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The twinning programmes as means for the change of C.I.S. banks



Category: Bank Management

In the banks of the C.I.S. countries, it was often felt recently that a « bank to bank » approach would be more practical and efficient than a more conventional consultancy approach. The idea of partnership was very attractive. Twinning was then often viewed as probably the best way of providing training and help to support change, to strengthen the overall capability of the local recipient banks and help them to modernise. This may contribute best to accelerate the development of a strong banking sector. The enthusiasm for twinning is the hignest among those bankers who had not yet been exposed to it.

Twinning is an integrated program of Technical Assistance between western and eastern banks, through bank development partnership, covering all aspects of a Bank’s operations (for instance, the twinning programme can include assisting the recipient bank to define its requirements for I.T. hardware and software).

Ebtra reviewed actual experiences of banks who took part in previous twinning programs to identify major lessons arising from these.

The suggestions that were found are presented in Ebtra’s manual entitled « Guidelines for the organisation and implementation of bank twinning programmes ».

Several conferences were also held by Ebtra on this topic in different C.I.S. countries.

The lessons these researches bring are summarised here after.

Desirability of twinning (usefulness and specific advantages):

Twinning is actually very efficient to transfer to bank staff, skills and practical expertise in all core banking disciplines, through close day-to-day working relationships and assistance. Local bankers work closely with the Western experts for a long period of time in the agreed areas of co-operation. This supplies an opportunity for a practical transfer of concrete skills and brings the most comprehensive support, to strengthen the whole bank. Twinning introduces a kind of international partnership. In fact, it offers some «coaching», the usefulness of which appears to be less known. Some of the most frequently noticed advantages of twinning are:

It can have a wide range of purposes and, thus, use very different methods.

It is nevertheless always implementation oriented (« hands on ») with practical guidance (the focus is on implementation and not just recommendations, but the western banks’ role is to recommend, not take the decisions on change).

It can, thus, help to prepare for privatisation.

It also opens further co-operation possibilities. It may open the possibility of broader linkages between the two banks.

For the involved western banks it provides opportunity for international business (e.g. trade finance) and for joint business together with the local bank partner.

But the risk is that it is less pedagogically efficient.

The main hindrances of twinning appears to be the fact that it requires management time: it appears to be difficult for managers to combine their every day duties with their time-consuming « twinning » responsibilities.

Feasibility (conditions for success) of twinning projects. The experience of more than twenty twinnings (see annex) shows that their success rely deeply on:

— clear initial definition of the results that are expected, and building of a structure (see table, hereafter) and business plan,

— mutual interest and benefits for both the local and the foreign banks involved. One must never forget that there should be some clear benefit for the Western bank involved,

— allowance of sufficient means (twinning is rather expensive and time consuming), that is:

— enough time has to be available for assimilation of skills and knowledge, so that change become effective (for instance 5 man/year per year during 2 years in the N.L.B. (Slovenia) project. Compared with the 30 weeks of consultancy input, per functional area, usually necessary to bring out sustainable change),

— and enough funding: A twinning program in a bank is likely to cost $ 5 million to cover a 2 years period,

Good correspondent relationships and a real partnership (and sustained commitment) between the two banks concerned

— twinning needs to be approved by the very senior people in both banks. The involvement of the Presidents is necessary. Thus the executive of the foreign bank should visit the recipient bank. In fact, a proactive management is required to ensure the necessary sustained commitment for the full duration of the twinning project,

— visits, workshops and familiarisation, involving senior and middle management from both banks, should be scheduled, to prevent potential misunderstandings or, even, disputes. These encounters and discussions are important, coupled with enthusiasm, confidence and trust, as strong bank to bank links help to avoid misinterpretations and to sustain the momentum. Therefore, it is critical that all the staff in the recipient bank are kept fully informed about the project. The purposes of the project should be established with participation of those directly concerned within the recipient bank. Departmental heads in the recipient bank should be encouraged to develop working relationship with their opposite numbers in the foreign bank. A good relationship between the module leaders is necessary. These interbank contacts should include cultural contacts as, if cultural empathy can be established between the two banks, sustained commitment to the twinning project is more likely. This «chemistry» between the foreign and the local bank should be well established and sustained throughout a long-term multi-dimensional project, which could evolve into a permanent mutually beneficial business relationship. From that point of view, taking a share in the C.I.S. partner bank would help.

Accurate and realistic design and content of the project:

— early thorough preparation in advance, by all parties -avoiding as much as possible unrealistic expectations- and planning are vital,

— an « inception stage », lasting up to two months, is also useful in order to refine and review the definition of the expected results (the output that has to be achieved) and of the work plan (a detailed scheduling of the work has to be set up). The results to be achieved in each module will be defined in the Terms Of Reference document, which is often produced about one year before the twinning project begins. Thus conditions and priorities could have completely changed and should be brought up-to-date.

— sequencing/logical ordering of the modules to avoid overload periods (plan the work in such a way that it can be absorbed by the recipient bank), but also to avoid wasting time and to allow enough time for efficient transfer of knowledge,

— careful overall project (and change) management (using a tight but simple methodology) and effective joint co-ordination and problem resolution. For that purpose, a project manager should be appointed by the recipient bank. He should be a member of the Management Board. A steering committee has to be set up. Each module should have a leader from each bank, at the concerned department head level.

— constant follow-up, frequent control and good quality monitoring of the project achieved results, so as to anticipate any problem,

Complementary aptitudes of the two concerned banks, that is:

— general qualification of the consultants, including their adequacy for the assignment and experience in C.I.S., ability credibility and confidence. It remains unlikely that western banks send their best elements abroad, until they have strategic projects in the C.I.S. countries. There is thus a risk that the « experts » in charge of twinning projects are the less competent, or, at least, that the only bank willing to engage in twinning projects are those who have, in fact, created a consultant firm aside their banking activities and make a business out of it*.

— preparation of the western bank’s specialists: even if significant changes in the local methodologies and practices are required in order to meet international standards, it is unlikely that the straight importation of a « western system » is appropriate. Experience shows that one cannot successfully impose western ideas or solutions. Customisation to meet local requirements is needed, as a minimum. Thus, the western bank’s experts must work hard and make efforts to study the culture of the recipient bank. To avoid that implementation of recommended solutions is delayed, there is a need for the western consultants to be aware of the local factors, and to take into consideration the specificificities of the banking environment. They have to understand local conditions and demonstrate it, in particular, the way responsibility of decisions is or not delegated.

For its part, the local bank should be capable of handling the twinning process, that is of being ready for wide ranging Assistance Program. The recipient bank should have developed to an extent that makes it able to benefit significantly from twinning and have sufficient capabilities. Thus the importance of a previous diagnostic screening/study that confirms the necessary prerequisite to select banks which could positively participate:

— its solvency,

— its sufficient management team and structure,

etc.

— last, both partners have to be very flexible.

Thus, the ideal selection, choice and accreditation of the best twinning partners should come from taking into consideration many elements (intensive screening of the risk factors, compatibility, empathy, openness, etc.). But we could add that, ideally, twinning partners should be similar types of banks. It would often be more appropriate if the western partners involved could be banks which have experienced the same problems, i. e. mainly small banks in countries that have similar sectoral economic concerns (for instance where agriculture or tourism are dominant).

Considering its costs and complexity, twinning requires support and guidance.

This is why, for instance, in Russia, the World Bank has developed the Equipment Support Program (E.S.P.), funding I.T. procurement, computers and application software’s, and the Financial Institutions Development Program (F.I.D.P.) to provide technical assistance.

So, the major conditions for success of twinning programs are:

A stable local situation is a prerequisite. For instance, the recipient bank should:

be sufficiently stable,

have developed to a point where it would benefit from twinning,

have a management able to handle a twinning project,

Thus, a diagnostic process has to be used to establish the suitability of local banks.

A sound process of choice of the right twinning partners is a key factor:

carefully define the criteria for the selection of Donor banks which could work well and co-operate fully with relevant C.I.S. banks. It would be, for instance, desirable to have, as twin partners, banks similar in size and operations.

A good preparation in advance (of middle management) and pre-training of all project personnel are necessary: many problems encountered in twinning partnerships were traceable to shortcomings in the preparation. For example, enough time has to be devoted to:

establishing a sound and clear contract for a long-term agreement (usualy 3 years). Ebtra has defined guidelines for that,

carefully planning and phasing the project: designing and sequencing the work modules,

selecting appropriate people from both banks to work on the project (good people are needed in charge of each module. For instance, local project manager should be a member of the bank board),

etc.

A deep understanding, by the western bank, of local business environment and culture and a close mutual human confidence in the partners. Ownership of the twinning program should be achieve by both banks. Building links, trust and commitment between the two banks (and their module leaders) is, thus, important. Therefore, it is necessary to ensure good communication at all levels through exchange visits and joint team work. Then, often, the western banks acquires equity stakes in their local partners and this is the start of long-lasting friendships between persons and institutions.

A systematic use of project management approach. For instance one has to make sure the plan includes sufficient flexibility to adapt to changing circumstances, and the programme should be refocused every 6 months, after a review of progress.

Nevertheless, the public pressure may slow the twinning process. Though, the specific functions and roles that have to be dealt with between government and banking communities have to be carefully defined.

Moreover, there is obviously a need for better co-ordination between the different existing funding agencies, twinning facilitators and organisations involved.

Anyhow, twinning relies on relationship. It is therefore necessary to find representatives and create a local network structure of Russian speaking experts in the different C.I.S. countries, fostered to ensure dissemination.

The twinning of training institutions specialised in banking would then be particularly useful.

The content of twinning programs

A twinning project really consists of between 10 to 15 modules, many of which are running simultaneously:

Business strategic planning: process of competitive analysis, agreement on future business directions, definition of priorities, identification of the resulting specific goals for each major area of the bank, setting a concrete program for the implementation of these decisions, etc.

Structure and organisational development: identify the required staffing levels and main skill requirements, definition of functions, missions, responsibilities, etc.

Financial management: accounting system, budgeting process, financial reporting and control, but also finance markets and treasury operations (risk management) and Asset & Liability Management.

Loans and credit risk management and control: policies, processes, project finance.

Information Technology: evaluation of the bank’s existing hardware architecture and systems, determination of an I. T. strategy, suggesting the most effective, and particularly the most cost-effective, engineering and development methodologies, Management Information System,

Marketing: analysis of markets, customers expectations, definition of target segments, design of products, Human Resources Management: recruiting, remuneration, incentives, performance and potential appraisal, individual development planning, transfer and promotion, succession planning


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