Impact Story

In late 2004, the Bangko Sentral ng Pilipinas (BSP), with the support of the IMF,  requested FIRST’s assistance in developing a foundation training program that would strengthen BSP’s ability to effectively supervise the banking sector. The project would also build a more effective and cohesive working relationship within the examination staff by standardizing training and advancement opportunities across the supervisory and examinations division of BSP.

The project arose indirectly from an FSAP.  Various areas for improvement were noted in the FSAP and also noted that some deficiencies were attributable to a lack of in-house training capacity for bank examiners.

As a result, FIRST support was requested to strengthen the supervision of the banking sector by:

• creating a foundation training program that increased and standardized the technical ability of all BSP examiners;
• building a more effective and cohesive working relationship among the examination staff by equalizing training and advancement opportunities across the SES division.

The BSP provided new examiners with a two-week introductory class on the basics of banking supervision and bank examinations. However, after delivering this introductory class, the BSP did not provide additional formal training to ensure that its examiners gain a more fundamental understanding of complex topics such as credit and market risk. Ad hoc training included sending small groups of examiners to schools/seminars domestically or abroad.  The participants in these seminars were required to echo the lessons learned upon returning to the BSP.  While this practice was considered sound, coverage was less than optimal as every iteration of an echo typically looks less and less like the original.  In addition, there was no reliable mechanism to ensure coverage of the entire SES staff due to its sheer size.  Also, these seminars were typically designed for a wide audience and did not always represent value for money or contribute to better bank examinations.

This lack of a formal training program has created several structural problems for the BSP:

• The lack of basic banking knowledge served as an impediment to the necessary migration to the risk-focused style of examination as the examination staff does not have the skill sets needed to perform an evaluation of systems and procedures
• The examinations tended to be financial audits (as opposed to critical evaluations of systems and procedures) as the bulk of the training received by the examination staff prior to employment with the BSP was in the accounting area  and the BSP training process did not address risk-focused examination techniques
• Knowledge within the staff was uneven, which caused excessive variability in the application of regulations and in the judgmental evaluation of a bank’s overall condition
• Focus on the numbers produced low value prescriptive recommendations that often ignored more significant management issues

The BSP has committed to reform and has developed a five-year plan to address weakness within banking supervision to comply with the 25 core principals of banking supervision.  The IMF resident advisor’s work plan has been designed to support those initiatives that supported compliance.

 Examiner Development Program

The project was part of a larger examiner development program.  BSP together with the IMF resident advisor were developing organizational changes that contemplated the creation of a segregated information technology examination unit. Concurrent with this project, a committee of senior staff would develop a more transparent examiner career path that included a formal training regime, revised job descriptions, evaluation criteria and a closer connection between performance and pay [1].  Trainee examiners were to be administered in a separate unit to ensure their training program was prioritized.

Under the arrangement, each new employee recruited would start as general examiner trainee and after completing the training become a general examiner, a central point of contact (“CPC”) or a subject matter expert (“SME”).

Lessons learned:

• An appropriate organizational structure should be in place prior to the initiation of a structured training program like the one developed and delivered under this project.  The recipient should be fully prepared to allocate the resources required for this type of training and several tasks should be completed to ensure this is accomplished.  Before even beginning to design curriculum, it would be useful to map out how many classes will be held, when, and who will attend.  In addition, the instructors should be identified so their schedules can be blocked off as well.  This would help the senior management understand the resources and changes required when introducing a structured training program, as well as reduce personnel conflicts.   Early creation of a training liaison office would prevent many of the personal issues and timing delays.
• Local content is of paramount importance.  In order to improve the effectiveness of training courses, the recipients must be willing to discuss the following in fairly specific terms: what is currently produced by the examination function, and what should be produced including specific examples of local institutions to illustrate what types of deficiencies should generate specific comments and ratings.
• In order that this type of project to be successful, the whole training program must be institutionalized.  To do this, training content must be current. In addition, employees must see that excelling, and applying the lessons learned in training yields tangible benefits.  Finally, the organization must ensure that high quality instructor succession is established.
• It is of great benefit if various donors active in the same area are working closely together. This project would have been less successful if FIRST would have not coordinated closely with the IMF resident advisor and the World Bank program would have not followed with the development and delivery of the advance training courses.

Reports:

• Training Needs Assessment. Useful because it illustrates a methodology for training needs analysis that could be applicable elsewhere.
• Cycle 2 Report. This is a consultant progress report but Appendix C is a useful tool for Instructor training techniques when delivering a lecture or training module.
• BSP Training Needs Questionnaire, another useful tool for conducting a Training Needs Analysis
• Progress Report Nov to Feb 2005. This is another consultants progress report and of particular interests are the Appendices A, B, C, D and E which outline a detailed Course syllabus for major topics such as Credit Risk, Liquidity, Financial Analysis.