Summary of the Fifth Consultative Group Meeting

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Summary of the Fourth Consultative Group Meeting

  MENA Financial Regulators' Training Initiative
  Under the Partnership for Financial Excellence
  Hosted by the Central Bank of Oman

  January 22 & 23, 2006

The Central Bank of Oman hosted the Fourth Consultative Group Meeting for the MENA  Financial Regulators’ Training Initiative on January 22-23, 2007.  The meeting was attended by representatives of Bahrain, Egypt, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.  The Union of Arab Banks and the Arab Monetary Fund also attended. The US delegation was led by the Treasury Department, which provides funding for the Training Initiative, and by US bank regulators: the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board of Governors (FRB) and the Office of the Comptroller of the Currency (OCC), who deliver the training programs and work with financial regulators in participating countries to arrange each event.  The Financial Services Volunteer Corps, which also delivers training under the MEPI program,  also attended some sessions.

The Executive President of the Central Bank of Oman, His Excellency, Hamood Sangour al Zadjaly, welcomed the group to the Sultanate of Oman and to the Central Bank.  He stressed the importance of the meeting to regulators in the MENA region and other stakeholders.  He noted that the program has helped regulators in the MENA region enhance their technical capacities in the fields of bank supervision, anti-money laundering and other areas of bank supervisory interest.  He also noted that the initiative promoted networking among regulators in region.   

The Federal Reserve Board (FRB) representative thanked His Excellency and the Central Bank of Oman for hosting the Consultative Group (CG) meeting and for the generous hospitality.  He explained that the meeting was extended to two days this year to provide additional time for discussion and to develop a draft training calendar for 2007.

 Review of 3^rd Consultative Group Meting

Egypt briefly reviewed the issues raised at the 2006 CG meeting held in Cairo in January 2006, including: the length of courses, course pre-work, exams and assessments, simultaneous translation, and certification.  The U.S. representatives reported that most of the recommendations from the 3^rd CG meeting were accomplished, including the delivery of study tours for MENA banking supervisors. The FRB, OCC and FDIC each hosted examiners for on-the-job training during 2006.

 Review of 2006 Regional Courses

The FRB explained that two events, “Fundamentals of Interest Rate Risk Management” and the “High Level Supervision Conference” were cancelled in 2006 because events made it unfeasible to conduct these seminars in Beirut as scheduled.  The Central Bank of Oman (CBO) commented on how useful the “Risk-Focused Supervision and Risk Assessment” seminar, which it hosted in February 2006, had been for its staff.  The CBO benefited from sending a large number of examiners to the course, which contributed to the CBO’s efforts towards implementing risk-based supervision.  Following the seminar, the lead instructor stayed in Oman to provide technical assistance to the CBO on supervisory issues.

 Egypt engaged in a discussion of the benefits of the 2 Cairo-based training events held in 2006:  “Evaluating Bank Management” and “Bank Analysis.”  The courses were very well-attended and participants found them both beneficial.  However, Egypt also highlighted the continuing problem with late course nominations and registrations. 

 Regarding the training courses, the UAE raised a number of process-related issues and requested clarification about the invitation and registration process and the contact list.  The U.S. confirmed that the contact information on the PFE website was up-to-date, but suggested that all the attendees confirm their contact details on the website.  With regard to registration problems, the U.S. noted that participants were likely not using the online list of contacts- which provides names and fax numbers of all relevant contacts at the central banks.  The US also encouraged all participants to contact the US Treasury with any requests, suggestions or concerns, including updated contact information.  Proposals to address these concerns were then discussed by the CG, including adding standard invitation and registration letters on the PFE MENA web site.  Participants agreed with the recommendation by Saudi Arabia that invitations be sent to CG members in addition to Central Bank governors. 

 Several members said that they would like to see broader regional participation, including from the GCC, and supported the proposal by Saudi Arabia that GCC members consider ways to encourage other countries to attend the courses.  Saudi Arabia also expressed concern that some MENA bank supervisors may not possess the sophistication for classes like “Interest Risk Management” & “Risk-Based Supervision” and, accordingly, the relevance of such classes should be assessed.  They also cited two other issues: 1) in North Africa, English is an obstacle and translation has been poor; and 2) some countries may have budgetary constraints that cannot be ignored.  In response to these concerns, the FRB noted that English is the common language of business and translation of provided.  The CG group agreed from the start of the MENA initiative that all courses would be conducted in English.  The FRB added that while not all countries will be at the same stage of bank supervisory development and sophistication, the courses identified for the MENA training initiative were relevant for the region and cover  internationally accepted best practices for bank supervision.

 Discussion of “Assessments”

Participants discussed a proposal by Egypt to have instructors provide assessments or evaluations of seminar participants.   A number of countries opposed this idea.   Several alternative suggestions were proposed (on a request-basis, achievement awards).   The UAE noted the utility of case studies used in some of the training courses, similar to the Harvard-style case study/question model, and several others agreed.   The FRB confirmed that participants were expressing a desire for more case studies than tests.

The creation of “achievement” certificates or diplomas was suggested. The FDIC, OCC and FRB all preferred that they be prepared on a voluntary basis.  Several countries openly debated the merits of mandatory assessments, and all agreed about the importance of regulatory agencies encouraging their participants to take the courses seriously.  Participants stressed the “value added” from the networking opportunity which the seminars provided, and encouraged each other to share their experiences, expertise and approaches at the courses.  The session concluded with a vote against the use of assessments.  members desiring the assessments will handle the process in-house. The UAB noted it was working with the FSVC to "Arabize" its best practices and address 6 areas of risk management. 

 Website

Participants discussed the MENA Financial Regulators’ Training Initiative website (http://www.pfe-mena.org/), and offered suggestions as to how it could be more useful.   Suggestions included posting the following materials: course work; additional information about Basel II; and relevant speeches and events from MENA countries (which CG members will forward Treasury for posting).  The FRB agreed to post links to its E-Learning courses, at the request of Saudi Arabia.  Saudi Arabia also requested that a synopsis of each country’s economic and financial profile be available online.  It also was agreed that sample forms will be posted for the following: course invitation letters, registration materials and certification forms.

 2007 Course Calendar

The US explained that the MENA training program was funded through 2007 and encouraged the CG to take the initiative to request its continuation if resources can be secured.  GC members indicated that they would send letters of support for continuation of the MENA Financial Regulators’ Training Initiative from their central bank governors to the US Treasury Department.

The CG then reviewed the list of courses offered by U.S. regulators for training in 2007.  The FRB clarified that two courses have already been scheduled at the AMF: “Market Risk Analysis Seminar” and “Electronic Banking & Technology Risk Supervision Seminar.”  The participants indicated their preference for courses and which events they wished to host, and accordingly, a tentative training calendar will be developed and circulated to CG members for their approval. 

 Study Tours

The Cairo representative from Financial Services Volunteer Corps (FSVC) was welcomed to the meeting and the organization was thanked for its invaluable contribution to the MEPI initiative.  The representative provided background on FSVC and illustrated the FSVC’s role in the MEPI program.  U.S. regulators welcomed feedback from participants on the effectiveness of the study tours held in the U.S.  They noted that requests were tailored to needs of participating examiners and required sufficient advance notice (at least 60-90 days) to arrange.  Egypt, which participated in two study tours with the FRB and the FDIC, found them to be very beneficial and noted they exceeded expectations.   The topic of accessing confidential banking data was addressed and the FRB noted that only U.S. banking supervisors can review certain confidential data.  Visitors may not have access to all bank data, but will still have comprehensive access to examination processes during on-site exams.  Participants typically spend a week at a US regulator’s office in advance and at the conclusion of an examination to experience an entire examination cycle. The FDIC explained that, for example, the Egyptian inspectors had spent time in the office before and after the on-site portion of the examination to cover pre-exam and post-exam supervisory response and report preparation at the request of the CBE.

 The FDIC suggested that requests for study tours try to avoid major U.S. holidays (Thanksgiving, Christmas, New Year’s Day) for a better quality examination experience.   The OCC explained that it was difficult to place trainees in the largest US banks (Citibank, J.P. Morgan Chase, etc.) because these banks already have dedicated full-time examination staffs.  Most assignments are in mid-size or community banks.  Saudi Arabia noted that sending examiners to train at small community banks provided limited value-added and consideration should be given to focusing on special issues, such as derivatives or operational risk.  US regulators responded positively that such requests can usually be accommodated, but countries must specify what type of examination training they want.  In response to Oman’s request for training of IT examiners, the FRB offered to open its training to non-US examiners on a case-by-case basis.

 High Level Financial Stability Conference

The FRB explained the background regarding plans for the High Level Financial Stability Conference.  It was originally requested by Lebanon as an event for senior policy makers on issues facing financial sectors in the region.  The event was postponed in 2005 and again in 2006, but both the Lebanese authorities and the Union of Arab Banks are keen to host it in Beirut in 2007.  The conference is tentatively scheduled for September 5-7, 2007, and will cover various financial sector and stability challenges, supervisory themes and regulatory issues.  The UAE has offered to host the conference, should political events force a venue change.  Various participants remarked that the topics be targeted to needs of the MENA region and not repeat other events.  Qatar proposed including Islamic finance and Saudi Arabia suggested a new title.