Circular to Banks and Financial Institutions No. 2023-05 of October 10, 2023

Tunis, October 10, 2023
CIRCULAR TO BANKS AND FINANCIAL INSTITUTIONS NO. 2023-05 Subject: Implementation of Consolidated Supervision.

The Governor of the Central Bank of Tunisia,
Having regard to Law No. 2016-35 of April 25, 2016, establishing the status of the Central Bank of Tunisia, Having regard to Law No. 2016-48 of July 11, 2016, on banks and financial institutions, Having regard to Circular to Credit Institutions No. 2006-19 of November 28, 2006, on internal control, Having regard to Circular to Banks and Financial Institutions No. 2017-06 of July 31, 2017, on accounting, prudential, and statistical reporting to the Central Bank of Tunisia, Having regard to Circular to Banks and Financial Institutions No. 2021-05 of August 19, 2021, on the governance framework for banks and financial institutions, Having regard to the opinion of the Compliance Monitoring Committee No. 2023-05 of July 28, 2023, as provided for in Article 42 of the aforementioned Law No. 2016-35, Decides:

Article 1
This circular aims to define the reference framework for implementing consolidated supervision in order to adequately assess the risk profile of banks and financial institutions at the group level and preserve their financial soundness. The reference framework is applied by the concerned institutions for developing prudential standards on a consolidated basis, issued by the Central Bank of Tunisia regarding capital adequacy and liquidity. This framework defines:

• the prudential consolidation scope and the consolidation methods under this scope; and
• the consolidated reporting to be submitted to the Central Bank of Tunisia.

Article 2
This circular applies to banks and financial institutions as defined by Law No. 2016-48 that exercise, directly or indirectly, over one or more entities, control, joint control, or significant influence, in the sense of the applicable accounting legislation, and which shall hereinafter be designated as "the institutions".

Article 3
For the purpose of determining the prudential consolidation scope, institutions must, starting from the accounting consolidation scope established according to applicable accounting legislation, while respecting the following rules:

1. Retain the following entities regardless of their weight relative to the institution:

• banks and financial institutions as defined by Law No. 2016-48 and their equivalents established abroad;
• microfinance companies;
• debt collection companies;
• insurance companies;
• common loan funds; and
• any other entity exercising activities related to payment services.

2. Retain the following entities provided they have a significant weight relative to the institution:

• auxiliary service entities whose purpose is to assist the institution exclusively on a logistical basis;
• venture capital investment companies;
• fixed-income investment companies;
• stock exchange intermediaries;
• collective investment schemes in securities; and
• any other financial company exercising activities related to financial intermediation.
  For the application of the provisions of this article, institutions must adopt the following definitions:
• The weight of an entity is understood as the following ratio:
  Total assets of the entity (determined based on its individual accounting balance sheet as of a specified date) Total assets of the institution (determined based on its individual accounting balance sheet as of the same date)
• The weight of an entity is considered significant if either of the following conditions is met:
  • Condition No. 1: It is greater than or equal to 1%; or
  • Condition No. 2: The cumulative weight of entities, each having a weight less than 1%, is greater than or equal to 10%.
    If Condition No. 2 is met, all entities with individually non-significant weight must be included in the prudential consolidation scope.

3. Exclude any other entity not mentioned by this article.

Article 4
For the purpose of determining consolidation methods under the prudential scope, institutions must respect the following rules:

• Apply the equity method for insurance companies.
• Maintain the consolidation methods under the accounting scope for other entities.

Article 5
Notwithstanding the provisions of Articles 3 and 4 of this circular, the Central Bank of Tunisia may require an institution, taking into account its consolidated risk profile assessment, to revise the prudential consolidation scope and/or the consolidation methods under the prudential scope.

Article 6
Without prejudice to the provisions provided by the aforementioned circulars on internal control and governance framework, institutions must take all necessary measures to comply with the terms of this circular through:

• The establishment of a formalized procedure for determining entities included in the prudential consolidation scope.
• The establishment of an adequate consolidated reporting production procedure ensuring compliance with regulatory deadlines and conformity to technical declaration requirements.

Article 7
Annex I to Circular No. 2017-06 on accounting, prudential, and statistical reporting to the Central Bank of Tunisia is amended by adding two declarations to Domain 4 "Consolidated Reporting", in accordance with Annex 1 of this circular.

Article 8
This circular enters into force from the date of its publication. The first consolidated reporting to be declared by institutions to the Central Bank of Tunisia is that as of the end of 2022. Institutions are granted a deadline not exceeding December 31, 2023, to declare this reporting. THE GOVERNOR MAROUANE EL ABASSI

Annex 1 to Circular No. 2023-05 of October 10, 2023
Amending Annex I to Circular No. 2017-06 of July 31, 2017, on accounting, prudential, and statistical reporting to the Central Bank of Tunisia

Domain	Declaration Code	Declaration Title	EA	Reporting Periodicity	Maximum Transmission Deadline	Format / Transmission
4-Consolidated Reporting	RBCA100	Intra-group Exposures (BR+BNR+EL+EF)		Annual	One month before the AGM date, not exceeding March 31	XML
	RBCA110	Consolidation Scope (BR+BNR+EL+EF)		Annual	One month before the AGM date, not exceeding March 31	XML
	RBCA120	Consolidated Financial Statements (BR+BNR+EL+EF)		Annual	One month before the AGM date, not exceeding March 31	PDF
	RBCA130	Determination of Entity Weights for Significance Criteria (BR+BNR+EL+EF)		Annual	One month before the AGM date, not exceeding March 31	XML
	RBCA140	Transition Table from Accounting Consolidation Scope to Prudential Consolidation Scope (BR+BNR+EL+EF)		Annual	One month before the AGM date, not exceeding March 31	XML

RBCA130: Determination of Entity Weights for Significance Criteria (In thousands of dinars unless otherwise stated)

Entity Name	Total Assets of the Entity at End of Reference Year	Total Assets of the Institution at End of Reference Year	Weight (Entity's total assets relative to institution's total assets) (%)	Inclusion/Exclusion from Prudential Consolidation Scope (to be stated as include or exclude)
Entity 1	...	...
...	...	...
Entity n	...	...

RBCA140: Transition Table from Accounting Consolidation Scope to Prudential Consolidation Scope

Entity Name	Category per Article 3 (*)	Country of Residence	Type of Dominance (**)	Consolidation Method under Accounting Scope	Inclusion/Exclusion from Prudential Consolidation Scope (***)	Consolidation Method under Prudential Scope
Entity 1	...	...	...	...	...	...
...	...	...	...	...	...	...
Entity n	...	...	...	...	...	...

() To be stated as "Other" if it is a category not covered by the provisions of Article 3 of Circular No. 2023-05 of October 10, 2023.
() Control, joint control, significant influence.
() The institution must state whether to include or exclude.