Circular to Banks and Financial Institutions No. 2025-01 of January 29, 2025

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Tunis, January 29, 2025.
CIRCULAR TO BANKS AND FINANCIAL INSTITUTIONS
No. 2025-01
Subject: Classification, risk coverage, and monitoring of commitments.
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 No. 91-24 of December 17, 1991, on classification, risk coverage, and monitoring of commitments, as amended and supplemented by subsequent texts, notably Circular No. 2024-01 of January 19, 2024, Having regard to Circular No. 2006-19 of November 28, 2006, on internal control, Having regard to Circular No. 2017-06 of July 31, 2017, on accounting, prudential, and statistical reporting to the Central Bank of Tunisia, Having regard to Circular No. 2021-05 of August 19, 2021, on the governance framework for banks and financial institutions, Having regard to Opinion No. 2025-01 of the Compliance Control Committee dated January 28, 2025, as provided for in Article 42 of Law No. 2016-35 of April 25, 2016, establishing the status of the Central Bank of Tunisia. Decides:

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Article 1: Annex III to the aforementioned Circular No. 91-24 is repealed and replaced by Annex 1 to this Circular.
Article 2: Banks and financial institutions are required to report to the Central Bank of Tunisia the elements for determining collective provisions in accordance with the model set out in Annex 2 to this Circular.
Article 3: This Circular enters into force as of its publication date, and its provisions apply to the fiscal year 2024 and subsequent years.
THE GOVERNOR,
Fethi Zouhaier NOURI

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Annex No. 1 to Circular No. 2025-01 of January 29, 2025
Annex III (new) to Circular No. 91-24 of December 17, 1991
Methodology for Determining Collective Provisions This methodology is based on the following steps:
I. Determination of the calculation base for collective provisions
Gross commitments by disbursement and off-balance sheet commitments, excluding notified but unused credits, classified as 0 and 1 at the end of the reference year designated "Nr". Excluded are commitments to banks and financial institutions within the meaning of Law No. 2016-48 and their equivalents established abroad, as well as microfinance institutions incorporated as joint-stock companies.

II. Grouping of commitments 0 and 1 into homogeneous groups
The target population's commitments are grouped by customer segment and by economic sector.

• Commitments to private sector professionals

• Agriculture

• Mechanical and electrical industries

• Agro-food industries, including oil millers

• Pharmaceutical industries

• Other industries

• Construction and public works (BTP)

• Tourism, including travel agencies

• Real estate development

• Commerce/Retail

• Health

• Telecommunications and ICT

• Other services, including car rental agencies

• Commitments to public counterparties

• Public enterprises operating in competitive sectors

• Other public bodies

• Commitments to individuals

• Private sector individuals: Housing loans

• Private sector individuals: Consumer credit

• Public sector individuals: Housing loans

• Public sector individuals: Consumer credit
  Banks and financial institutions must ensure, within the framework of this grouping, the homogeneity of the groups.

III. Determination for each counterparty group designated "gi" of an estimated average migration rate based on the most recent 7-year history, including the reference year and excluding the year 2020.
With:

• TMgi(N): Migration rate of year N for counterparty group i.
• Additional risk of group i: commitments at the end of year N for counterparties classified as 0 and 1 at the end of year (N-1) in group i that become classified as 2-3-4 at the end of year (N).
• The TMgi(N) must be adjusted to eliminate exceptional effects that may cause bias. Details of these adjustments must be communicated to the Central Bank of Tunisia (BCT).
• TMMgi: Historical average migration rate for counterparty group i.
• n: number of years retained in the calculation of TMMgi.

IV. Increase in historical average migration rates
The historical migration rates for counterparty group "gi" are increased by the rates "Δgi" as follows:
TMgi (N) = × 100
TMMgi = ∑𝑛
𝑁=1 𝑇𝑀𝑔𝑖(𝑁)/𝑛

Counterparty Group | Δgi
Private Sector Professionals
Agriculture | 6.75%
Mechanical and electrical industries | 2.75%
Agro-food industries, including oil millers | 2.75% Pharmaceutical industries | 0.50% Other industries | 3.50% Construction and public works (BTP) | 6.25% Tourism, including travel agencies | 7.75% Real estate development | 6.75% Commerce/Retail | 3.25% Health | 1.00% Telecommunications and ICT | 0.75% Other services, including car rental agencies | 4.25% Public Counterparties Public enterprises operating in competitive sectors | 6.00% Other public bodies | 2.50% Individuals Private sector individuals: Housing loans | 2.00% Private sector individuals: Consumer credit | 3.25% Public sector individuals: Housing loans | 0.50% Public sector individuals: Consumer credit | 0.75%

V. Application of standard provisioning rates "TPgi"
The standard provisioning rates "TPgi" are as follows:

Counterparty Group | TPgi
Private Sector Professionals
Agriculture | 40%
Mechanical and electrical industries | 40%
Agro-food industries, including oil millers | 40% Pharmaceutical industries | 40% Other industries | 40% Construction and public works (BTP) | 40% Tourism, including travel agencies | 40% Real estate development | 30% Commerce/Retail | 40% Health | 40% Telecommunications and ICT | 40% Other services, including car rental agencies | 40%

Public Counterparties
Public enterprises operating in competitive sectors | 40% Other public bodies | 40% Individuals Private sector individuals: Housing loans | 20% Private sector individuals: Consumer credit | 40% Public sector individuals: Housing loans | 20% Public sector individuals: Consumer credit | 40% The increase rates "Δgi" and the standard provisioning rates "TPgi" must be applied by banks. Financial institutions may, following prior approval from the Central Bank of Tunisia and based on a reasoned report, adopt increase rates "Δgi" and/or provisioning rates "TPgi" lower than those indicated above.

VI. Calculation of the amount of collective provisions "PC" on commitments 0 and 1
The total amount of collective provisions must be reviewed at each annual financial statement closing date. The target population and the TMMgi must be recalculated annually. Global collective provision: Sum of collective provisions by group: ∑𝑛 𝑃𝐶𝑔𝑖 Collective provision for group i: PCgi = Engts 0 et 1gix (TMMgi + Δgi )x TPgi

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Annex No. 2 to Circular No. 2025-01 of January 29, 2025
Statement for Determining Collective Provisions (*) - Notified but unused credits

• Commitments to banks and financial institutions within the meaning of Law No. 2016-48 and their equivalents established abroad
• Commitments to microfinance institutions incorporated as joint-stock companies.

Gross commitments by disbursement	Off-balance sheet commitments	Elements to be deducted (*)	Outstanding commitments classified as 0 and 1 (calculation base for collective provisions)
(In million Dinars)	TM1	TM2	TM3	TM4	TM5	TM6	TM (Nr)
Private Sector Professionals
Agriculture
Mechanical and electrical industries
Agro-food industries, including oil millers
Pharmaceutical industries
Other industries
Construction and public works (BTP)
Tourism, including travel agencies
Real estate development
Commerce/Retail
Health
Telecommunications and ICT
Other services, including car rental agencies
Public Counterparties
Public enterprises operating in competitive sectors
Other public bodies
Individuals
Private sector individuals: Housing loans
Private sector individuals: Consumer credit
Public sector individuals: Housing loans
Public sector individuals: Consumer credit
Total
Average migration rates (TMM)	Δgi	Increased TMM	Provisioning rates (TP)
Outstanding collective provisions at the end of the reference year (Nr)
Migration rates (TM) (7-year most recent history including the reference year and excluding 2020)
Outstanding collective provisions at the end of the year (Nr-1)
Outstanding commitments classified as 0 and 1 at the end of the reference year (Nr)
Customer segment / Economic sector