13TH IADI CORE PRINCIPLES TO STRENGTHEN THE
FINANCIAL STABILITY ARCHITECTURE HYATT REGENCY
HOTEL, PORT OF SPAIN, TRINIDAD, 22-23 OCTOBER
2014
Preparing for and Conducting a Self Assessment
Technical Assistance Programme
JOHN M CHIKURA
22 to 23 October 2014
Trinidad and Tobago
Organization of the Presentation
Introduction
Desired Outcomes
IADI Expert Review of a Self-Assessment
Preparing for a Self Assessment
Conducting a Self Assessment Technical Assistance Programme
Post Field Work
Conclusion
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Introduction
The
global financial crisis illustrated the importance of effective
depositor compensation arrangements resulting in the Basel
Committee on Banking Supervision (BCBS) and the International
Association of Deposit Insurers (IADI) jointly issuing in June 2009 the
Core Principles (CP) for Effective Deposit Insurance Systems. This
established a benchmark, a standard or best practice in deposit
insurance.
An assessment is a systematic process of gathering, reviewing and
using important quantitative and qualitative data and information from
multiple and diverse sources for the purpose of evaluating whether core
deposit insurance principles and standards are being met.
A self assessment (SA) is an assessment conducted by the subject
institution i.e the DI itself
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Desired Outcomes of Self Assessment
SA helps the DI system to effectively and efficiently carry out and meet
its set public policy objectives
The primary objective is to evaluate compliance with core principles
after taking into account the operating environment, structural, legal, &
institutional features of each DI system
Provide feedback for quality assurance
The complex nature of the assessment makes careful planning a critical
element of a successful assessment
If the assessment is done under IMF/World Bank FSAP the mission will
determine the preparation and report production process
If conducted as a third party review (consulting firms), a peer review, or
a self assessment, a time line may help guide the preparation and
completion of the review
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IADI Expert Review of a Self-Assessment
A
peer-assessment by an IADI team of experts under the IADI SelfAssessment Technical Assistance Program (SATAP) is an excellent way to
prepare for an FSAP review and is markedly less formal process.
 The review is carried by a team of experts from IADI member jurisdictions
and may include a member from the requesting jurisdiction's geographic
region and/or members who are familiar with assessing deposit insurance
agencies with similar mandates
Under SATAP the team reviews relevant documents and spend two to three
days on-site to meet with safety-net participants and provide feedback to
the deposit insurance agency.
A review by an IADI team of experts on compliance with the Core Principles
is similar in scope to an FSAP Review, though less intensive.
 The completion of a self-assessment, as well as evidence that suggested
corrective actions are being implemented, may be favorably regarded by
FSAP review teams.
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Elements of A Successful Assessment
 Purpose identification
 Data collection
 Analysis and evaluation
 A comprehensive review of the operating environment i.e.
• financial health of the system, structure, strength of regulation &
supervision, legal framework, accounting & disclosure regime
 Assessing the DI against the core principles & identification of gaps
 Decision-making regarding actions to be taken
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Preparing for a Self Assessment
When conducting a self assessment it is important to be clear on
Purpose and Objectives of the assessment
Planning for the assessment. Requires a detailed, well thought
out
work plan with specific timelines as the review of the DI involves many
documents
The selection of team members must keep in mind the conditions and
constraints facing assessors and should include a mix of experienced
members in line with the mandate of the deposit insurer.
The size of the team depends on how the assessment is undertaken
 Team roles should be clearly defined designating areas of responsibility
If the deposit insurance agency is a risk minimizer, the team should
include assessors familiar with risk minimizing
If it’s a pay box, the assessment team needs staff with an understanding
of supervision and insolvency framework.
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Preparing for a Self Assessment
There
is need to develop a comprehensive work plan which
includes;
Conducting preliminary assessment before the field work begins
Review of prior assessments, reports, laws and regulations
Sending out questionnaires (data gathering),
Assessment template of the Core Principles methodology with each
Core Principle, The essential Criteria, and Additional Criteria and the
Deposit Insurance Agency fills in the details and return the completed
questionnaire
The questionnaire should be send seven weeks before the actual
assessment and the deposit insurance agency given three weeks to
respond.
The assessors should review the questionnaire and the legal and
regulatory framework.
Data analysis. To be useful the assessment must be comprehensive
enough to enable a judgment on whether criteria are fulfilled in
practice, not just in theory or on paper
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NB:
Preparing for a Self Assessment
For an assessment to be effective a national counterpart should be
appointed early and be in frequent contact with the counterparts.
Meetings schedules
The team should have extensive discussions with various representatives
from the deposit insurance agency
The team should also meet players in other safety nets such as;
 Ministry of Finance, Central Bank, Bankers Association,
 Private Lawyers
 Consumer representatives
 Other safety net players
Pre mission assessment
Once the questionnaire and supporting documents is received the team
should finalize the review of key documents
Based on this initial review the team may determine the soundness of the
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deposit insurance system and identify key gaps
Conducting a Self Assessment Technical Assistance
Programme
The Field work starts by holding meetings with representatives from
the deposit insurance agency to discuss each Core Principle;
There are four phases to the assessment process;
Phase 1
Updating the assessment of the legal and regulatory framework.
The assessors must identify gaps in the legal and regulatory
framework as identified in the pre-mission period
Then discuss with staff members the nature of discrepancy between
what's in the Core Principles criteria and what is actually provided.
This will help to determine the necessary steps to be taken to correct
the deficiencies in the laws.
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Conducting a Self Assessment Technical Assistance Programme
Phase
11 involves reviewing the practical application of laws, policies
and procedures.
The assessors should go beyond just looking at the implementation of
laws and regulation but the impact of the implementation.
Assessors should draw conclusions on whether the laws are
implemented or not and if they are to what extend.
Phase 111 involves assessment of compliance with the Core Principles.
On this stage the extent of compliance depends on the assessment of
the strengths and weaknesses in the previous two phases.
A deposit insurance agency can be said to be compliant, largely
compliant, materially non compliant, non compliant, not compliant, not
applicable and not reviewed against each essential criteria.
This analysis will help assessors to determine whether the DIA is
meeting the objectives of each Core Principle
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Conducting a Self Assessment Tenchnical
Assistance Programme
After
the field work the process of reviewing and incorporating
comments are essential steps for producing the final product.
Phase 1v involves the producing of final report and action plan.
The final report should include;
 summary of the legal and institutional framework
 analysis of preconditions for effective deposit insurance
 summary of main conclusions of the team
 detailed principle by principle compliance assessment
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Post Field Work
The team should produce a report and forward it to the DIA for comments.
Communication at this stage is critical as there is need to overcome
obstacles to corrective action
If
the assessment is part of IMF or World Bank mission they will include
their comments.
If
the assessment is a self or third party review, IADI could be asked to
arrange for an expert review.
The final report will include comments from all the relevant parties and its
then send to the authorities.
If
authorities wishes to include additional information for clarity it can still
be done and incorporated in the report.
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Conclusion
A
successful assessment should examine all aspects of the Core Principles as
they are interrelated and co dependent and any weakness on any of the
functions would undermine the authorities’ ability to protect financial stability.
The broad nature of the Core Principles for Effective Deposit Insurance
Systems complicates the assessment process hence careful planning is critical.
The team must also be able to evaluate safety net functions falling outside the
direct responsibility of the deposit insurer.
 This design feature puts a premium on collaboration across institutions, calls
for a team approach to the assessment, and strengthens the usefulness of
working in the context of an international assessment effort.
IADI will continue to update & develop additional guidance to address areas
where the Core Principles may need more precision to achieve effective
compliance or to better reflect leading practices
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I THANK YOU
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