout the financial services sector.
Measures to increase customer engagement. These include recommendations to empower consumers to access, assess and act on information.
Measures to improve competition in the market for MSME finance. These include recommendations to improve the ability of MSMEs to make informed decisions about loan products and to improve lenders’ ability to share and access credit information on existing and prospective customers, and to improve creditors’ rights. This package also recommends creating an independent commission to investigate the effects of cross-ownership between financial and non-financial entities.
Measures to eliminate unnecessary regulatory provisions that stifle competition in the payment services sector. These include recommendations to remove regulatory barriers to entry and expansion in the sector.
The implementation of these measures will have a positive effect on the three services that form the focus of this review, as they address market features and practices weakening banks’ incentives to compete, leading to higher prices, lower quality, and limited innovation throughout the retail banking sector.
9.3.1. Reform the Conseil Bancaire et Financier
Vigorous competition is essential for markets to work well for consumers. To mitigate the risk of anti-competitive practices arising from interactions among members of the banking association, the OECD recommends:
Abolishing the requirement that banks consult the CBF, on the introduction of new fees and the requirement that the CBF act as an intermediary between its members and the Central Bank of Tunisia when introducing new fees. These practices should be forbidden, as they provide an opportunity for monitoring rival banks and co-ordinating price strategies, and risk making the CBF a platform that facilitates co-ordination among banks.
Collaborating with the Competition Council to identify clearly what the CBF and its members should and should not do. For example, the CBF generates value by bringing together financial institutions to discuss trends, challenges and opportunities common to its members. However, the CBF should not facilitate the sharing of commercially sensitive information, such as discussions of pricing strategies or plans to introduce new services.
Abolishing the requirement that financial institutions and banks join the CBF.
Eliminating restrictions on hiring rival banks’ personnel specified in codes of conduct. In particular, the OECD recommends removing the requirement to inform employers immediately after recruitment, to co-ordinate among banks before an employee moves to a new employer, and to refrain from assigning executives and operational managers to the same area in which they previously worked for rival banks for a period of two years in order not to harm the interests of their previous employers by soliciting clients.
9.3.2. Strengthen the role of the Conseil de la Concurrence
The OECD reiterates the benefits that competition in the finance sector can bring to individuals and businesses and reiterates its recommendations to remove sector exceptions in merger control (OECD, 2022[1]). The 2022 OECD Peer Review of Competition Law and Policy in Tunisia recommended improving co-operation between the Competition Council and sector regulators such as the BCT, including through drafting formal co-operation agreements to facilitate exchanges of information and open up direct channels of communication. The review also recommended that sector regulators consult the Competition Council on competition-related matters. The OECD reiterates the recommendations of the peer review to remove sector exceptions in merger control and centralise merger control powers within a single competition authority, with the possibility of seeking opinions from sector regulators.
The OECD also recommends strengthening the role of the Competition Council in financial services by:
Introducing a requirement that the BCT consult the conseil when introducing new regulation (such as circulars) to obtain its opinion on potential impacts on competition. Such consultations should be caried out via a transparent process, with clear and realistic timelines and outcomes (e.g. the process should specify what occurs when the conseil identifies potential restrictions on competition in new circulars).
Including the conseil’s representation on the BCT’s Commission d’Agréments.
Organising periodic training programmes on competition law. The OECD recommends that the conseil collaborate with the CBF to increase awareness of and compliance with competition law.
Increase the advocacy activity of the council, especially in the financial services. Box 9.1 lists several examples of campaigns run by competition authorities.
Competition authorities engage in advocacy initiatives to raise awareness of the benefits of competition, promote a competitive market environment, and increase awareness of competition law and the risks associated with non-compliance, all of which may discourage businesses from engaging in anti-competitive practices. Competition advocacy may also encourage pro-competitive regulatory reforms by removing unnecessary regulation or adopting more competition-friendly legislation. Several examples of campaigns by competition authorities are listed below:
The UK Competition and Markets Authority’s “Online Rip-off Tip-off” campaign in 2022 educated consumers about certain unfair sales tactics in digital environments, such as drip pricing, pressure selling, subscription traps and fake reviews.
The UK Competition and Markets Authority’s “Cheating or Competing?” campaign, launched in 2020, focused on cartel conduct.
The Portuguese Autoridade da Concorrência’s “Fair Play” campaign in 2014 explained the benefits of competition to businesses and highlighted the risks of non-compliance. The campaign also included best practices related to trade associations and anti-competitive agreements in labour markets.
The Australian Competition and Consumer Commission’s annual awareness campaign on scams encourages consumers to be alert for swindles and fraud.
9.3.3. Strengthen the independence of banks’ board members
The independence of boards of directors, measured as a ratio of the independent directors to the total number of directors, is likely to mitigate the effects of common ownership and interlocking directorships, and to limit the control that large industrial groups may exert over banks. Boards of directors with larger numbers of independent members are less likely to take into account the interests of common investors or be influenced by directors linked to other banks.
Independent boards are also likely to mitigate the negative effects of informal decision-making processes that appear to characterise plans made by listed banks controlled by Tunisia’s large industrial groups. Independent directors may also be less likely to favour related borrowers.
The OECD recommends strengthening corporate governance within banks. The OECD does not have best practices for corporate governance at banks, but it recommends following the principles of corporate governance for banks published in 2015 by the Bank for International Settlements (Bank for International Settlements, 2015[2]). Several of these principles are already enshrined in Tunisian regulations. Nevertheless, it is useful to recall some of them and to ensure their strict application, in particular:
The requirement that the chair of the board is an independent non-executive member. A non-executive member of the board does not have any managerial responsibility within the bank, and is not under any other undue influence, internal or external, political or ownership-related, that would impede the board member’s exercise of objective judgment. A non-executive member of the board is not an employee of the bank and may receive a fee for their services.
The prohibition on chief executive officers being members of boards of directors.
The requirement that committee chairs are independent non-executive board members.
The requirement that each committee have a majority of independent non-executive members. Currently, Tunisian legislation stipulates that two of the three special committees (audit, risk, and appointment and remuneration) are chaired by independent board members.
Strengthening the selection process to ensure the independence of non-executive members.
To improve transparency relating to the ownership structures of listed and non-listed banks, the OECD also recommends:
9.3.4. Rethink the role of the state in the financial sector
Section 3.1 discusses the presence of the Tunisian state in the retail banking sector and the potential risks that entails. The OECD acknowledges the importance of state intervention in cases of market failures and as required by public policy objectives. It also recognises that state-owned development banks may be beneficial means of helping smaller businesses, in particular in overcoming information asymmetries and accessing finance. However, the participation of the state in universal banks may hinder banks’ incentives to compete and innovate, creating an uneven playing field if state-owned banks are – or are perceived to be – less likely than others to fail. State-owned banks may also favour state-owned enterprises in non-financial industries, for example by providing finance on more favourable terms.
The OECD Guidelines on Corporate Governance of State-Owned Enterprises make clear that there should be a clear rationale for state ownership, and that the objectives justifying state ownership should be carefully evaluated and disclosed. The guidelines also state that these objectives should be reviewed regularly. In line with these guidelines, the Tunisian state should define the rationale for owning banks and review it regularly. The state should also develop and disclose any public policy objectives to which these banks are subject.
If the state decides to end its participation in universal banks, the OECD has recently developed good-practice guidance entitled “A Policy Maker’s Guide to Privatisation” (OECD, 2019[3]), which provides insights on the process of privatising state-owned enterprises. The guide proposes guiding principles, measures to undertake before divesting, best practices to organise the process of privatisation, and steps to take post-privatisation. Among other things, the divestiture process should give careful consideration to the potential to exacerbate the risks to competition highlighted in this report, such as those related to common ownership or to extensive ties between banks and large domestic industrial groups. For example, prospective buyers of state-owned banks should not be investors with ties to other banks or large industrial groups.
As part of its assessment of the role of the state in Tunisia’s retail banking sector, the OECD recommends considering the role of La Poste Tunisienne. La Poste is already an important player in the current account and savings markets, and was among the first providers to introduce mobile payments. In addition, La Poste’s extensive branch network and relatively low fees for banking services make it an essential institution for increasing both competition in Tunisia’s retail banking sector and financial inclusion. See Box 9.2 for a description of the role of national postal operators to increase financial inclusion in MENA countries.
Postal operators in Middle East and North Africa (MENA) region countries have extensive branch networks that are often larger than those of banks, especially in rural areas. Postal operators offer financial products in several MENA countries, including current accounts, savings products, payment services, insurance and credit products.
The Universal Postal Union identifies a number of key factors that make postal operators successful in increasing financial inclusion. These factors are: branch network size (particularly in rural areas), expertise of personnel, financial viability, consumer trust, digitalisation of internal processes, high-quality risk management processes, political support, legislative frameworks, and the ability to attract customers (Universal Postal Union, 2016[4]).
Morocco’s Al Barid Bank
Al Barid Bank (ABB), a financial subsidiary of Morocco’s postal operator, was created in 2007 and obtained a banking licence in 2010 after a three-year transformation period. ABB is regulated by Morocco’s central bank and has a mandate to improve financial inclusion with a focus on rural areas. According to (World Bank, 2012[5]), the Moroccan postal operator hired new management teams with retail banking expertise, it partnered with credit providers, and invested in hardware and software upgrades for its IT systems.
ABB initially offered savings products and payment services, and then overdraft and mortgage products, aimed at lower-income borrowers. (World Bank, 2014[6]) indicated that ABB had been particularly successful in offering payment services, accounting for around 80% of domestic payments.
Sources: Asian Development Bank Institute (2018[7]), Postal Savings – Reaching Everyone in Asia, https://www.adb.org/publications/postal-savings-reaching-everyone-asia; World Bank (2012[5]), Can Postal Networks Advance Financial Inclusion in the Arab World?, https://openknowledge.worldbank.org/entities/publication/604920f6-e285-5eb0-97ea-6ecb3b8e783a; Universal Postal Union (2016[4]), Global Panorama on Postal Financial Inclusion 2016, https://www.upu.int/en/Publications/Financial-inclusion/Global-Panorama-on-Postal-Financial-Inclusion-2016; World Bank (2014[6]), Enhancing Financial Capability and Inclusion in Morocco A Demand-Side Assessment, https://documents.worldbank.org/en/publication/documents-reports/documentdetail/936861468051895341/enhancing-financial-capability-and-inclusion-in-morocco-a-demand-side-assessment.
La Poste’s lack of a banking licence hinders its ability to offer a realistic alternative to the country’s banks, especially for consumers and businesses that want to access credit. For example, evidence suggests that Tunisian consumers often open current accounts with La Poste and then switch to banks when they need credit. Stakeholders mentioned several challenges in granting La Poste a banking licence. For example, savings held in postal savings accounts are managed by the Ministry of Finance, which pays La Poste’s customers a fixed per annum rate of remuneration. The OECD understands that granting a banking licence to La Poste would potentially require its corporatisation (it is currently a department within the Ministry of Telecommunications) and changing the way in which deposits in postal accounts are managed.
In light of the above, the OECD recommends designing a medium-term strategy leading to the issuance of a banking licence to La Poste. The strategy should include a plan to either train personnel or hire new personnel with retail banking expertise, to ensure the financial viability of the new entity, and to improve its risk management processes to standards comparable with those of other financial institutions. The strategy should also include a clear business plan that aims to maintain La Poste’s status as an energetic competitor in the industry. The OECD acknowledges that this medium-term recommendation involves several risks. In fact, in absence of other changes, it would increase the presence of the state in the retail banking sector, and there is a risk that La Poste, once it has obtained a banking licence, could align its conduct with that of other banks.
9.3.5. Encourage consumers to use online banking services
The report shows how the reliance of banks and consumers on branches reduces the choice of providers available to consumers. Consumers in rural areas have fewer alternatives than consumers in urban areas and may need to travel long distances to access banking services. The OECD considers that a greater availability of online banking services could increase the range of providers available to consumers, reduce the costs of attracting new customers for smaller and newer banks, and reduce costs for consumers that prefer to use their accounts online. Thus, the OECD recommends encouraging the online opening and management of current accounts, for example by providing banks with lower-cost alternatives to the existing electronic signature certification process. The OECD also recommends that the BCT develop a media strategy to promote the use of online banking.
9.3.6. Strengthen regulatory oversight
The report presents several areas in which either the BCT lacks tools to enforce existing consumer protection regulation or additional consumer protection safeguards are needed. The BCT’s actual and perceived limited supervision and enforcement reduces incentives for banks to comply with regulation.
Adopting implementing rules for Article 84(1) and Article 84(2) of Law No. 2016-48 to make use of powers of sanction to enforce consumer protection rules.
Strengthening the enforcement of existing prudential and consumer protection regulation. The list below includes several circulars the OECD understands are not enforced, at least not consistently.
Circular No. 2018-06, which limits banks’ exposure to related borrowers or to multiple borrowers belonging to the same industrial group (as described in Section 5.2.3).
Article 2 (d) of Circular No. 2006-11 requiring banks to notify account holders of changes in fees at least 45 days in advance.
Article 3 of Circular No. 2006-12, requiring banks to adopt a communications policy based on the principles of transparency.
Article 37 of Circular No. 91-22, which requires banks to publish fees and terms in brochures made available to customers.
Article 2(1) of Circular No. 2006-12, prescribing that banks set maximum time limits for closures of accounts and strictly adhere to them.
9.3.7. Eliminate competitive bottlenecks in the payment card supply chain
The OECD recommends requiring the Societé Monétique Tunisie (SMT), which processes card payments, to choose providers of services related to issuing and acquiring cards (such as the provision of plastic cards) via a public tender. The OECD understands that La Poste uses a different provider of plastic cards from the one used by banks via the SMT and considers that introducing effective competition in this market segment could lower costs for banks and yield savings that could be passed on to consumers.
9.3.8. Additional considerations
Retail financial markets are often characterised by high actual or perceived switching costs and high levels of consumer inaction. Chapter 4 shows that financial services in Tunisia are no exception and that very few individuals and MSMEs shop around before opening current accounts. Consumer inaction weakens competition because it reduces incentives for firms to offer better deals and innovate, and it also represents a barrier to entry and expansion for new providers. In fact, low switching rates reduce the pool of customers available to providers that want to increase their market share.
Many countries have introduced regulatory initiatives to reduce barriers created by consumer inaction. In 2016 the EU implemented the Payment Services Directive 2, aimed at enhancing competition by granting access to customer banking data for non-bank licensed payment service providers and account information services. A similar scheme has been developed in the UK (see Box 9.3). A 2022 survey of the OECD shows that 20 OECD countries have introduced similar data-sharing arrangements (OECD, 2023[8]).
The OECD understands that the BCT has started diagnostic work to assess the feasibility of such “open banking” arrangements in Tunisia. The OECD encourages the BCT to continue its exploratory work on open banking and seek to implement a solution as soon as is feasible. The OECD believes open banking has strong potential to deliver substantial benefits to consumers through enhanced competition.
Open banking was introduced in the UK following a report on the country’s retail banking sector published by the Competition and Markets Authority (CMA) in 2016. The report found that larger, established banks did not have to compete sufficiently intensely to gain customers’ business, while newer banks found it difficult to access the market and grow. One of the CMA’s recommendations to tackle the problem was open banking.
Banks in the UK are required to introduce an open application programming interface (API) banking standard that enables individuals and businesses to share their banking transaction histories safely and securely with other banks and third parties. This enables customers to, for example, open an app and compare the fees and conditions applicable to financial products tailored to their individual circumstances, making it easier for customers to identify the best deals and switch providers.
Source: Competition and Markets Authority, (2016[9]), Retail banking market investigation – Final report, https://assets.publishing.service.gov.uk/media/57a8c0fb40f0b608a7000002/summary-of-final-report-retail-banking-investigation.pdf.
The implementation of the measures in this package will deliver benefits in both the current account and the bank loan markets.
9.4.1. Measures to improve consumers’ ability to make informed decisions on current accounts
Engaged and active consumers are vital to effective competition. The OECD recommends several measures to improve customers’ ability to access, assess and act on information. The key recommendations in this package include:
Improving disclosure and transparency requirements to ensure that customers can easily access meaningful information on the prices and characteristics of products. In particular, the OECD recommends introducing a requirement that current account providers effectively disclose fees and other terms and conditions related to current accounts through all distribution channels.
Banning fees that are related directly or indirectly to closures of accounts (an example of the latter are fees charged for letters of indemnity, not related to outstanding charges).
Switching costs and searching costs both have the potential to stifle competition. If consumers face barriers to accessing information to compare products, they will not be able to identify their preferred products and will be unduly discouraged from switching. High switching costs may deter consumers from even attempting to obtain information. The OECD recommends:
Facilitating the switching of current accounts. Specifically, the OECD recommends introducing an automated current account switching service similar to those in use in countries such as Australia, France, Italy, New Zealand, Spain and the UK. This would allow customers to easily switch current account providers, automatically transferring direct debits and standing orders and rerouting payments to new accounts for a period of time such as 12 months (see Box 9.4). Although the OECD acknowledges that this may be a technologically significant undertaking, an automated current account switching service is likely to generate substantial benefits for consumers.
Facilitating the creation and use of a price comparison website (PCW) for both personal and business current accounts, to be extended potentially to other retail financial products. An effective PCW would make comparisons of current account terms among providers easier and would encourage switching and thus competition. A PCW could be operated either by a public or a private entity. The (World Bank, 2013[10]) describes best practices for designing and operating a state-owned PCW. The cost of setting up a PCW could be covered through levies on financial institutions, which could also be mandated to advertise the PCW, for example on bank statements or on their websites. Finally, the performance of the tool should be reviewed periodically to ensure its effectiveness.
The following recommendations are expected to deliver relatively fewer benefits individually but are mutually reinforcing and are likely to deliver the most significant benefits if implemented holistically. They include:
Introducing a requirement not to charge fees after the date from which closure of an account has been requested.
Facilitating procedures for opening current accounts. In particular, the OECD recommends:
Introducing a requirement that banks issue letters that include reasoned arguments explaining refusals to open accounts within a specified, reasonable timeframe. Refusal letters should be issued free of charge. Customers can then present these letters to the Ombudsman.
Introducing clear and binding rules on legitimate and illegitimate reasons for not opening current accounts. These should be available to customers and should be used to make complaints if customers consider that they have been denied a current account without good reason.
Monitoring compliance with Article 4 of Circular No. 2006-12, which requires banks to disclose fees paid in monthly or annual statements.
Introducing a requirement that accounts are closed within a month (or another specified short timeframe) of receiving closure requests from customers.
Introducing a requirement that banks contact customers with dormant current accounts (those that that have no credit or debit movement in a 12-month period that are not the result of fees, charges or refunds issued by a retail bank) to ask whether they want to close the account.
Introducing a requirement to notify customers that their accounts have been closed.
Adopting rules to issue penalties and vigorously enforce them if banks do not comply with regulations on promptly closing accounts and notifying customers that they have done so.
The Current Account Switching Service (CASS) is a voluntary scheme launched in 2013 by the UK’s Payment Council. CASS is owned and operated by Pay.UK, the operator of the UK’s retail interbank payment systems, including Bacs, Faster Payment and the Image Clearing System. The scheme makes switching current accounts quick and easy for consumers. More than 40 banks and building societies have signed up to it.
A simple way to switch accounts is an important element of a well-functioning current account market. If consumers can close an account and open a new one quickly and smoothly, they will be more likely to change providers when better deals appear in the market. This provides incentives for current account providers to compete by improving their offers to attract new customers and retain existing ones.
In 2011 the Independent Commission on Banking (ICB), established by the UK Government, found that the process of switching took on average 18 days and required a number of parties to take various actions. The switching process was also perceived as risky, which deterred potential switchers. The ICB thus recommended the introduction of the CASS (Independent Commission on Banking, 2011[11]), whose main features are as follows:
All outbound payments, such as direct debits and standing orders, and inbound payments, such as salary payments, are automatically moved to the new account.
Payments accidentally made to the old account are redirected automatically for a period of three years after the switch.
If anything goes wrong, interest paid or lost, and charges imposed on either the old or new accounts are refunded.
Sources: Pay.UK (2023[12]), Current Account Switch Service Annual Report 2022, https://newseventsinsights.wearepay.uk/media/0n3dkaoc/cass-annual-report-2022.pdf; Financial Conduct Authority (2015[13]), Making current account switching easier: The effectiveness of the Current Account Switch Service (CASS) and evidence on account number portability, https://www.fca.org.uk/publication/research/making-current-account-switching-easier.pdf
9.4.2. Reform the mediation mechanism
It is crucial that consumers can make use of an effective and well-functioning mediation mechanism that can be used to make complaints when things go wrong. Box 9.5 describes the principles set out by the International Network for Financial Services Ombudsman Schemes (the INFO Network) for financial services ombudsmen. To make the mediation mechanism more effective, the OECD recommends:
Establishing a financial services ombudsman, as prescribed by Article 187 of Law No. 2016-48. The OECD recommends considering the most appropriate regulatory set-up and that:
Raising consumer awareness of the mediation service.
The BCT should actively promote awareness of the mediation mechanism.
Financial services businesses should be required to inform their existing and prospective customers in writing about the mediation service on their websites, at points of sale, in contracts, if a customer makes a complaint, and in final written decisions on complaints. The financial services business’s final written decision on any complaint should include details of how to use the financial services ombudsman scheme, alongside time limits and other conditions that apply.
Adopting regulation to monitor and enforce the obligations of financial services businesses to raise consumer awareness of the mediation service.
The INFO Network is an international association of financial services ombudsmen. Its objective is to develop expertise in dispute resolution and share best practices for mediation mechanisms in financial services through exchanges of experience, knowledge and ideas. The INFO Network sets out six fundamental principles for its members:
Independence: A financial services ombudsman should be independent of both the financial services industry and consumer bodies, and decision-makers should be free of influence by the parties in disputes and by regulators and governments. Decision-makers should be appointed by legislation, government, regulators or bodies with balanced memberships following a transparent process, on terms that secure their independence from the financial services industry, regulators, consumer bodies and those who appointed them.
Clarity of scope and powers: A financial services ombudsman should publish, among other things, details of the scope of their jurisdiction, their enquiry and complaint-handling processes, their powers, and the status of their decisions.
Accessibility: Financial services businesses should be required to inform customers about the financial services ombudsman scheme.
Effectiveness: A financial services ombudsman should employ flexible and informal processes that do not require parties to engage professional advisers. A financial services ombudsman should employ skilled decision-makers and be resourced adequately. They should also provide a clear definition of what constitutes a complaint and clear obligations on financial services businesses to deal with complaints fairly and promptly.
Fairness: A financial services ombudsman should be prompt, impartial and fair. They should inform parties in writing about their reasoned decisions.
Transparency and accountability: A financial services ombudsman should consult on the scope of their responsibilities, procedures and business plans, and publish reports on their activities.
Source: INFO Network (2023[14]), A worldwide network of financial services ombudsman schemes, https://www.networkfso.org/.
9.4.3. Financial education
In 2020, the OECD Council adopted a Recommendation on Financial Literacy. This instrument has the objective of helping governments and other public authorities to design, implement and evaluate policies to improve financial literacy. The recommendation covers three main areas:
The Tunisian Observatoire de l’Inclusion Financière recently joined the OECD International Network on Financial Education (INFE) as a full member (see Box 9.6 for a description of the objectives of INFE). The OECD recommends that public authorities in Tunisia draw from the OECD Recommendation on Financial Literacy and the INFE experience, and in particular that they:
Collect data to analyse financial literacy levels among the population, with a focus on understanding the financial knowledge, attitudes and behaviours of potential and current retail banking customers.
Develop a national financial education strategy, and effective financial education programmes with a focus on addressing the needs of potential and current retail banking customers.
The OECD/INFE promotes international co-operation on financial literacy and education by facilitating the sharing of experience and good practice, developing policy analyses and research, and developing policy instruments. The network includes more than 270 members from over 130 countries and economies around the world, comprising mostly ministries of finance and education, central banks and financial regulators. The OECD/INFE supported the development of the OECD Recommendation on Financial Literacy, adopted in 2020 and welcomed by G20 finance ministers and central bank governors in 2021.
Co-ordinating the collection of internationally comparable data on financial literacy among adults, young people and owners of micro and small businesses.
Supporting the development and implementation of national strategies for financial literacy.
Developing analysis and research on the implications for financial education of emerging and ongoing trends, such as the digitalisation of finance and sustainable finance.
Developing analysis and research on effective financial education programmes to support relevant target groups, including young people, seniors, women, migrants, and owners of micro and small businesses.
Overseeing the organisation of the Global Money Week awareness campaign.
Source: OECD (2023[15]), International Gateway for Financial Education, https://www.oecd.org/financial/education/.
9.4.4. Strengthen and clarify the financial consumer protection mandate
Financial consumer protection is a key ingredient of well-functioning retail banking markets. Financial consumer protection refers to regulatory frameworks that have the objective of ensuring fair and responsible treatment of consumers in financial markets. Financial consumer protection regulatory and supervisory frameworks have a positive effect on the finance sector as they strengthen trust in the market and increase transparency and competition. Even well-informed and educated consumers may still make decisions that may not be in their best interests. For example, consumers may find it difficult to assess their future needs or to take risk into account in their decisions.
The OECD recently updated the G20/OECD High-Level Principles on Financial Consumer Protection, which are included in an OECD recommendation (OECD, 2022[16]). These principles are international standards for comprehensive and effective financial consumer protection frameworks that are included in the Financial Stability Board’s Compendium of Standards. Among other things, the principles highlight the importance of maintaining an appropriate legal, regulatory and supervisory framework to protect consumers in financial markets and an oversight body explicitly responsible for financial consumer protection.
The OECD recommends that Tunisia:
Consider joining the International Financial Consumer Protection Organisation (FinCoNet). FinCoNet is an international network of market conduct supervisory authorities that are responsible for financial consumer protection. FinCoNet promotes sound market conduct and strong consumer protection through efficient and effective financial market conduct supervision (Financial Consumer Protection Organisation, 2023[17]).
Design a national policy framework for financial consumer protection in accordance with the G20/OECD High-Level Principles on Financial Consumer Protection.
9.4.5. Measures to improve MSMEs’ ability to make informed decisions when shopping around for financial products
Introducing measures to increase transparency around the cost of loan products, such as requiring lenders to disclose the total costs of such products over their lifetimes. These should be calculated using a standardised set of assumptions to allow easy comparisons among providers. Compliance with this requirement must be supervised by financial regulators and cannot be left to banking associations in order to minimise the risks of co-ordinated conduct.
Introducing a requirement that lenders issue letter that include reasoned arguments when they refuse credit applications.
Introducing clear and binding rules on legitimate and illegitimate reasons for not granting finance. A list should be available to customers and should be used to make complaints if consumers consider that they have been denied credit without good reason. Borrowers that believe that they have been denied credit unfairly can then take their letters to the Ombudsman.
The implementation of the measures in this package will deliver benefits in bank loan markets. The OECD recommends:
Creating an independent commission to investigate cross-ownership among financial and non-financial entities. The OECD requested information to assess the impact of the connections between banks and non-financial enterprises on lending to MSMEs. This included, for example, detailed loan-level data covering information on lending products and borrowers. The OECD also requested aggregate information on the composition of banks’ portfolios and outstanding loans to connected borrowers, which is held by the BCT. However, the OECD was not given access to this data. As a result, it was not possible to assess concerns related to access to financing among businesses that lacked connections to banks.
However, the OECD recognises that these concerns are widespread and have the potential to increase the barriers that businesses face when accessing finance. For these reasons, the OECD recommends further investigation of these issues. Given the nature of these concerns, the OECD considers the best way to do so would be by creating an independent commission with the mandate to investigate the effects of cross-ownership between financial and non-financial entities in lending markets. One of the main objectives of the commission would be to identify whether banks’ practices have the effect of making it harder for unrelated borrowers to access finance or in some instances excluding them altogether.
The commission should be independent of banks, industrial groups and current regulatory frameworks. It should have sufficient legal powers to compel the provision of relevant information and the necessary resources to perform its role.
Introducing a registry for movable goods. As described in Section 5.3.2, Tunisian banks require MSMEs to provide high-value collateral for the vast majority of loans. Although the majority of small businesses’ capital stock typically resides in movable assets such as equipment and machinery, lenders are reluctant to accept movable assets as collateral. A registry for movable goods may increase access to finance by fulfilling two functions: notifying parties of the existence of a security interest in movable assets, and establishing the priority of creditors. This may reduce the length of court proceedings. See Box 9.7 for a description of an international comparison measuring the impact of the introduction of registries for movable assets.
Enforcing regulation of prudential requirements, including compliance with Circular No. 2018-06 on related lending, discussed in Section 6.2.3.
Adopting a proportionate, risk-based approach and considering lowering or abolishing minimum capital requirements for private credit information bureaus.
Adopting a proportionate, risk-based approach when establishing technical and governance requirements.
Assessing the impact of new entrants to credit information markets on competition in related sectors, for example if potential entrants have ties with established banks.
Standardising and enforcing conformity with the methodology for calculating effective interest rates on loan products to ensure that financial institutions calculate the cap in the same way.
Assessing the impact of the cap on lending interest rates and publishing an analysis. The assessment should include analysis of whether the cap has negative effects on market outcomes, including, for example, whether it leads to the exclusion of riskier categories of borrowers or whether it is used by lenders as focal point to co-ordinate. To do this, the BCT should require granular loan data from lenders over a period of time, potentially including loan-level data including characteristics of the interest rate charged (e.g. interest rate type and associated fees), characteristics of loans at origination (e.g. origination dates, types of loans, maturity dates, amounts and repayment frequencies), characteristics of borrowers, information on the performance of loans (e.g. missed payments and defaults), and information on rejected applications. Based on the results of the assessment, the OECD recommends considering the removal of the cap on lending interest rates or raising it significantly.
Abolishing limitations on the maturity and size of loans specified in Circular No. 1987-47.
Evidence from the World Bank suggests that the introduction of collateral registries for movable assets increases firms’ access to finance, especially that of smaller enterprises. Using the World Bank Enterprise Surveys and a difference-in-difference approach, (Love, Martínez Pería and Singh, 2016[18]) compared access to finance for firms in seven countries that introduced a collateral registry for movable assets against three control groups. One group comprised countries that introduced collateral reforms without introducing a registry for movable assets, one group was countries “matched” to the seven “target” countries based on geography and GDP per capita that did not introduce any reforms, and one group was countries without reforms that were not matched to the target countries. The article considered seven measures of access to finance correlated with the introduction of a registry for movable assets, controlling for a set of country-level and firm-level characteristics. (Love, Martínez Pería and Singh, 2016[18]) found that the introduction of a registry for movable assets was associated with an increase of 8% in the number of firms with credit lines and an increase of 7% in the number of firms with bank loans. The impact on access to finance was more significant among smaller firms.
Source: Love, Martínez Pería and Singh (2016[18]) Collateral Registries for Movable Assets Does Their Introduction Spur Firms’ Access to Bank Finance?, https://doi.org/10.1007/s10693-015-0213-2.
Considering a proportional, risk-based approach when establishing capital and other requirements for payment service providers. It is important that capital requirements reflect risks to the financial system without lowering standards for payment service providers.
Amending the licensing process for payment service providers. In particular:
Adopting governance requirements for payment service providers more tailored to their specific activities, facilitating licensing and access to market for innovative start-ups and fintech companies offering these services.
Lifting the twin requirement of minimum capital and insurance or bank guarantees, especially when capital requirements are already substantial.
Drawing from the experience of European countries and considering lowering minimum capital requirements.
Introduce differing capital requirements depending on services provided.
Increasing transparency and reducing uncertainty in the licensing procedure by: 1) introducing a requirement that the BCT publicly provide a list of conditions triggering ad hoc minimum capital requirements; and 2) complying with existing regulation and providing a response to entities applying for licences in a timely manner.
Allowing payment services providers to be part of the SMT, similarly to traditional banks.
Removing restrictions on pricing imposed to payment service providers, such as the prohibition on charging for payments below TND 15, as per Article 21 of Circular No. 2020-11.
The OECD considers that the following recommendations may generate benefits for consumers in the longer term.
9.7.1. Branch networks
Simplifying conditions for opening branches by removing:
requirements that branch premises should have a minimum floor area of 75 m2, an ATM, and should not be near risky facilities or equipment such as fuel or gas depots.
the requirement that each branch to have at least three employees with at least two always present during opening hours.
requirements related to educational and professional experience for branch managers.
9.7.2. Financial sector regulatory set-up
The OECD recommends considering whether models other than the one currently operating in Tunisia may be better suited to pursuing the financial consumer protection mandate. Potential options include: 1) strengthening the independence of financial consumer protection officials; 2) increasing and ringfencing resources for financial consumer protection; 3) increasing co-operation with international bodies such as FinCoNet to adopt best practices; and 4) creating a separate authority dedicated to supervising market conduct and financial consumer protection.
References
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