MEFMI Facilitating Introduction of New Bank Examiners to Bank Supervision

The Financial Sector Management Programme (FSM) held a regional workshop on Intermediate Bank Supervision from the 24^th to 28^th of February 2014 in Blantyre, Malawi. The objective of the workshop was to formally introduce new bank examiners to bank supervision principles, processes, corporate governance and an overview of best practices and standards for bank supervision.

Bank supervision departments in MEFMI member countries struggle to maintain well trained staff as they tend to leave the central bank for greener pastures. As a result, they are constantly recruiting to fill the gaps. In most cases, the newly recruited bank supervisors do not receive formal training due to time constraints and the expectation is that they will learn on the job. In order to reduce the impact of the skills flight and to assist member countries sustain functional and effective bank supervision departments, FSM runs Intermediate Bank Supervision workshops at least every two years.

The workshop was designed for entry level bank supervisors. It introduced young bank supervisors to sound supervisory principles and practices and developments while also endeavoring to enlighten them on the future of financial regulation and covered procedures and processes for both on-site and off-site surveillance.

Topics of discussion ranged from the Revised Basel Committee’s Core Principles for Effective Bank Supervision to licensing, off-site and on-site supervision and Basel III. The topics were carefully selected to ensure that the main principles are covered and participants also benefited from sharing different experiences and practices that are employed by the MEFMI member countries including tools that are employed to improve efficiencies in how the inspections / examinations are conducted. For instance in Tanzania, the Central Bank has automated their On-Site Supervision Process which enables every member of the team to work on-line including reviews. The system has useful features such as progress reports which are used to track performance of each team member and overall progress of the inspection. The system also has a reporting module which helps to pull all the inspection findings and recommendations to generate a draft inspection report.

The resource person from Standard Bank Malawi Limited shared a practical walk through of his bank’s risk management framework. His presentation highlighted Standard Bank’s main risks, how those risks are identified, measured and managed, and the governance structure in place.

Group exercises and the case study presented enhanced interaction and gave participants practical approach to some issues that they may encounter in their supervisory work.

The workshop confirmed MEFMI’s assertion that risk based supervision is still a topical issue in the region. The workshop covered Risk Based Supervision in detail and helped provide clarity on how each step in the Risk Based Supervision process is critical to ensure intimate knowledge of the entities that are supervised. The workshop highlighted the need for proper planning and scheduling supervisory activities, which is critical for efficient and effective supervision of banks.

Some of the issues that were discussed at the workshop include the need for countries to conduct self-assessments for compliance with the Basel Committee’s Core Principles of Effective Bank Supervision on a periodic basis as objective self-assessments are critical in revealing regulatory and supervisory gaps and shortcomings; and the elements of an effective corporate governance process in a banking institution which include board and senior management oversight and board effectiveness self-assessments.

During discussions, it was noted that the concept of quality assurance committee which is an effective training tool for assigning ratings and report writing at institution level is still not practised or fully understood by most bank supervisors. A quality assurance committee is an important evaluative tool that ensures consistency in rating as well as allows for an independent test before a report is sent to the respective examined bank.

It was pleasing to note that member central banks are beginning to appreciate the importance of mixing skills in bank supervision. For this new group of examiners, there were lawyers, mathematicians, accountants, economists and IT specialists which is a welcome development considering that for a long time, only accountants were recruited as examiners. The mix of skills is good as it allows for the diversity of analysis and risk management ideas.

The official opening of the workshop was conducted by the Governor of the Reserve Bank of Malawi, Mr. Charles Chuka. The Governor noted that supervisors are often comfortable in regulating pan-African Banks on a solo basis yet there was need to go beyond and examine these banks from a consolidated supervision perspective. He urged participants to actively participate in the activities planned for the workshop so that they can go back to their respective countries and implement what they leant in order for them to develop better supervisory approaches that address the problem of pan-African banks.

The workshop was attended by 27 participants from 12 MEFMI member countries. The resource persons were Mr. Norman Mataruka, a MEFMI Accredited Fellow from the Reserve Bank of Zimbabwe, Mr. Kened Nyoni a Manager at the Bank of Tanzania, Mr. Bob Takavingofa a MEFMI Graduate Fellow and Mr. Mulilima Kodwani the Head of Risk at Standard Bank Malawi who presented on gratis.