Training In Due Diligence Methodology for Assessing Local Banks

Large banks in many countries increasingly are being required to undertake Due Diligence Reviews of local domestic banks. The need for the reviews arises because, for example, the smaller bank is slated to serve as agent for an international lender or is a potential acquisition target. Traditionally, due diligence reviews are undertaken by international accounting firms and often require a team of expatriate auditors. The cost involved can be significant, much of which can be reduced by using properly trained local personnel following internationally accepted audit and review practices.

Product Approach and Outputs

This product offers an approach to banking sector development that assists large banks to scale down and absorb small business lending capacities and techniques, and also assists micro- and small-sized banks ?graduate? to the formal banking sector by making themselves more attractive for investment or acquisition and merger. The services offered by the Sibley Consortium through this product provide training of local staff in evaluating lending and investment risk. The training relies on a score card approach that enables the large bank to determine the extent to which smaller banks that it is working with comply with international banking and audit standards. The scorecard is in the form of an evaluation matrix that defines a formalised structure for reviewing local banks. The significant areas of review include: corporate governance, management competencies, capital adequacy; earnings; loan quality; ALCO liquidity and funding; risk management process; accounting, IT and MIS; internal Control; and, human resources. Each section, and sub-sections within each section, has weighted maximum marks enabling the large bank to make comparisons and form a standardised view on the local bank being assessed. Outputs from the training and advisory services offered through this product include:

  • Increased competence of large and small bank staff in evaluating risk
  • A methodical approach to evaluating bank conformity to international banking standards
  • A more integrated and efficient banking sector

How to Access a Due Dilegence Training Methodology

The product is available from the Sibley Consortium through the General Business Trade and Investment II (GBTI II) indefinite quantity contract (IQC). A brief written request through the Mission or Regional Contracting Officer is all that is required by the fast-track procurement process set up by USAID to provide easy access to small businesses. Contact Theresa Stoll, GBTI II CTO, or Mark Karns, Deputy CTO, for more details on the fast-track process available to small businesses under USAID procurement regulations.

What Does It Cost?

Training at the basic level of requires three days of formal instruction. A more detailed skill transfer approach requires that a specialist from the Sibley Consortium accompany bank personnel on a due diligence review to provide hands-on training and advice. This more intensive approach requires about three person-months of effort. Project costs, therefore can range from about $10,000 to $100,000. The actual level of effort required depends on the needs of each financial institution, current legal regulations, and market conditions.

USAID Contacts:

Theresa Stoll
CTO GBTI II EGAT/EG
Tel: (202) 712-0924
Fax: (202) 216-3025
stoll@usaid.gov

Mark H. Karns, CFA
658427
Structured Finance Advisor
EGAT/ED/EDFM
Tel: (202) 712-5516
Fax: (202) 216-3025
mkarns@usaid.gov


Sibley Consortium Contacts:

Robert Rourke
Project Manager GBTI II
Tel: (202) 833-9588
Fax: (202) 775-9416
gbti@sibleyinternational.com

Donna Sibley
President
Tel: (202) 833-9588
Fax: (202) 775-9416
dsibley@sileyinternational.com