Journal of Accounting and Taxation Vol. 3(4), pp.

70-78, August 2011

Available online at http://www.academicjournals.org/JAT
ISSN 2141-6664 ©2011 Academic Journals

Full Length Research Paper

The factors influencing bank credit risk: The case of

Tunisia
Nabila Zribi1* and Younes Boujelbène2
1
Faculty of Economics and Management of Sfax. University of Sfax-Tunisia. Route Saltania 4 Km, 3081 Sfax-Tunisia.
2
Faculty of Economics and Management of Sfax. University of Sfax-Tunisia. Higher Institue of Business Administration
of Sfax. Route from the Areport 4 Km, Sfax. BP1013-3018 Sfax-Tunisia.
Accepted 24 June, 2011

This paper aims to examine the determinants of bank credit risk in Tunisia, being an emergent country.
Our sample includes ten commercial banks over the period of 1995 to 2008. The paper takes into
account both macroeconomic factors and microeconomic variables that are likely to influence credit
risk. Overall, the results show that the main determinants of bank credit risk in Tunisia are: ownership
structure, prudential regulation of capital, profitability and macroeconomic indicators.

Key words: Bank credit risk-taking, bank’s characteristics, ownership structure, capital regulation, emerging
country.

INTRODUCTION

Over the last few years, the Tunisian banking sector has literature about the analysis of the key factors influencing
become more and more market oriented, competitive, credit risk of banks in emerging countries.
attractive for foreign investors and not immunized against This research paper is organized as follows.
diffusion of new technologies of information and Subsequently, a review of the literature and hypotheses
communication. In consideration of this new open and was done, after which the study focused on Tunisian
turbulent environment and in view of minimizing all kinds banking literature. This was followed by a description of
of risks or signs of fragility, the Central Bank of Tunisia the methodology and the empirical results. Finally, the
has made it mandatory for the banks to respect restrictive study was concluded.
reforms.
These reforms are centred around five axes: improving
prudential regulation, opening the financial sector to RELATED LITERATURE AND HYPOTHESES
foreign investors, promoting the equity market,
implementing new indirect monetary policies and Two trends in the literature have focused on the main
liberating the interest rates and the allocation of credits. factors that are likely to influence bank credit risk. One
All these changes will certainly have implications on the trend appears to suggest internal variables as potential
risk taken by the Tunisian banking industry. In this determinants of credit risk. The other trend highlights
setting, our paper aims to analyse the factors that are changes in external variables in the prudential regulation
likely to influence the level of bank credit risk. and economic conditions affecting the bank credit risk.
Three main factors lie behind this research: First, the The main results of this literature provide evidence of a
competitive and regulated environment in which Tunisian close relationship among internal variables, external
banks operate. Second, the increase of the potential of variables and bank credit risk.
moral hazard and agency problems between different A large part of the literature highlights that the
actors in the Tunisian banks due to the lack of ownership structure might play a role in influencing credit
transparency. Finally, the gap we have noticed in the risk and a particular focus is put on the relationship
between public ownership or State-owned banks and
their levels of risk. Generally, it is assumed that State-
owned banks take more risks than the private and foreign
*Corresponding author. E-mail: nabila1zribi@gmail.com capital requirements and bank risks in complete markets.
 Zribi and Younes 71

Their results have shown that with a flat insurance banks. Similar results have been reached by Koehn and
In this context, Micco and Panizza (2004) have found that Santomero (1980). These authors have analysed the
public banks are exposed to more risk than other banks impact of capital ratio (equity capital to total assets
since they play an important role in the facilitation of the without taking into consideration the inherent risk of
credit policies and their loans are less sensitive to different assets) on bank risk-taking. Their results show
macroeconomic shocks in comparison with private banks. that higher capital requirements lead banks to revise the
Sapienza (2004) has also found such a relationship. He composition of their portfolios.
explains this result by three alternative views. From the This composition is characterized by the detention of
social view, he has shown that the State interferes in riskier assets in comparison with those before the
banks in order to correct the market failure caused by amendment of the regulation. Kim and Santomero (1988)
private banks. According to the political view, he have criticized the researches of Kahane (1977) and
demonstrates that the State-owned banks are a Koehn and Santomero (1980). They have propose the
mechanism for pursuing politicians' private interests, such ratio of equity capital to risk-weighted assets as a
as doing favours for political protégés. regulator ratio. Their results have shown that a regulator
Finally, in relation to the agency view, he has shown ratio adjusted to risk leads the banks to change the
that State-owned banks are basically benevolent compositions of their asset portfolios in favour of less
maximizers of social welfare but they are plagued by risky assets and thus a less bank risk-taking. Similar
corruption and misallocation. In a recent research from results have been found by Furlong and Keely (1989,
industrialised countries, De Nicolo (2001) and Giuliano et 1990) and Dothan and Williams (1980) suggesting that
al. (2007) have suggested that state-owned banks the prudential regulation of capital leads banks to reduce
typically exhibit higher risk than other types of banks. In their potential of bank risk-taking. For empirical
Russian banks over the period 1999 to 2007, Zuzana and researches, Shrieves and Dahl (1992) represent the
Laura (2008) have found that the effect of state reference point of all the empirical studies. Shrieves and
ownership on banks’ insolvency risk is positive. They Dahl (1992) have studied the impact of regulation of
explain this result by the fact that state-controlled banks equity capital on the bank risk-taking decisions in the
tend to be more stable. In order to investigate this result context of 1800 U.S. banks over the period 1983 to1987.
more closely, they add an interaction term of size and Based on a simultaneous equation model, these results
state control to their model. This interaction makes the show a positive association between changes in equity
coefficient of state controlled variable become negative, capital and the level of risk, particularly for over-
which indicates that only large state-controlled banks are capitalized banks. In the same context, Jacques and
more stable than other state-controlled banks. In the Nigro (1997) have shown that the introduction of capital
context of a sample of 423 banks in transition countries based on risk has led to higher capital ratios and a lower
(Russia, Ukraine, Hungary, Czech Republic etc), Rainer risk portfolio of banks.
and Paul (2007) have found no indication of excessive Hussain and Hassan (2004), in the context of 11
risk taking by any specific ownership or size categories of developing countries have also shown a negative
transition banks. Generally, studies in the context of relationship between capital ratio and portfolio risk. In the
transition countries have not been conclusive about the European context and especially in Switzerland, Rime
sign of state-controlled banks. So, following theoretical (2001) has examined the relationship between regulatory
literature, we expect to find a positive relationship capital and risk-taking by banks. She has concluded that
between state-owned banks and the level of bank credit the regulatory pressure has induced Swiss banks to
risk. increase their capital levels while keeping stable levels of
risk-taking. Nor and Mohamed (2007) have presented a
comparative study of all factors contributing to the credit
Hypothesis 1: State owned-banks take more risks risks of commercial banks in a multi-country setting:
than other banks Australia, France, Japan and the U.S. represent
developed economy banking systems while emerging
As for the prudential regulation of capital, it might also ones are represented by India, Korea, Malaysia, Mexico
help to explain why banks take risks. The common belief, and Thailand. They have found that the regulatory capital
at least among regulators, is that higher capital is an important factor influencing the credit risk of any
requirements result in a higher stability of the banking banking system that offers a range of services. This study
sector and consequently in lower levels of bank risk- also highlights that the credit risk in emerging economy
taking. However, the literature analysing the relationship banks is higher than that in developed economies and
between bank capital regulation and the level of risk is that risk is formed by a larger number of bank-specific
ambiguous and is not conclusive about the sign (positive factors in emerging economies compared to their
or negative) of this relationship. Kahane (1977) and counterparts in developed economies.
Sharpe (1978) have analysed the relationship between Marina and Svetlana (2001) have studied the main The
premium, banks have incentives to increase risk-taking. Tunisian banking sector has received a part of the factors
72 J. Account. Taxation

influencing excessive risk in transition banks with a One part of this literature has been interested in the
special emphasis on Russian banks. They have found analysis of banking performance, banking efficiency,
that many banks in Russia have violated prudential ratios banking stability and banking governance. Another part of
in a forbearance environment or when the value of the literature focuses on some phenomena characterizing
license is low and the probability of success in a risky the Tunisian banking industry like restructuring,
project is relatively high. In the context of emerging liberalisation and privatisation. In this context, Mohamed
countries, Goldlewski (2004) have found that the (2002) has studied the impact of alternative ownership
regulation of capital and risk are negatively related. In structures on Tunisian firm performance and managerial
summary, as the ratio of capital and its regulation aim to behaviour with special emphasis on institutional and
reduce the levels of bank risk-taking, we expect to find a managerial ownerships. His results have suggested a
negative relationship between these two variables. positive relationship between institutional ownership and
the value of the firm explained essentially by internal
mechanisms of control. He has also found that the higher
Hypothesis 2: There is an inverse relationship the managerial ownership is the lower institutional
between capital regulation and bank credit risk ownership.
Abdelwahed (2003) has studied the impact of the
Another part of the literature has been interested in the different variables of corporate governance on the
analysis of the theoretical arguments based on the performance of 43 quoted Tunisian firms during the
relationship between the bank size and bank risk-taking. period 1995 to 2000. His study has shown that there is a
It suggests a negative relationship between these two statistically significant relationship between corporate
variables. Such a relationship is justified by the most governance systems and performance. Samy (2003) has
natural argument that is diversification by size. Indeed, investigated the impact of banks’ characteristics, financial
larger banks are expected to have lower risks because structure and macroeconomic indicators on banks’ net
they have the capability of holding more diversifiable interest margins and profitability in the Tunisian banking
portfolios. In this respect, many researches have been industry over the 1980 to 2000 period. His results have
conducted. According to the researches of Saunders et shown that individual bank characteristics are main
al. (1990), Chen et al. (1998), Cebenoyan et al. (1999) factors that determine bank interest margins and net
and Megginson (2005), there is a negative relationship profitability. Other important internal determinants of
between bank risk and bank size. They explain this result banks’ interest margins are bank loans which have a
by the fact that larger banks are likely to be more skilled positive and significant impact. The size has mostly
in risk management and have also better diversification negative and significant coefficients on the net interest
opportunities. Thus, we expect to find that the bank size margins. He has also found that the macroeconomic
is negatively related to the level of risk. indicators such as inflation and growth rates have no
impact on banks’ interest margins and profitability. Then,
turning to the financial structure and its impact on banks’
Hypothesis 3: The bank size affects the level of risk interest margins and profitability, he has found that
negatively concentration is less beneficial to the Tunisian
commercial banks than competition.
Moreover, macroeconomic indicators can also influence Wade et al. (2005) have been interested in the analysis
bank risks. These indicators are those at the origin of of the impacts of financial liberalization on the efficiency
banking crises: inflation rate of growth GDP, interest rate of the banking system in Tunisia, using various DEA
and exchange rate. In this setting, many researches have models and Panel data covering the period 1992 to 1997.
been conducted to analyse the relationship between Also, Zaghla and Boujelbene (2008) have analysed the
these indicators and the occurrence of banking crises. determinants of efficiency of the banking system in
The findings in this respect indicate that there is a close Tunisia. Their empirical results have revealed
relationship between macroeconomic indicators and pronounced differences in efficiency depending on the
banking crises and excessive risk(Angeloni and al (2009), size and structure of bank ownership. In addition, the
Olga Bohachova (2008), Buch and al (2010). We will test preponderance of credit activity relative to other outputs
if these variables influence the levels of credit risk in the represents a source of efficiency. Then, there is a
Tunisian context. negative relationship between the ratio of equity to total
assets and bank efficiency, suggesting that banks are
engaged in risky activities. Finally, the share of non-
Hypothesis 4: Macroeconomic factors affect bank performing loans represents a source of inefficiency since
credit risk the charges for bank increase with these types of loans,
especially for large banks.
The Tunisian banking sector has received a part of the Studies on bank risk-taking decisions in the Tunisian
littérature. banking sector are limited. In this context, we can cite the
 Zribi and Younes 73

Table 1. List of the Tunisian banks.

Ownership structure
Banks abbreviation in French Full name of banks Specialisation
(Period: 1995 to 2008)
AB Amen Bank Private No specialisation
ATB Arab Tunisian Bank Private No specialisation
BH Bank of Housing State Estate-field
BIAT International Arab Tunisian Bank Private No specialisation
BNA National Agricultural Bank State Agriculture

State (95 to 05)

BS South Bank or Attijari Bank No specialisation
Private (06 to 08)

BT Bank of Tunisia Private No specialisation

STB Tunisian Company Banking State No specialisation
UBCI Industrial and Commercial Bank Union Private No specialisation

State (95 to 02)

UIB International Bank Union No specialisation
Private ( 03 to 08)

research of Hamza (2009) and Mnasri and Abaoub METHODOLOGY

(2010). Hamza (2009) has investigated the effects of
Sample and data
ownership structure, as an internal control mechanism of
agency problem, on corporate governance. He has The purpose of this paper is to analyse the internal and external
focused especially on the impact of the size, number and factors determining the levels of bank credit risk-taking in Tunisia.
type of blockholders on the performance and the risk- Our sample consists of a panel of 10 commercial banks that are
taking of the Tunisian listed companies over the period listed on the Stock Exchange of Tunis (Table 1) over the period
2001 to 2004. The main result of his study indicates that 1995 to 2008. The data used in this paper are collected from the
annual reports of the Professional association of the Tunisian banks
the presence of controlling shareholders affect and financial establishments; the activity reports of the Banks, the
performance and risk-taking and play an important role in guides of the Tunis stock exchange, the Documents of the council
corporate governance. However, we assume that the of financial market and the Web sites news of the companies, the
control contest of the leading shareholder is not stock exchange and the central bank of Tunisia.
conclusive but it indicates a form of coalition and
agreement effect to share private benefits. In the same Variables’ measures
way, Mnasri and Abaoub (2010) have empirically
analysed the determinants of risk-taking in Tunisian First, following Shrives and Dahl (1992), Jacques and Nigro (1997),
commercial banks, with a special emphasis on the Rime (2001) and Hussain and Hassan (2004) among others, we
ownership structure, the acceptance of government employ the ratio of risk-weighted assets to total assets as a
officials on banks' boards, the capital adequacy measure of bank credit risk. This measure is justified by the fact
that the allocation of bank assets across different categories of risk
requirements and the franchise value. Using a sample of is the major determinant of bank risk. Second, we define banks’
ten commercial banks for the period from 1997 to 2006, characteristics in the following manner:
they have found that the acceptance of government
officials on banks' boards reduces bank risk. 1. Ratio of profitability: Return on assets “ROA” is measured as the
The relationship between the managerial holdings and ratio of net income to total assets.
total risk and firm specific risk is non-linear; the risk 2. Ratio of capital: CAP- is defined as the ratio of equity capital to
total assets.
increases initially with the ownership by managers and
then decreases as the effect of managerial entrenchment Thirdly, we also measure ownership structure (GOV) by a dummy
dominates the effects of interest alignment on bank risk. variable that equals 1 if it is the case of State-controlled banks’
In contrast, systematic risk is unrelated to ownership and (Public Ownership) and 0 otherwise (Private and Foreign
franchise value does not affect bank risk. Following these ownership).
Fourth, we use one proxy for regulation. Our measure of bank
researches, our research aims to analyse the
regulation (REG) is a dummy variable that captures the degree of
determinants of bank credit risk in relation with respect to the regulation by banks. It takes one if the bank respects
microeconomic factors, macroeconomic factors, the minimum threshold of 5% before 1999 and 8% after 1999 and 0
ownership structure and bank prudential regulation. in other cases. So, if the solvency ratio of the bank (the ratio
74 J. Account. Taxation

Table 2. Descriptive statistics.

% GDP Exchange Interest

Risk COV REG ROA CAP LN size Inflation
growth rate rate
Mean 0.904493 0.435714 0.885714 0.007809 0.092806 14.47209 4.99285 3.442857 1.169456 6.053482
Median 0.915310 0.000000 1.000000 0.008680 0.090960 14.41782 5.15000 3.150000 1.281053 5.875000
Maximum 0.995856 1.000000 1.000000 0.035006 0.194211 16.28021 7.10000 6.300000 1.436490 8.812500
Minimum 0.660699 0.000000 0.000000 -0.103505 -0.010985 13.37246 1.70000 1.900000 0.000000 5.000000

Table 3. Regression results.

Credit risk Coefficient Z P› │Z│

GOV 0.180684 2.27 0.023**
REG -0.029004 -3.22 0.001***
ROA 0.893013 4.47 0.000***
CAP -0.3494283 -3.17 0.002***
LN size 0.0001677 0.03 0.977
GDP growth -0.005324 -4.98 0.000***
Inflation -0.0083063 -4.72 0.0000***
Exchange rate -0.022998 -2.58 0.0100***
Interest rate -0.016921 -5.55 0.0000***
Constant 1.149065 12.33 0.0000***
*** Significant at the 1% level. ** Significant at the 5% level.

Of equity-capital to risk-weighted assets) is superior to the minimum effect (Random effect). In order to identify the specific effect, we
required by the regulator variable it takes the value of 1 and 0 resort to Hausman test. We resort also to Breusch-Pagan test and
otherwise. Wooldridge’s test for testing serial correlation and heterosedasticity.
Fifth, we use four macroeconomic indicators that can influence The model specified is a random effect model which takes into
banks’ risk: inflation, growth rate of GDP, interest rate and account the existence of heterosedasticity and correlation (Table 3).
exchange rate. Finally, we define one control variable: Bank size
(LNSIZE) measured as the natural logarithm of total assets.
EMPIRICAL RESULTS
Empirical model
Descriptive statistics
The estimation model is written as:
The descriptive statistics for the dependent, independent
and control variables are provided in Table 2. First of all,
i ,t = α + ς it Zi ,t + δ it COVi ,t + ϕit REGi ,t
CreditRisk the descriptive statistic of the variable of risk
demonstrates that the average bank risk is 0.9044, which
+ ηitVi,t + βit LTAi,t + ε it means that 90.44% of total assets are risk-adjusted
(1)
assets. Second, the descriptive statistic of the ownership
Where for each individual bank (i), at time (t): RISK i, t: ratio of risk- structure variable shows that the mean of ownership held
weighted assets to total assets in bank i for period t, Z i, t: matrix of directly by the State, the public and semi-public establish-
the bank’s characteristics variables, COV i, t: ownership structure ments is on average equal to 43.57%. This result shows
variable, REG i, t : regulation variable, V i, t: matrix of
that despite the encouragement of the participation of
macroeconomic variables, LTAit: bank size, α, β, δ, ς, η, ϕ:
Parameters to be estimated; ε: Error term. foreign and private investors in the Tunisian banking
sector, the State continues until now the control of the
three major Tunisian banks (BNA, BH and STB) by the
Estimation method support of public and semi-public establishments. Third,
the descriptive statistic of bank regulation demonstrates
In order to analyse the determinants of Tunisian bank credit risk-
that 88.57% of the Tunisian banks respect the regulatory
taking, we adopt Panel data. This econometric method permits to
control the heterogeneity of the observations in their individual threshold, which illustrates the capacity of the regulatory
measurements, either by taking into account a specific stationary authorities in Tunisia to control the banking system.
effect (Fixed effect) or by considering a non-observable specific Fourth, the descriptive statistic of banks’ characteristics
 Zribi and Younes 75

RCRE
RCRE
1
0.98
0.96
0.94
0.92
0.9
0.88 RCRE
0.86
0.84
0.82
0.8

Figure 1. Evolution of mean of credit risk in Tunisia over 1995 to 2008 periods.

10
9
8
7
6 GDP GROWTH
5 INFLATION
4 EXCHANGE RATE
3
INTEREST RATE
2
1
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Figure 2. Evolution of mean of macroeconomics variables in Tunisia during 1995 to 2008 periods.

InlnSize
size
15,2
15.2
15
15
14,8
14.8
14,6
14.6
14,4
14.4
14,2
14.2
14 In size
lnSize
14
13,8
13.8
13,6
13.6
13,4
13.4

Figure 3. Evolution of mean size of Tunisian commercial banks over 1995 to 2008 period.

show that the mean of the ratio of return on assets is Also, the mean of the ratio of capital is about 9.28%,
about 0.78%, which means that the average net income which shows that on average the Tunisian banks capital
of Tunisian banks represents 0.78% of their total assets. represent 9.28% of their total assets. Fifth, the descriptive
76 J. Account. Taxation

CAP
CAP
0.12
0,12

0.1
0,1

0.08
0,08

0.6
0,06

0.4
0,04 CAP

0.2
0,02

00

Figure 4. Evolution of the mean capital ratio in Tunisian commercial banks over 1995 to 2008 period.

statistic of the control variable indicates that the mean of economic development in Tunisia because of their
banks size is about 1,447,209 Tunisian Dinars. Finally, contribution to cover the trade deficit and the resolution of
the descriptive statistic of macroeconomic variables unemployment problems. However, these sectors show a
indicates that the mean of GDP growth is about 4.99, the risky character since they are associated with numerous
mean of inflation is about 3.45 and the mean of interest contingencies. For example, the tourist sector is affected
rate and exchange rate are around 6 and 1.17, by a seasonal character since the Tunisian tourism
respectively. To have an idea about the tendencies of attracts more tourists in the high season and results in an
some of these variables during the period of the study under-use of the tourist facilities off-season which leads
(Figures 1, 2, 3 and 4). to a limited performance of this sector and this makes it
vital for the State to interfere to revive it. Moreover, the
agricultural sector strongly depends on the climatic
Regression results conditions (drought, flood, rainfall variability etc) that can
affect its performance and can justify the tendency of the
The credit risk is one of the main risks that seriously state to come to the finance of this risky sector. The
affect banks’ stability. The credit risk in banking is interference of the State to finance these risky sectors
commonly defined as the probability of a borrower explains the positive relationship between State
defaulting his loan commitments. The main goal of a ownership and Tunisian bank credit risk-taking.
bank is to manage this type of risk because effective 2. The prudential regulation of banks’ capital also
management of credit risk is a critical component of a influences the level of banks’ risks. Indeed, the coefficient
comprehensive approach to risk management and of REG is negative and statistically significant with risk at
essential to the long-term success of any banking a level of 1%. This result shows that the introduction of
organisation. In this respect, it is essential to identify the the capital adjusted to risks has led to a significant
main factors causing this risk in order to manage it. In the increase in capital ratios and a lower risk in the portfolios
following, we present the regression results of the main of banks which have already respected the regulations
factors influencing bank credit risk in Tunisia. So, Table 3 requirements. This result converges with from the
indicates the results of GLS estimation of regression of literatures supporting that the over-capitalized banks
Equation 1. Overall, the results of the model show that: force the under-capitalized banks to reduce their potential
of credit bank risk taking (Kim and Santomero (1988);
1. The ownership structure influences the risk taken by
Furlong and Keely (1989, 1990); Jacques and Nigro
Tunisian banks. Indeed, consistent with expectation, the
(1997); etc). This result can be also explained by the
coefficient of GOV is positive and statistically significant
efforts made by the Central Bank to make the Tunisian
with the bank credit risk. This result is coherent with the
banks at the same level as their foreign counterparts by
research of Sapienza (2004) and La Porta et al. (2002)
imposing a new prudential regulation. Indeed, the new
who have found that the public ownership is positively
prudential regulation in Tunisia was born with the circular
related to the bank risk. They explain this result by the
of the Central Bank no. 91 to 24 of December 17th, 1991.
fact that the State acquires the control of the banks to
The main important reforms of this circular are:
direct their resources towards the financing of political
and social projects. In the Tunisian context, this result
can be explained by the fact that the public banks (BH, 1. The net capital of a bank always has to represent 5%
STB and BNA) have strengthened their efforts in of the total of its risk-weighted assets (article 4 of
financing projects in the estate, the tourist and the thiscircular).
agricultural fields. These sectors play a leading role in the 2. Since 31 December 1999, the solvency ratio has
 Zribi and Younes 77

0.14

0.12

0.1

0.08
Regulatory Ratio

0.06 Cooke Ratio

0.04

0.02

Graph 1. Evolution of mean ratio of solvency and regulatory threshold. (Regulatory Threshold = 5% before 1999 and 8%
from 1999 to 2008).

increased from 5 to 8%. Conclusion

The negative association between the bank risk and the This paper has empirically examined the determinants of
prudential regulation of capital make it necessary to credit risk held by Tunisian banks over 1995 to 2008
analyse of the tendencies of the ratio of solvency of periods. This study takes its importance from the
Tunisian banks during the period of the study (Graph 1). numerous structural changes in the Tunisian banking
From this graph, we can notice that the Tunisian sector (globalization, deregulation, internationalization,
commercial banks have respected the reglementation technologies of information and communication) that
threshold over 1995 to 2008 period. These tendencies have exposed them to a number of risks and stated
show that the capital regulation is effective in the important challenges for their stability. The empirical
Tunisian banking sector and this can reduce the risks results of this study show that the public ownership
taken by these banks. increases the bank credit risk. Moreover, the prudential
The banks’ characteristics are also important factors regulation of capital decreases the credit risk taken by
influencing the level of the Tunisian bank credit risk- Tunisian banks. This result accounts for the willingness of
taking. Indeed, the ratio of profitability also influences these banks to respect the bank regulations. Besides, the
bank risk taking decisions. Since the coefficient of return banks’ characteristics are also important factors
on assets (ROA) is positive and statistically significant influencing the levels of risks taken by Tunisian banks.
with risk. This result shows that the most profitable banks Indeed, the ratio of return on assets is positively related
are the riskiest banks. The ratio of capital CAP is with credit risk and the ratio of capital adequacy is
negative and statistically significant with risk. This result negatively associated with credit risk. Then, the results
indicates that over-capitalized banks are less risk-taker indicate that the bank credit risk-taking decisions are also
compared with under-capitalized banks. Contrary to related to bank macroeconomic indicators.
expectation, the coefficient of bank size is insignificant
with bank credit risk. This result diverges from the results
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