REQUEST FOR PROPOSAL (RFP) FOR APPOINTMENT · PDF fileConfidential Page 1 of 147 Appointment of Consultant for Setting up Enterprisewide Integrated Risk Management System REQUEST FOR

Confidential Page 1 of 147

Appointment of Consultant for Setting up Enterprisewide Integrated Risk Management System

REQUEST FOR PROPOSAL (RFP)

FOR

APPOINTMENT OF CONSULTANT FOR SETTING UP

ENTERPRISEWIDE INTEGRATED RISK MANAGEMENT SYSTEM

RFP Reference No. BCC: RMD: RFP: 102/01

Bank of Baroda,

Baroda Corporate Centre,

C-26, Block, Bandra Kurla Complex

Bandra (East),

Mumbai - 400 051.



Important Dates:

1. Issuance of RFP Document by Bank from: 13.10.2010

2. Last Date of Submission of Response by the Bidder: 15.11.2010

Important Clarifications:

Following terms are used in the document interchangeably to mean:

Bank means “Bank of Baroda (Domestic operations, overseas operations \ International & Indian subsidiaries & Associate banks)” (“excluding Regional Rural Banks”).

BCC means “Baroda Corporate Centre”

Recipient, Respondent and Bidder means “Respondent to the RFP document”.

Branch and Branches means any office/branch of the Bank where risk related transaction takes place.

RFP means this “RFP document”

Words “Technical Consultant” and “Consultant” carry the same meaning.

Basel II means the guidelines issued for measurement of risk and allocation of capital by Reserve Bank of India and Basel Committee on Banking Supervision, Bank for International Settlement, Basel, Switzerland.

Consultant, Bank shall be individually referred to as “Party” and collectively as “Parties”.

EIRMS means “Enterprisewide Integrated Risk Management System”

This document is meant for the specific use by the Company / person/s interested to participate in the current tendering process. This document in its entirety is subject to Copyright Laws. Bank of Baroda expects the bidders or any person acting on behalf of the bidders to strictly adhere to the instructions given in the document and maintain confidentiality of information. The bidders will be held responsible for any misuse of the information contained in the document and liable to be prosecuted by the Bank. In the event of such a circumstance is brought to the notice of the Bank. By downloading the document, the interested party is subject to confidentiality clauses.



SECTION – I .............................................................................................................................. 6

1) INTRODUCTION AND DISCLAIMER..................................................................................... 6

2) INORMATION PROVIDED ................................................................................................... 6

3) FOR RESPONDENT ONLY................................................................................................... 6

4) CONFIDENTIALITY............................................................................................................. 7

5) DISCLAIMER ..................................................................................................................... 7

6) COSTS BORNE BY RESPONDENTS ..................................................................................... 7

7) NO LEGAL RELATIONSHIP ................................................................................................. 7

8) RECIPENT OBLIGATION TO INFORM ITSELF ....................................................................... 8

9) EVALUATION OF OFFERS .................................................................................................. 8

10) ERRORS AND OMISSIONS ................................................................................................. 8

11) ACCEPTANCE OF TERMS................................................................................................... 8

12) RFP RESPONSE TERMS ..................................................................................................... 8

13) NOTIFICATIONS .............................................................................................................. 12

14) DISQUALIFICATION ......................................................................................................... 12

15) PROCESS & TIMEFRAME. ................................................................................................ 12

SECTION – II .......................................................................................................................... 14

1) BANK OF BARODA .......................................................................................................... 14

2) BACKGROUND OF RISK MANAGEMENT ........................................................................... 14

3) REQUIREMENT OF RISK MANAGEMENT .......................................................................... 15

SECTION – III ......................................................................................................................... 17

1) PROJECT OBJECTIVES ................................................................................................... 17

2) PROJECT SCOPE IN DETAIL ............................................................................................ 17

2.1. PROJECT SCOPE ............................................................................................................... 17 A) RESPONSIBILITIES .................................................................................................................. 18 B) SCOPE OF CREDIT RISK MANAGEMENT FOR DOMESTIC AND OVERSEAS OPERATIONS SHALL INCLUDE,

BUT NOT LIMITED TO............................................................................................................... 20 I. PHASE I ................................................................................................................................ 20 II. PHASE II ............................................................................................................................... 20 III. PHASE III .............................................................................................................................. 21 IV. PHASE IV .............................................................................................................................. 22 V. PHASE V ............................................................................................................................... 23 VI. PHASE VI .............................................................................................................................. 24 VII. PHASE VII ............................................................................................................................. 25 C) PILLAR II AND INTERNAL CAPITAL ADEQUACY ASSESSMENT POLICY (ICAAP) FOR DOMESTIC AND

OVERSEAS OPERATIONS SHALL INCLUDE BUT NOT LIMITED TO: ...................................................... 25 I. PHASE I ................................................................................................................................ 25 II. PHASE II ............................................................................................................................... 26 III. PHASE III .............................................................................................................................. 27



IV. PHASE IV .............................................................................................................................. 27 V. PHASE V ............................................................................................................................... 28 D) SCOPE OF OPERATIONAL RISK MANAGEMENT FOR DOMESTIC AND OVERSEAS OPERATIONS SHALL

INCLUDE BUT NOT LIMITED TO: ................................................................................................. 28 I. PHASE I ................................................................................................................................ 28 II. PHASE II ............................................................................................................................... 30 III. PHASE III .............................................................................................................................. 31 IV. PHASE IV .............................................................................................................................. 32 V. PHASE V ............................................................................................................................... 33 VI. PHASE VI .............................................................................................................................. 34 VII. PHASE VII ............................................................................................................................. 34 E) MARKET RISK MANAGEMENT FOR DOMESTIC AND OVERSEAS OPERATIONS SHALL INCLUDE, BUT NOT

LIMITED TO: .......................................................................................................................... 35 I. PHASE I ................................................................................................................................ 35 II. PHASE II ............................................................................................................................... 36 III. PHASE III .............................................................................................................................. 37 IV. PHASE IV .............................................................................................................................. 40 V. PHASE V ............................................................................................................................... 42 VI. PHASE VI .............................................................................................................................. 43 VII. PHASE VII ............................................................................................................................. 44 F) OTHER SCOPE OF WORK OF CONSULTANT FOR DOMESTIC AND INTERNATIONAL OPERATIONS SHALL

INCLUDE BUT NOT LIMITED TO: ................................................................................................. 45 I. PHASE I ................................................................................................................................ 45 II. PHASE II ............................................................................................................................... 46 III. PHASE III .............................................................................................................................. 48 2.2. REQUIRED RFP DOCUMENT PREPARATION AND PROCUREMENT OF SOFTWARE................................. 48 2.3. AWARENESS TRAINING PROGRAM ............................................................................................. 50

3) DELIVERABLES ............................................................................................................... 50

4) ELIGIBILITY CRITERIA. .................................................................................................... 51

5) SUBMISSION OF BIDS ..................................................................................................... 52

6) EARNEST MONEY DEPOSIT (EMD) ................................................................................... 54

7) GENERAL TERMS AND CONDITIONS (PLEASE ALSO REFER TO SECTION – I) .................... 54

7.1. TERM OF ASSIGNMENT: .......................................................................................................... 54 7.2. ADHERENCE TO TERMS AND CONDITIONS .................................................................................. 54 7.3. EXECUTION OF PA/NDA AND CERTIFICATE OF ORIGINALITY ........................................................ 54 7.4. PERIOD OF CONTRACT ............................................................................................................ 55 7.5. OTHER TERMS AND CONDITIONS............................................................................................... 55

8) WORK SPACE/STAFF MEMBERS REQUIRED FOR CARRYING OUT ACTIVITIES .................. 55

9) PROJECT TEAM MEMBERS ............................................................................................. 56

10) SUBSTITUTION OF PROJECT TEAM MEMBERS ................................................................ 56

11) PROFESSIONALISM ......................................................................................................... 56

12) ADHERENCE TO STANDARDS .......................................................................................... 56

13) EXPENSES ...................................................................................................................... 57

14) PAYMENT TERMS ............................................................................................................ 57

15) CHARGES TERMS ........................................................................................................... 59



16) CONTRACT PERFORMANCE GUARANTEE......................................................................... 59

17) SECURITY DEPOSIT ........................................................................................................ 60

18) SINGLE POINT OF CONTACT ............................................................................................ 60

19) APPLICABLE LAW AND JURISDICTION OF COURT ............................................................ 60

20) LIQUIDATED DAMAGES (LD) ............................................................................................ 60

21) PROFESSIONAL LIABLITY INSURANCE ............................................................................. 60

22) FORCE MAJEURE ........................................................................................................... 61

23) AUTHORIZED SIGNATORY ............................................................................................... 61

24) INDEMNITY ..................................................................................................................... 61

25) ERASERS OR ALTERATIONS: ........................................................................................... 61

26) RIGHT TO REJECT BIDS .................................................................................................. 62

27) NON PAYMENT OF PROFESSIONAL FEES ......................................................................... 62

28) ASSIGNMENT .................................................................................................................. 62

29) NON – SOLICITATION....................................................................................................... 62

30) NO EMPLOYER-EMPLOYEE RELATIONSHIP ...................................................................... 63

31) VICARIOUS LIABILITY ...................................................................................................... 63

32) SUBCONTRACTING ......................................................................................................... 63

33) CANCELLATION OF CONTRACT AND COMPENSATION ...................................................... 64

34) DISPUTE RESOLUTION .................................................................................................... 65

35) CONSULTANT‟S SELECTION/EVALUATION PROCESS ....................................................... 65

35.1. EVALUATION OF TECHNICAL BID .............................................................................................. 65 35.2. PRESENTATION-CUM INTERVIEW .............................................................................................. 66 35.3. COMMERCIAL BID EVALUATION CRITERIA .................................................................................. 67

36) TECHNICAL EVALUATION CRITERIA ................................................................................ 69

37) PROJECT TIMELINES ...................................................................................................... 72

ANNEXURE - A........................................................................................................................ 73

ANNEXURE - B........................................................................................................................ 77

ANNEXURE - C ....................................................................................................................... 97

ANNEXURE - D ....................................................................................................................... 99

ANNEXURE - E...................................................................................................................... 122

ANNEXURE - F ...................................................................................................................... 123

ANNEXURE – G ..................................................................................................................... 124

ANNEXURE - H ..................................................................................................................... 126



SECTION – I

1) INTRODUCTION AND DISCLAIMER

This Request for Proposal document (“RFP document” or “RFP”) has been prepared solely for the purpose of enabling Bank of Baroda (“Bank”) in defining the requirements for appointment of a suitable organization as Technical Consultant for the ongoing and new initiatives, for migration to advanced approaches of Basel II to be undertaken by the Bank over a period of next eighteen months, who can provide prudent advice on the domain of Enterprise wide Integrated Risk Management System and procurement of the related software solution and policies, methods, staff training incidental to that.

The RFP document is not a recommendation, offer or invitation to enter into a contract, agreement or any other arrangement in respect of the services. The provision of the services is subject to observance of selection process and

appropriate documentation being agreed between the Bank and any successful bidder as identified by the Bank after completion of the selection process as detailed in Section – III.

2) INORMATION PROVIDED

The RFP document contains statements derived from information that is believed to be true and reliable at the date obtained but does not purport to provide all of the information that may be necessary or desirable to enable an intending contracting party to determine whether or not to enter into a contract or arrangement with Bank in relation to the provision of services. Neither Bank nor any of its directors, officers, employees, agents, representative, contractors, or advisers gives any representation or warranty (whether oral or written), express or implied as to the accuracy, updating or completeness of any writings, information or statement given or made in this RFP document. Neither Bank nor any of its directors, officers, employees, agents, representative, contractors, or advisers has carried out or will carry out an independent audit or verification or investigation or due diligence exercise in relation to the contents of any part of the RFP document.

3) FOR RESPONDENT ONLY

The RFP document is intended solely for the information of the party to whom it is issued (“the Recipient” or “the Respondent”) i.e. Government Organization/PSU/ limited Company, partnership firm or/and an Autonomous Institutation approved by GOI/RBI



4) CONFIDENTIALITY

The RFP document is confidential and is not to be disclosed, reproduced, transmitted, or made available by the Recipient to any other person. The RFP document is provided to the Recipient on the basis of undertaking of confidentiality given by the Recipient to Bank. Bank may update or revise the RFP document or any

part of it. The Recipient acknowledges that any such revised or amended document is received subject to the same confidentiality undertaking.

The Recipient will not disclose or discuss the contents of the RFP document with any officer, employee, consultant, director, agent, or other person associated or affiliated in any way with Bank or any of its customers or suppliers without the prior written consent of Bank.

5) DISCLAIMER

Subject to any law to the contrary, and to the maximum extent permitted by law, Bank and its directors, officers, employees, contractors, representatives, agents, and advisers disclaim all liability from any loss, claim, expense (including, without

limitation, any legal fees, costs, charges, demands, actions, liabilities expenses or disbursements incurred therein or incidental thereto) or damage (whether foreseeable or not) (“Losses”) suffered by any person acting on or refraining from acting because of any presumptions or information (whether oral or written and whether express or implied), including forecasts, statements, estimates, or projections contained in this RFP document or conduct ancillary to it whether or not the Losses arises in connection with any ignorance, negligence, inattention, casualness, disregard, omission, default, lack of care, immature information, falsification or misrepresentation on the part of Bank or any of its directors, officers, employees, contractors, representatives, agents, or advisers.

6) COSTS BORNE BY RESPONDENTS

All costs and expenses (whether in terms of time or money) incurred by the Recipient / Respondent in any way associated with the development, preparation and submission of responses, including but not limited to attendance at meetings, discussions, demonstrations, etc. and providing any additional information required by Bank, will be borne entirely and exclusively by the Recipient / Respondent. Stamp duty, that may be incurred towards entering in to agreement with the

successful bidder for awarding the contract, will be shared by the bank and the successful bidder in equal proportion.

7) NO LEGAL RELATIONSHIP

No binding legal relationship will exist between any of the Recipients / Respondents and the Bank until execution of a contractual agreement to the full satisfaction of the Bank.



8) RECIPENT OBLIGATION TO INFORM ITSELF

The Recipient must apply its own care and conduct its own investigation and analysis regarding any information contained in the RFP document and the meaning and impact of that information.

9) EVALUATION OF OFFERS

Each Recipient acknowledges and accepts that the Bank may, in its sole and absolute discretion, apply whatever criteria it deems appropriate in the selection of organizations, not limited to those selection criteria set out in this RFP document.

The issuance of RFP document is merely an invitation to offer and must not be construed as any agreement or contract or arrangement nor would it be construed as material for any investigation or review to be carried out by a Recipient. The Recipient unconditionally acknowledges by submitting its response to this RFP document that it has not relied on any idea, information, statement, representation, or warranty given in this RFP document.

10) ERRORS AND OMISSIONS

Each Recipient should notify the Bank of any error, fault, omission, or discrepancy found in this RFP document but not later than five business days prior to the due date for lodgment of Response to RFP.

11) ACCEPTANCE OF TERMS

The Recipient will, by responding to the Bank‟s RFP document, be deemed to have accepted the terms as stated in this RFP document.

12) RFP RESPONSE TERMS

12.1) Lodgment of RFP Response.

Lodgment of RFP Response terms should be guided by point number 12.2 to 12.5 of section I and any changes there of will not be considered.

12.2) Application Money & Earnest Money

The bidder will be required to submit Application Money of Rs.10,000/-(Rupees Ten Thousand) by way of Bankers Cheque/Demand Draft/Pay Order favoring Bank of Baroda, Payable in Mumbai, which is non refundable, must be submitted separately along with RFP response.

The bidder will also be required to submit Earnest Money of Rs.2, 50,000/-(Rupees Two Lacs Fifty Thousand) by way of a separate Bankers Cheque/Demand Draft/Pay Order favoring Bank of Baroda, Payable in Mumbai, which, must be submitted separately along with RFP response. Earnest Money will be refunded to all the bidders except the one who will be finally selected for award of the contract. The selected successful bidder will



be required to enter in to an agreement with the bank with respect to award of contract and the Earnest Money will be adjusted with the Security Deposit payable. If the selected bidder fails to enter in to agreement of contract the Earnest Money will be subject to forfeiture at the discretion of the Bank. No interest will be payable by the Bank on the Earnest Money Deposit.

The Application Money/ Earnest Money documents should not be put inside the envelope containing RFP Response documents.

RFP document should be downloaded from the banks website www.bankofbaroda.com.

12.3) RFP Closing Date

RFP Response should be submitted to the officials indicated below not later than 3:00 PM IST (Indian Standard Time –GMT + 05:30) on 15-11-2010.

12.4) Submission to Bank

The RFP response documents should be submitted in paper copies in two sets (Original Set and Duplicate Set) and each set should contain one copy of the

following:

(i) Sealed envelope containing documents towards eligibility criteria (Annexure G) should be superscribed “ELIGIBLITY CRITERIA FOR APPOINTMENT OF CONSULTANT FOR SETTING UP ENTERPRISEWIDE INTEGRATED RISK MANAGEMENT SYSTEM”

(ii) Another sealed envelope containing Technical Bid documents should be superscribed „TECHNICAL BID FOR APPOINTMENT OF CONSULTANT FOR SETTING UP ENTERPRISEWIDE INTEGRATED RISK MANAGEMENT SYSTEM” and

(iii) Third envelope containing Commercial Bid documents should be superscribed „COMMERCAIL BID FOR APPOINTMENT OF CONSULTANT FOR SETTING UP ENTERPRISEWIDE INTEGRATED RISK MANAGEMENT SYSTEM”. The three envelopes should be put together in an envelope to constitute one set. Each set should be packed in an envelope superscribing “APPOINTMENT OF CONSULTANT FOR SETTING UP ENTERPRISEWIDE INTEGRATED RISK MANAGEMENT SYSTEM”

The proposal should be prepared in English in MS Word/Excel format. The e-mail address and phone/fax numbers of the bidder should also be indicated on the sealed envelopes.

Paper copies of RFP response as mentioned above along with Demand Draft/Banker‟s Cheque/Pay Order for Rs. 10,000/- towards Application Money (which shall be non-refundable) and Rs 2,50,000/- towards Earnest Money Deposit & one electronic copy (Microsoft Word and Excel, on CD ROM) of Technical Bid must be submitted to Bank at the following address.



General Manager,

(Risk Management)

Bank of Baroda,


C-26, G-Block, Bandra Kurla Complex,

Bandra (East), Mumbai 400 051.

The sealed bid envelopes as mentioned above should be delivered to

B. P. Sharma (Chief Manager) or D.G.Mahabal (Chief Manager) Risk Management Dept, Baroda Corporate Centre (2nd Floor) at the address given above.

The evaluation of the bid will be done as per para 35, Section III of this offer document. The bidders who do not qualify as per eligibility criteria will not be considered for Technical evaluation. A bidder not eligible under Technical Bid will not be considered for opening of Commercial Bid.

12.5) Submission will be valid if ;

Copies of the RFP response documents are submitted as per clause 12.4, subject to clause 12.7, before the aforementioned closing date specified in clause 12.3.

Submission by Fax transmission or email is not allowed and will be considered invalid.

12.6) Registration of RFP

Registration of RFP response will be affected by the Bank by making an entry in a separate register kept for the purpose upon Bank receiving the RFP response in the above manner (Point 12.1 to 12.5) The RFP response must contain all documents, information, and details required by this RFP. If the submission to this RFP does not include all the documents and information required or is incomplete or submission is through Fax mode or e-mail, the RFP is liable to be summarily rejected.

All submissions, including any accompanying documents, will become the property of Bank. The Recipient shall be deemed to have licensed, and granted all rights to the Bank to reproduce the whole or any portion of their submission for the purpose of evaluation, to disclose the contents of the submission to other Recipients who have registered a submission and to disclose and/or use the contents of the submission as the basis for any resulting RFP process, notwithstanding any copyright or other intellectual property right of the Recipient in the submission or accompanying documents.



12.7) Late RFP Policy

RFP responses received after the deadline for lodgment of RFPs may be registered by Bank and may be considered and evaluated by the evaluation team at the absolute discretion of the Bank. Respondents are to provide detailed evidence to substantiate the reasons for a late RFP submission. It

should be clearly noted that Bank has no obligation to accept or act on any reason for a late submitted response to RFP.

Bank has no liability to any person who lodges a late RFP response for any reason whatsoever, including RFP responses taken to be late only because of another condition of responding.

12.8) RFP Validity Period

RFP responses will remain valid and open for evaluation according to their terms for a period of at least six (6) months from the RFP closing date.

The Bank shall have the right at its sole and absolute discretion to continue the assignment/contract on the consultant for future requirement on the rates finalized in this processing for various items/activities as described in

the Price Bid after expiry of current assignment period.

12.9) Requests for Information

Recipients are required to direct all communications for any clarification related to this RFP, to the Bank officials as mentioned under point 5 of Section III.

All queries relating to the RFP, technical or otherwise, must be either in writing or by email only and will be entertained by the Bank only in respect of the queries received up to the date of Pre Bid Meeting.

The Bank will try to reply, without any obligation in respect thereof, every reasonable query raised by the Recipients in the manner specified.

However, the Bank will not answer any communication initiated by respondents later than the date of Pre Bid Meeting. Bank may in its absolute discretion seek, but being under no obligation to seek, additional information or material from any Respondent after the RFP closes and all such information and material provided will be taken to form part of that Respondent‟s response.

Respondents should invariably provide details of their email address as responses to queries will only be provided to the Respondent via email.

If Bank in its sole and absolute discretion deems that the originator of the query will gain an advantage by a response to a question, then Bank reserves the right to communicate such response to all Respondents.

Bank may in its sole and absolute discretion engage in discussion or negotiation with any Respondent (or simultaneously with more than one Respondent) after the RFP closes to improve or clarify any response.

Please also refer to Section III for details.



13) NOTIFICATIONS

Bank will notify the Respondents in writing as soon as practicable, about the outcome of the RFP evaluation process, including whether the Respondent‟s RFP

response has been accepted or rejected. Bank is not obliged to provide any reasons for any such acceptance or rejection.

14) DISQUALIFICATION

Any form of canvassing/lobbying/influence/query regarding short listing, status etc will be a disqualification.

15) PROCESS & TIMEFRAME.

Selection of a successful Technical Consultant will involve a five (5) stage approach. The approach follows the Indian Government‟s Central Vigilance Commission (CVC)

guidelines.

The following is an indicative timeframe for the overall selection process. Bank reserves the right to vary this timeframe at its absolute and sole discretion should the need arise. Changes to the timeframe will be relayed to the affected Respondents during the process.

Receipt of RFP Bids

Evaluation

Of Bids

Award of Contract

STAGE 1 STAGE 2 STAGE 3 STAGE 4 STAGE 5

Pre - bid Meeting

Issue Of RFP



Description Due Date & Time

Issue Tender Notification 13.10.2010

Pre Bid Meetings 29.10.2010 from 10.00 AM to 03.00 PM

Bid Submission Last Date & Time 15.11.2010 – 3.00 PM

Opening of Eligibility Bid - Date & Time 15.11.2010 – 4.00 PM

Technical Bid Opening Date & Time 18.11.2010 - 12.15 PM

The dates mentioned above are tentative dates and the bidder acknowledges that it cannot hold the Bank responsible for breach of any of the dates.

Note: Bidders can depute their representative (only one) to attend the bid opening process.

No separate intimation will be given in this regard to the bidders for deputing their representatives.



SECTION – II

1) BANK OF BARODA

Bank of Baroda hereinafter being referred to as the Bank, is one of the largest Public Sector Banks in India with a network of over 3000 branches, 43 Regional Offices and 76 international branches / offices in 25 countries, 3 domestic subsidiaries, 8 overseas subsidiaries and 3 representative offices. At the end of March 2010, the bank had a total business mix of Rs. 416079 Crs. The total deposits amounted to Rs. 241044 Crs, while an advance was at Rs. 175035 Crs (figures represent domestic and International).

Risk management is an essential function which gives an overall view of the risks perceived from different banking operations. Bank of Baroda has a Risk Management Department which has different cells looking after Market Risk, Credit Risk and Operational Risk etc.

2) BACKGROUND OF RISK MANAGEMENT

Presently, the Bank is compliant with the requirements of the RBI guidelines on Basel II basic approaches, i.e., Standardized approach for Credit & Market Risk and Basic Indicator approach for Operational Risk. In addition, the Bank has put in place certain building blocks from the point of view of migrating to the Basel II advanced approaches.

Existing systems and procedures are as under:-

a) Credit Risk: Domestic borrower risk rating models for corporate portfolio, Scorecards for Retail portfolio, Collection of historical data for rating grade-wise transition matrices and default rates. The bank has purchased software‟s from M/s CRISIL Ltd

(i) Risk Assessment Model

(ii) Capital Assessment Model & Portfolio Analysis

(iii) EAD & LGD Calculator. The models are in use for last 2 to 3 years. Bank has also implemented models for UK and UAE territory.

b) Market Risk: Basic Value at Risk (VaR) models on KVaR+ Software.

c) Operational Risk: Collection of loss event data in MS Excel worksheets on half yearly basis.

d) ICAAP: The Bank has a Board approved Internal Capital Adequacy Assessment Policy document named as ICAAP, Collateral management & Credit mitigation and Stress test Policy. The outcome of the policy document is submitted to the Board and then RBI after Board approval on regular half yearly basis after 31.03.2008. The Bank has also successfully conducted its



capital planning exercise for the FY 2008, 2009, 2010 and 2011 each on three years outlook.

While the Bank has put in place certain basic elements for migrating to Basel II advanced approaches as indicated above, the Bank would like to enhance the same so that they are compliant with the requirements of RBI and Basel II advanced approaches preferably as per the timelines set by RBI & other local regulators for its overseas operations. As part of the exercise to upgrade its risk management system and processes, Bank seeks to benchmark itself against Basel II advanced approaches, i.e., Internal Rating Based Approach (IRB) for Credit risk, Internal Model Approach (IMA) for Market risk and Advanced Measurement Approach (AMA) for Operational risk. As the Bank would migrate towards the advanced approaches, it would have to undertake a variety of projects such as to build a range of practices for Advanced Approaches, calculate economic capital and build policies and procedures to validate and improve the models continually and implant these models into the business decisions of the bank and ensure appropriate controls and their usage as well as establish MIS of key indicators to senior management.

3) REQUIREMENT OF RISK MANAGEMENT

The consultant should be in a position to suggest ways to formulate policies and suggest ways to implement Basel II and RBI guidelines pertaining to risk management, on an ongoing basis for migrating to advanced approaches of Basel II, on Enterprisewide basis. Bank has Branches, Subsidiaries and Associates in India as well as foreign countries, which are subject to home country (The Reserve Bank of India) as well as host country (equivalent of Reserve Bank of India in respective territory regulations). The Bank wants to put in place system and procedures so as to comply with the regulatory requirements of the home and the host regulators as per the timelines stipulated thereof.

a) The Consultant is required to assess the bank‟s preparedness and adequacy or otherwise of existing systems in terms of:

Policies, Procedures and systems,

Governance structure,

Data quality and availability,

Risk measurement methodologies,

Risk mitigation strategies,

Capital calculation methodologies,

Reporting framework and disclosures.

Compliance as per regulations, & other related areas.

b) Review the existing compliance function in the bank, perform a gap analysis vis-à-vis regulatory guidelines and industry best practices and suggest modifications, improvements or any other suitable measures.



c) Evaluate various risk management solutions currently in use within the Bank, assess the need for integration of the same for risk aggregation and suggest improvements for its business in India and Overseas across all units / offices.

d) Evaluate existing software and suggest up gradation to provide guidance for selection of solution provider including preparation and evaluation of RFP for any new software solutions that need to be procured in the risk management area.

e) Enhance existing ALM framework beyond regulatory reporting and assist in product pricing, balance sheet planning and management decision making.

f) Risk Management being an evolving subject further guidance / directions are expected from the Regulators for which the consultant is expected to evaluate and advise the Bank suitably.

g) Prepare approach application to RBI for migration to advanced approaches for IRB (credit risk), TSA & AMA (operational risk) and IMA (market risk) and help the Bank to get the application for Advanced Approaches approved by RBI.



SECTION – III

1) PROJECT OBJECTIVES

The Bank wishes to appoint a competent Technical Consultant to provide Assistance for Setting up Enterprisewide Integrated Risk Management System and assist Bank in selection and acquisition of suitable software for Risk Management essential as per the Basel II and approximation of suitable time frame for applying to RBI for advanced approaches and completion of the necessary application procedure.

Bank may, at its sole and absolute discretion, choose to avail all services or part thereof. Such decision may be advised during the course of the project.

The area of consultancy shall include, but not limited to as under:

1) Credit Risk

2) Operational Risk

3) Market Risk

4) Country Risk Management

5) Asset Liability Management

6) Pillar II and ICAAP, including stress testing framework and Capital Planning.

7) Risk Management Policies and Procedures

8) Pillar III disclosures

9) Group Consolidation of Risk Management (all related aspects) practices especially under Pillar I, II and Pillar III.

2) PROJECT SCOPE IN DETAIL

2.1. PROJECT SCOPE

A description of the envisaged scope is enumerated in sub para „a‟ to „f‟ of this paragraph. However, Bank reserves its right to change the scope of the RFP considering the size and variety of the requirements and the changing business

conditions.

Based on the contents of this RFP, the selected Technical Consultant (“Consultant”) shall be required to undertake a diagnostic study to find out gaps in the existing system. Notwithstanding what is mentioned in paras “a” to “f” hereinafter, consultant is required to design and implement Enterprisewide Integrated Risk Management System compliant as per BASEL II and RBI guidelines in phases within a specified time frame.



The consultant will be responsible for monitoring the project till pilot phase (as required) implementation as stated below.

The Bank expressly stipulates that the selection of Consultant under this RFP is on the understanding that this RFP contains only the principal provisions for the entire assignment and that the services in connection therewith are only a part of the assignment. The Consultant shall be required to undertake to perform all such tasks, render requisite services as may be required for the successful completion of the entire assignment at no additional cost to the Bank.

a) Responsibilities

Conduct a gap analysis against the desired state of risk management at the Bank and revision of policies.

Enhance existing Risk Management System, Policies, Procedures, Processes, MIS, Analytics, etc.

Based on discussion with the Bank and the Risk Management Department, Consultant will prepare a road map and time line for moving towards

advanced approaches for Internal Risk Based (IRB) for Credit risk, The Standardised Approach (TSA) / Advanced Measurement Approach (AMA) for Operational risk and Internal Models Approach (IMA) for Market risk.

Advising on risk governance architecture suitable to the organizational structure of the Bank as a whole and for each business unit and detail the roles and responsibilities at each level.

Consultant will also prepare related operating manual with detailed description of standard operating procedures. The consultant has to design risk reporting system and develop strategies to identify measure, monitor and control/mitigate risk. All such risk of the Bank‟s global consolidated operations is to be captured.

Hold training programme for the staff involved in risk identification, measurement and monitoring of risks or implementation of the policies, procedures and reporting of risks. Basic awareness should be created to ensure smooth implementation of risk policies and strategies adopted by the Bank in course of consultancy.

Assist Bank in identification of related required software vendor. The

consultant will have to rollout full implementation of pilot phase (rollout of software solution) in 70 to 100 domestic and international branches and subsidiaries. The consultant is also expected to develop an implementation strategy base for rolling out the solution.

The consultant will be required to prepare a blue print for Bank to move towards advanced approaches under Basel II as per RBI guidelines.

Facilitating / Hand holding for obtaining various approvals from RBI/ Financial Regulator of respective country. Help in attending to their queries, inspection, validation etc. with an aim to enable the Bank to get approval from



the relevant authority to migrate to advance approaches in Risk Management Domain.

Program management for software implementation , UAT and application to RBI

(a) Setting up of program management and escalation matrix.

(b) Co-develop Project plan and implementation schedule

(c) Regular updates by way of presentations to

(i) Steering Committee

(ii) Project monitoring committee

(d) Develop Project requirements plan for

(i) Credit Risk IRB approach Implementation

(ii) Market Risk IMA Implementation

(iii) Operational Risk AMA implementation

(e) Review of Software Requirement Specifications (SRS) developed by vendor and provide areas of improvement

(f) Help the Bank in constructing test scenarios for functional testing of all the software‟s

(g) Roll out of Software and User Acceptance Testing of the Software (including the existing software solution)

(h) Help the Bank in carrying out hardware acceptance testing

(i) Report on test results and level of compliance of the implemented software

(j) Prepare approach application to RBI for migration to advanced approaches for IRB (credit risk), TSA & AMA (operational risk) and IMA (market risk)



b) Scope of Credit Risk Management for domestic and overseas operations shall include, but not limited to

i. Phase i

Gap analysis and Review of existing policy documents

The consultant should conduct a gap study to identify the missing data elements which are currently not being captured and/or stored in any of current data source systems.

Enhance credit risk management policy as per Basel II and RBI requirements.

The gap assessment should be done based on Basel II requirements and leading global practices in credit risk management and suggest methods to bridge the gaps.

Evaluate the preparedness for moving over to IRB approach, identify the

gaps.

Assist Bank in developing reporting policy as per Pillar I, II and III of Basel II and RBI guidelines.

Deliverables:

Gap analysis report

Time frame and estimation report for moving towards advanced approaches

Policy document on reporting as per Pillar I, II and III of Basel II and RBI guidelines

Report to be submitted covering the above scope in whole.

ii. Phase ii

Data collection system for data elements required to compute the RWA assets under IRB

The consultant should identify the data source systems (such CBS, loan

origination system, recovery system etc.) which contain the required data for implementation of advanced approaches.

Review data maintenance and credit analysis and establish the data collection model for data elements required to compute Risk Weighted Assets (RWA) under IRB approach.

Review the data captured by the bank for estimation of key Basel II parameters (PD- LGD- EAD-M) vis-a-vis Basel-II requirements. Guide and introduce a system for data capturing where data is currently not captured.



Determine data to be captured by the Bank for LGD and EAD models for its various exposures.

Develop and suggest on data collection through existing system.

Deliverables:

Data remediation report containing findings of data gap analysis and list of missing data elements required to be captured as per the IRB approaches of Basel II and LGD and EAD models for all key exposures of the Bank.

Definition of various data elements for Basel II

Data collection system for missing data elements

Roll out the data collection process across the Bank and ensure timely collection of data.


iii. Phase iii

Build retail pool and develop methodologies to perform retail pooling

Assessment of the existing retail credit rating framework and its data maintenance including assessment of existing retail rating models and suggest any required updates

Develop prototypes for retail pooling and tests to assess homogeneity within a pool and heterogeneity across pools to differentiate default behavior.

Develop reporting templates to monitor pool stability and migration

Grouping / pooling the asset portfolio of the Bank to various asset classes as prescribed by Basel-II, IRB approach based on statistical methods.

Evolve mechanism to capture data and to estimate PD, LGD, and EAD for each retail pool.

Suggest any software solution required to undertake the process

Deliverables

Policy on rating of retail advances and its data maintenance.

Retail pooling and policy on retail pooling

Purchase of software solution to capture the data and process it to compute RWA and all activities pertaining to purchase of software selection. (Issue of RFP to UAT of software)




iv. Phase iv

Develop Standards and user guide for PD/LGD/EAD model developments:

Build LGD and EAD predictor models and conduct stress testing on LGD and EAD.

Develop standards and operating guides for PD, LGD, and EAD model development. The standards should cover the following aspects:

o Governance and controls over the model development process.

o Process to approve and use a model.

o Guidance on portfolio segmentation to determine the number of rating models to be developed and allocation of exposures to various rating models.

o Guidelines on data collection for model development, sample creation process and time weighting of historical data.

o Guidelines on the usage of statistical techniques and expert

judgment in model development and incorporation of conservatism in model development exercise.

o Guidelines to calibrate PD and LGD to borrower and facility rating grades.

o Standards of model documentation

Provide user guides and prototypes for model development, detailing the various statistical techniques of PD, LGD, and EAD model development.

Deliverables

Document on LGD and EAD predictor models and stress testing on LGD and EAD.

Develop standards and operating guides for PD, LGD, and EAD model development

The standards should cover the following aspects as mentioned above.

Provide user guides and prototypes for model development, detailing the various statistical techniques of PD, LGD, and EAD model development.




v. Phase v

Implementation of FIRB and more sophisticated approaches

Review the use of rating for credit sanction and pricing and loan administration.

Suggestions for having Through the Cycle (TTC) rating as per Basel II and IRB requirements.

Assist in ensuring compliance to minimum requirements for both FIRB & AIRB approaches.

Identification of Credit risk in Derivatives and other treasury products

Identification of Credit losses at portfolio level: Product wise, Rating wise, Branch wise, Region wise, Industry wise.

Identification of portfolio loss estimation, correlation analysis, assessing portfolio granularity for meeting Basel II IRB requirements.

Map Asset Classes/Subclasses to Approach Type (Standardized /IRB, etc) by a defined rule as per Basel II/ RBI guidelines

Review the credit risk mitigation framework in the bank.

Provide guiding principle on credit risk capital computation process Develop the supervisory slotting criteria for specialized lending to map the credit rating of specialized lending exposures to supervisory slots.

Provide guiding principle on collateral management detailing the methodology to capture, store, update and manage collateral information.

Provide guiding principle on treatment of counterparty credit risk covering the eligible instruments, methodology to assess various measures of exposure amount, methodology to identify cross product netting. The consultant has to provide guidance on the suitable method to compute exposure.

Identify the information requirements for the advanced approaches of all risk areas.

Compliance to securitization requirements as indicated in Basel II and RBI guidelines as and when Bank undertakes securitization deals.

Study on various aspects of credit risk management at portfolio level. (sectoral deployment, group borrower, industry wise exposure caps, etc)



Deliverables

Suggestions for having Through the Cycle (TTC) rating as per Basel II and IRB requirements.

Identification of Credit risk in Derivatives and other treasury products

Identification of Credit losses at portfolio level: Product wise, Rating wise, Branch wise, Region wise, Industry wise.

Provide guiding principle on credit risk capital computation process Develop the supervisory slotting criteria for specialized lending to map the credit rating of specialized lending exposures to supervisory slots.

Provide guiding principle on collateral management detailing the methodology to capture, store, update and manage collateral information.

Provide guiding principle on treatment of counterparty credit risk covering the eligible instruments, methodology to assess various measures of

exposure amount, methodology to identify cross product netting. The consultant has to provide guidance on the suitable method to compute exposure.

Identify the information requirements for the advanced approaches of all risk areas.


vi. Phase vi

Perform Validation of models and develop policy for model validation:

Review the existing rating framework / scoring framework in the Bank for both retail and non retail and suggest modification / improvements such as : Corporate, SME, Retail Models, (including agricultural loans)

Perform validation of models and develop policy for model validation, calibration and benchmarking the model using internal data.

Perform qualitative validation of the current rating models to assess the model design, governance, documentation, and usage of models in business decision making.

Perform quantitative validation to assess the discriminatory power (in case of borrower ratings only), calibration and stability of the models.

Provide recommendation on the usability of the current models in Basel II implementation, need for re-calibration or re-building of models.

The Bank has 13 corporate models and 6 Retail models that are to be validated and recalibrated as a part of this exercise.



Deliverables:

Validation report of existing model in the Bank both quantitative and qualitative (corporate, retail, etc.)

Models validation policy and benchmarking the model using internal data.

Recommendation document on the usability of the current models in Basel II implementation, need for re-calibration or re-building of models.


vii. Phase vii

Assist Bank in developing reporting policy as per Pillar III of Basel II

Assist the Bank in developing a policy for Pillar 3 disclosures and rating based MIS. The policy should provide guidelines on the reporting templates, governance of reporting process and controls over the reporting process.

Implement the Pillar 3 disclosures and rating based MIS by identifying the various source systems, developing reporting formats as per the regulatory and business needs.

Strengthening of Risk Based Internal Audit (RBIA) in line with international best practices, Basel II and RBI guidelines.

Deliverables

Policy for Pillar III disclosures

Documented report on RBIA


c) Pillar II and Internal Capital Adequacy Assessment Policy (ICAAP) for domestic and overseas operations shall include but not limited to:

i. Phase i

Gap Analysis in the existing Framework and System

Gap analysis in the existing framework of Pillar II of Basel II and suggest improvements as per Basel II & RBI guidelines

Identification of Bank specific risks, framework for testing materiality of risks to the Institution.

Review the existing frame work and risks identified under Pillar II and suggest missing elements as per Pillar II of Basel II.



Deliverables

Gap analysis report to be submitted


ii. Phase ii

Develop the ICAAP framework to assess both quantitative and qualitative risks:

All the Pillar II aspects are to be covered as per Basel II and RBI guidelines.

Study the risk philosophy of the Bank, future growth strategies and stakeholder expectations to formulate the risk appetite of the Bank for various risks faced.

Develop more sophisticated and data-intensive methodology models for quantitative assessment.

Develop governance structure for the Bank‟s ICAAP and identify the roles and responsibilities of Risk, Finance teams and senior management.

Develop standards and framework to integrate ICAAP in the day to day management and business decisions.

Defining qualitative and quantitative tolerance level for key risk of the Bank and framing risk appetite of the Bank

Define capital cushion to cover other risks dealt in Pillar II

Deliverables

Documented report to be submitted on study of the risk philosophy of the Bank, future growth strategies and stakeholder expectations to formulate the risk appetite of the Bank for various risks faced.

Develop more sophisticated and data-intensive methodology models for quantitative assessment.

Setting framework to integrate ICAAP in the day to day management and business decisions.

Documented report on qualitative and quantitative tolerance level for key risk of the Bank and framing risk appetite of the Bank and capital cushion to cover other risks dealt in Pillar II




iii. Phase iii

Enhance the ICAAP framework to incorporate risk based pricing and Stress testing.

Suggest improvements in existing Stress testing framework. The framework should facilitate assessing the impact of macroeconomic stress scenarios on the capital position (for all quantifiable risks) and P&L of the Bank.

Suggest improvements, if required, in measurement techniques for quantifiable risks such as Concentration risk, Liquidity risk, IRRBB, Business risk, Residual Risk, Counterparty Credit Risk etc.

Suggest improvements, if required, in risk management techniques for non-quantifiable risks like Strategic risk, Reputational risk etc.

Conduct counter party credit risk stress testing

Identify data elements to be captured for RAROC, Risk Based pricing and suggest data remediation

Develop a risk based pricing framework containing:

o Methodology to estimate hurdle rate for individual business units.

o Mechanism to allocate costs to a new transaction and assess the marginal capital requirement for a new transaction

o Methodology to compute RAROC and SVA on an ex-ante basis and price a new loan

Deliverables

Report on quantifiable and non quantifiable elements required to calculate risk identified in ICAAP

Enhance existing Stress testing framework & measurement techniques for quantifiable risks & non-quantifiable risks like Strategic risk, Reputational risk etc.

Conduct counter party credit risk stress testing

Develop a risk based pricing framework containing:


iv. Phase iv

Formulation of requires Policies and Procedures and Infrastructure

Develop a documented report on the process for assessing overall capital adequacy in relation to risk profile.

Assistance in formulation of group ICAAP and consolidated ICAAP and review of existing stress testing policy.



Formulation of a documented copy of the procedures used to evaluate the correlation between various risks.

Ensure compliance with the New Capital Adequacy Framework of RBI and all other related guidelines issued from time to time including those for Supervisory Review Process (SREP), Internal Capital Adequacy Assessment

Process (ICAAP) as well as Market Discipline.

Deliverables

Study the risk philosophy of the Bank, future growth strategies and stakeholder expectations to formulate the risk appetite of the Bank for various risks faced. Submit Recommendations in respect of all of the above for consideration by the Bank

Assistance in formulation of group ICAAP and consolidated ICAAP and review of existing stress testing policy.

Ensure compliance with the New Capital Adequacy Framework of RBI and all other related guidelines issued from time to time including those for

Supervisory Review Process (SREP), Internal Capital Adequacy Assessment Process (ICAAP) as well as Market Discipline.


v. Phase v

Assessment of required System/software solution.

Consultant is required to identify any require system of software solution for the purpose of ICAAP

All work or assignment to be accomplished with respect to software solution (including preparation of RFP and UAT of the software)

Deliverables

Purchase of required software solution (including preparation of RFP and UAT of the software)

Rollout of software solution


d) Scope of Operational Risk Management for domestic and overseas operations shall include but not limited to:

i. Phase i

Gap analysis and Operational risk management governance

Conduct a gap analysis against the desired state of risk management at the Bank.



Designing risk reporting system and develop strategies to identify, measure, monitor and control/mitigate operational risk.

Review of existing operational risk management policy compliant to regulatory and Basel II requirements

Advise on risk governance architecture suitable to the organizational structure of the bank as a whole and for each business unit and detail the roles and responsibilities at each level.

Develop operational risk management strategy and objectives for the Bank.

Re-defining the roles and responsibilities and accountability of the risk management committees and authorities, with regard to operational risk management.

The roles and responsibilities of the bank wide operational risk management function and line of business management.

A description of the internally derived analytical framework that quantifies the operational risk exposure of the Bank.

Define qualitative and quantitative factors and risk mitigants and incorporated them into the operational risk management framework.

A documentation of the testing and verification of the processes and procedures with respect to enterprise wide has to be submitted.

Regular reporting of critical risk issues faced by the banks and its control/mitigations has to be submitted to senior management and Board.

Provisions for review, treatment, and resolution of non-compliance issues.

System for validating/reviewing the operational risk management processes and assessment has to be built.

Methodology for risk reporting and risk analysis covering operational risk exposures, material operational risk losses, material near-misses has to be built

Suggesting techniques for creating incentives to improve the management of operational risk throughout the Bank.

Deliverables

Gap analysis report and revision of Operational Risk Policy compliant with Regulatory and Basel II requirements

Documented report on strategies to identify measure, monitor and control/mitigate operational risk.

Advising on risk governance architecture suitable to the organizational structure of the bank as a whole and for each business unit and detail the roles and responsibilities at each level.

Develop operational risk management strategy and objectives for the Bank.



Documented description of the internally derived analytical framework that quantifies the operational risk exposure of the Bank.

Regular reporting of critical risk issues faced by the banks and its control/mitigations to senior management and Board.

Documented methodology for risk reporting covering operational risk exposures, material operational risk losses, material near-misses to the Board and Management.

Documented report on suggesting techniques for creating incentives to improve the management of Operational Risk throughout the Bank.


ii. Phase ii

Installation of TSA and road map for moving ahead to advanced approaches.

Develop methodology to meet Qualifying criteria as per TSA.

Identification of -8- Business Lines with reference to our Bank.

Mapping of Income / Expenditure Heads as per -8- Business Lines as per the directives of RBI guidelines on TSA.

Integration of ORMS with that of internal audits.

Develop framework for capital computation as per The Standardized Approach (TSA) for operational risk of Basel II

Setting up Qualitative & Quantitative standards as per Basel II and RBI guidelines (AMA soundness standard)

Build framework for quantifying operational risk under AMA and perform capital computation (including stress testing) for key business areas

Develop framework for assessing operational risk in new products/policies

Develop methodology for recognizing insurance under the AMA which will need to capture elements thorough appropriate discounts or haircuts in the amounts of insurance recognition.

Identify Operational risk which form a part of Pillar II

Deliverables

Identification of -8- Business Lines in reference to our Bank and mapping of income / expenditure heads

Framework for capital computation as per Standardized Approach of Basel II

Assistance to the Bank in performing the capital computation under Standardized Approach



Setting up Qualitative & Quantitative standards as per Basel II and RBI guidelines (AMA soundness standard)

Build framework for quantifying operational risk under AMA and perform capital computation (including stress testing) for key business areas

Develop framework for assessing operational risk in new products/policies

Develop methodology for recognizing insurance under the AMA which will need to capture elements thorough appropriate discounts or haircuts in the amounts of insurance recognition.


iii. Phase iii

Risk & Control Self Assessment (RCSA) shall include, but not limited to:

Develop criteria to assess risk and control, identification of alternate approaches available, selection of a suitable approach or combination of approaches, on the basis of size, structure and business mix of the Bank

by analyzing cost benefit analysis of various approaches.

Advising on the process of risk identification. The scope of the exercise and the areas/units to be covered and the priority of identification. Risk Identification should include monitoring of the external environment and industry trends.

Develop credible methodology to determine top risks, top concerned (weakness areas) areas, prioritize areas of improvement.

Develop methodology for conducting risk and control assessment and the roll out plan across various units. The methodology should include setting up of rating scales for risks and controls and evaluation of residual risks.

Develop reports for the most detailed level (eg. Report for process owners) to the Bank. (Eg. Risk map, heat map, etc).

Conduct RCSA for all business and process of the Bank. The key business should include but not limited to: Treasury, Retail banking, Trade finance and corporate banking, Rural/Priority sector, IT, International Banking. The RCSA should be considered for pilot branch for the above business, including centralized operations as applicable.

MIS templates for monitoring and analyzing the RCSA results. The consultant will also develop an implementation strategy for rolling out the RCSA across the Bank.

Deliverables

RCSA Policy and Methodology

RCSA Implementation across all the key businesses of the Bank

Methodology for RCSA roll-out and aggregation of results



MIS templates for reporting RCSA results on an aggregated basis


iv. Phase iv

Loss event management framework

Develop loss data management framework and develop templates for capturing all kinds of Operational risk incidents.

Develop process to capture non financial losses, near misses, potential losses and develop mechanism to follow up and update loss event until the event is closed.

Develop methodology for avoiding double counting of operational risk losses and reconciliation of these losses with those in books of accounts/General Ledger.

Design MIS for capturing the loss, potential loss and near- miss events.

Developing methodology to identify loss events to classify events to as a

Risk Type. Eg. Market Risk, Credit Risk etc.

Develop methodology for avoiding double counting of operational risk losses and reconciliation of these losses with those in books of accounts/General Ledger.

Development of methodology and process to quantify Operational risk including scenario analysis, the use of external loss data, considering the business environment and internal control factors of the Bank.

Develop methodology for integration of external loss data with internal loss data.

Suggest methods for scaling external data with that of internal data.

Root cause analysis of all the losses captured recommended by the consultant.

Deliverables

Loss event management Policy

Template for Loss data collection to capture non financial losses, near

misses, potential losses and develop mechanism to follow up and update loss event until the event is closed.

Documented methodology for avoiding double counting of operational risk losses and reconciliation of these losses with those in books of accounts/General Ledger.

Designing MIS for capturing the loss, potential loss and near- miss events.

Documented report on methodology to identify loss events to classify events to as a Risk Type. Eg. Market Risk, Credit Risk etc.



Development of methodology and process to quantify Operational risk including scenario analysis, the use of external loss data and considering the business environment and internal control factors of the Bank.

Develop methodology for integration of external loss data with internal loss data and suggest methods for scaling external data with that of internal

data.

Root cause analysis report of all the losses captured


v. Phase v

Key Risk Indicators (KRI) framework

Develop KRI‟s for all key risks for various processes, including capture of source system, threshold and calculation methodology.

Develop KRI monitoring process (including KRI data collection). Develop KRI validation process and methodology to ensure effectiveness of KRI in

measuring risk level.

Develop KRI specification and definition, such as purpose of KRI, usage of KRI, threshold and frequency of reporting, frequency of KRI data collection. Etc.

It should also support evidential data (Loss Events) of the organization, which can be furnished to the model in a useable manner. Conduct training sessions on KRI identification and monitoring methodology including calibration of thresholds for key risk indicators.

Develop a Risk dashboard providing periodic snapshot of a top down assessment of key risk, mitigation plans and effectiveness of controls.

Suggest on minimum and maximum number of KRI‟s at Bank level and reporting of such KRI at the Board Level, Business line Level, Zone level.

Develop methods on scaling of KRI with that of Industry trends.

Developing KRI monitoring and Validation process to ensure effectiveness of KRI‟s.

Deliverables

KRI Policy covering the above

MIS template for KRI reporting and aggregation

Methodology document for identifying KRI‟s

Identification of KRI‟s for all key risks identified during the RCSA exercise including data elements and related calculations




vi. Phase vi

Framework for quantifying operational risk under AMA and best practices

Develop statistical methodologies including the capture and use of internal and external operational risk loss data including data potential events (including the use of Scenario Analysis).

Build framework for quantifying operational risk under AMA and perform capital computation (including stress testing) for key business areas:

Methodology for integration of external loss data with internal loss database.

The development and incorporation of business environment and internal control factor assessments framework.

Use of scenario analysis, internal loss data, BE&ICF and External loss data for quantification

Data collection templates and road map for operational risk modeling under AMA.

Perform Capital computation including stress testing for key business areas refer RCSA section for key business areas) of the Bank.

Deliverables

Framework for quantification of capital under Advanced Measurement Approach of Basel 2

Documented report on statistical methodologies including the capture and use of internal and external operational risk loss data including data potential events (including the use of Scenario Analysis).

Prototype for computation under AMA approach

Capital computation including stress testing for key business areas

Assist bank in developing document for integration of operational risk management with Internal Audit:

Develop framework for assessing operational risk in new products/policies:

Build framework to embed risk management in the day to day operations of the bank:

Project Plan Requirements & Gap analysis, sound ORM library is preferred. Eg. Library of Risks, Library of KRI‟s, control etc.


vii. Phase vii

Assessment of IT risk and Required Software Selection for moving ahead towards Advanced Approaches



The Consultant will design the security architecture required for the Operational Risk.

Ensuring effective IT governance relating to operational risk management

Internal audit convergence, new product/process approval and use test

approaches

1. Assist bank in developing document for integration of operational risk management with Internal Audit

2. Develop framework for assessing operational risk in new products/policies

3. Build framework to embed risk management in the day to day operations of the bank

Preparation of RFP and selection of software vendor

Deliverables

Ensuring effective IT governance relating to Operational Risk Management

Assessment of IT risks with respect to Operational risk

Documented report on Internal audit convergence, new product/process approval and use test approaches

Software selection and Pilot phase implementation in 70 to 100 domestic and international branches and UAT


e) Market Risk Management for domestic and overseas operations shall include, but not limited to:

i. Phase i

Gap Analysis and Current State Assessment of existing Policies and Procedures

Conduct a Diagnostic Study and prepare a Gap Analysis Report, which should cover the existing governance structure, policies, procedures, and

systems.

Gap Analysis Report should include alternate approaches addressing the identified gaps and recommendations covering Market Risk Management goals, process description, assessment methods, and any escalation framework.

Identify the gaps in the existing system and assess the readiness of the Bank towards regulatory compliance.

Assess incremental approach and develop a Road Map to transition from Standardized method to Internal Model Approach.



Prepare and discuss a detailed report with the Bank, covering all findings along with a detailed project plan and implementation road map by the end of this phase.

Deliverables:

Gap analysis report on findings and recommendations for enhancement of Market Risk Management framework as per Internal Model Approach of Basel 2 and guidelines issued by RBI.


ii. Phase ii

Assist the Bank to comply with the qualitative requirements defined by Basel II/ RBI guidelines on Advanced Approaches.

Assess the market risk management standards at the Bank and benchmark them with the regulatory standards and leading industry practices. The following items should be covered:

Advising on risk governance architecture suitable to the organizational structure of the Bank as a whole and for each business unit.

It should cover all the aspects of Market Risk management as mentioned in the new guidelines.

Re-define the roles and responsibilities and accountability of the risk management committees and authorities, with regard to Market Risk Management.

Enhance the market risk policy to comply with RBI and Basel II guidelines for IMA for market risk:

Assist the Bank in designing new market risk related policies, if needed, after a detailed study of the existing policies, and its relevance in a Basel II environment. Identify gaps / enhancements so as to align them with the regulatory expectations. It should cover at least the following policies:

Market Risk and ALM Policy; Valuation, Investment, Risk Appetite document and Limit Structures / Frameworks; IT Security Policy and Procedures.

Suggest qualitative factors and risk mitigants and how they can be

incorporated into the Market Risk Framework.

Comment upon the adequacy of the existing mid office policy with particular reference to :

a. Regular reporting of critical risk issues facing the banks and its control/mitigations to senior management and Board.

b. Provisions for review, treatment, and resolution of non-compliance issues.



c. System for validating/reviewing the Market Risk Management processes and assessment.

Develop methodologies for risk reporting covering Market Risk exposures, limit breaches, risk Management and risk analysis.

Suggest techniques for creating incentives to improve the management of Market Risk throughout the Bank.

Define policy requirements for qualitative and quantitative disclosures.

Deliverables

Risk governance architecture covering all the aspects of Market Risk management as mentioned in the new guidelines.

Enhancement of market risk policy covering qualitative and quantitative aspects to comply with RBI and Basel II guidelines for IMA for market risk

Documented methodologies for risk reporting covering Market Risk exposures, limit breaches, risk Management and risk analysis.

Suggest techniques for creating incentives to improve the management of Market Risk throughout the Bank.


iii. Phase iii

Defining the approach and methodology for addressing the quantitative

Standards required for Internal Models approach by Basel II and RBI

guidelines:

Systems and procedures for monitoring stop loss/take profit limits across various portfolios on real time basis under Treasury Operations.

Documented report on systems and procedures for on line monitoring of regulatory limits, operational limits, counterparty limits /Settlement limits & Country limits under all portfolios of Treasury Operations as set out in various policies of the Bank. (Investment Policy, Forex Risk Management Policy, Off-Balance Sheet Policy, Policy on exposure limits on counter party banks, Mid Office Policy, CRMS etc. Study the existing systems and procedures in Treasury branch and suggest improvements in the

systems/procedures/new systems, if required for compliance /monitoring/reporting of Regulatory Guidelines/ Internal Limits.

Computation of capital charge including illiquid position on market risk as per RBI master circular-Prudential Guidelines on Capital Adequacy Framework (NCAF). {Ref: RBI/2009-10/308 DBOD.No.BP.BC.73/21.06.001/2009-10 dated 8th Feb 2010.

Suggest methods in computing capital for incremental risk in the trading book.( ref: BCBS doc July 2009)



Validation of Mark to Market methodology for the Bank‟s trading book including all the asset classes (Equity, Fixed Income and Forex) and Derivatives.

Validation of calculation methodology of various risk factors such as PV01 for interest rate risk, Greeks for option portfolio, Duration and convexity

for fixed income instruments.

Framework & Validation [Simulation-based & Scenario Analysis] Methodology for Value-at-Risk Model

Suggest the appropriate methodology in case the existing methodologies are insufficient or inappropriate.

Articulate the methodologies for compliance with the “Prudent Valuation Guidance” for positions held in the Trading Book.

Review of existing VaR methods for general market risk supported by the existing software – assumptions, merits and limitations, computational accuracy using internal data

Develop methodology for Specific risk measurement capacity of the current software – equity, fixed income and derivatives: comments and suggestions

Develop methodology for Specific and liquidity risk computation for fixed income and derivatives using internal data – model selection and choice between VaR methods and Stress Testing Specific and liquidity risk. The specific risk should have special emphasis on computation of product specific credit estimation factors on account of market variables.

Review the existing VaR and mark to market valuations methodologies, and suggest improvements if required across all asset classes

Monitoring of the realized and the unrealized gains/losses in various asset classes.

Risk vs. return of various asset classes

Rating migration of issuers with respect to Non-SLR asset class

Analysis of profits earned from merchant transactions in foreign exchange dealing

Portfolio management from a risk perspective and suggesting hedging strategies of various asset classes.

Computation of General Market Risk, Specific Risk, (Default Risk, Credit Migration Risk, Credit Spread Risk) & Incremental Risk Charge as per RBI guideline/Basel guidelines.

Develop VaR based Computation of capital requirement under IMA comprising Normal VaR measure (general market risk and specific risk), Stressed VaR measure (for general market risk and specific risk) and



Incremental Risk Charge (IRC) (for positions subject to interest rate specific risk capital charge).

Comprehensive Validation of VaR models for various risks.

Define methodology for Value adjustment for illiquid positions as required under Prudential Guidelines on Capital Adequacy and Market Discipline- New Capital Adequacy Framework (NCAF) issued by Reserve Bank of India.

Study the Investment Valuation systems and procedures of investment portfolios in Treasury books as per RBI guidelines and suggest improvements/customizations etc.

Study the Duration and Modified Duration of SLR/Non SLR portfolio of Investments in Treasury Branch and methodology of computation. Suggest improvements in systems/procedures and Ideal Duration/Modified Duration of SLR/Non SLR portfolios under different market conditions.

Study of the Stress testing policy of the Bank and suggest improvements

/formulate requirements as per extant RBI guidelines on stress testing of various portfolios.

Feasibility Study/Systems and procedures for VaR based STOP LOSS limits across various portfolios.

Documented manual/systems & procedures for Market Risk Model (MRM) Dossier as per the RBI prudential guidelines on capital adequacy-implementation of IMA for market risk.

Study of existing risk measurement systems related to Interest Rate Sensitive Portfolios, Foreign exchange exposures and equity exposures and suggestions/methods for improvement / compliance of said criteria‟s in RBI prudential guidelines on capital adequacy-implementation of IMA for market risk.

Assistance with software installation for specific risk. Program management for software UAT.

Deliverables

Documented report on systems and procedures for on line monitoring of regulatory limits and other set of aspects as mentioned above.

Computation of capital charge including illiquid position for incremental risk in the trading book.

Validation of Mark to Market methodology, calculation methodology of various risk factors

Articulate the methodologies for compliance with the “Prudent Valuation Guidance” for positions held in the Trading Book.

Review of existing VaR methods for general market risk and specific risk supported by the existing software



Develop methodology for Specific and liquidity risk computation and review the existing VaR and mark to market valuations methodologies and suggest improvements

Documented manual/systems & procedures for Market Risk Model (MRM) Dossier as per the RBI prudential guidelines on capital adequacy-

implementation of IMA for market risk.


iv. Phase iv

Define the criteria for identifying risks in the banks trading book as per RBI guidelines (ref: RBI/2009-10/384)

Develop framework for capturing Interest rate risk (general and specific), Equity price risk (general and specific) exchange risk and other risk as per guidelines.

Define the Market Risk factors involved in Bank‟s Trading Book. Factors like Re-pricing Risk, Yield Curve Risk, Basis Risk, and Embedded Options

Risk should be covered in this process (Both on balance sheet items and off balance sheet items should be covered).

Assist the Bank in segregating the trading book positions into the different categories like Interest Rate risk, Equity position risk, Foreign Exchange risk, Commodities risk (as applicable to Indian banking scenario).

Cover the second order risk factors like skew adjustment in case of option portfolio and correlated risk factors.

Systems and procedures for monitoring regulatory guidelines and various risks under all Derivative Products/Off balance sheet items.

Market Risk in Banking Book

Liquidity Risk

a) Structural Liquidity Report:

Conduct behavioral study on distribution of assets & liabilities for liquidity risk

Conduct back testing and Stress testing for liquidity risk

b) Dynamic Liquidity Report:

Study the existing software and suggest improvements/customization etc. in Treasury Front Office/Back Office systems as well as Bank‟s other systems/ software.

Future estimation of Inflows and outflows, back testing of dynamic liquidity.

c) Contingency Funding Plan:

Reviewing the present system of CFP.



CFP under various stress test scenarios Interest Rate Risk

Interest Rate Risk

d) Statement of Interest Rate Risk Report

Behavioral study on distribution of assets & liabilities for interest rate risk.

Estimation of RSA and RSL. Back testing and Stress testing for interest rate risk.

e) Earning at Risk Report

Computation of duration of assets and liabilities analysis and assessment of duration of equity

f) Duration of Equity

Computation of duration of assets and liabilities analysis and assessment of duration of equity

Define methodology for aggregation for capital computation:

Define Aggregation Methodology for Capital computation

Define the products to be covered under IMA

Define the products / risk factors to be covered using standardized approach and document the reasoning for the same.

Define the methodology to be adopted for calculation of Stress VaR

Review the netting and correlation benefits availed during VaR calculation

Prepare detailed road map for the smooth transition from standardized approach towards Internal Model Approach.

Deliverables

Develop framework for capturing Interest rate risk (general and specific), Equity price risk (general and specific) exchange risk and other risk as per guidelines.

Assist the Bank in segregating the trading book positions into the different categories like Interest Rate risk, Equity position risk, Foreign Exchange

risk, Commodities risk (as applicable to Indian banking scenario).

Conduct behavioral study on distribution of assets & liabilities for liquidity risk

Enhance Dynamic Liquidity Report & Earning at Risk Report

Review the present Contingency Funding Plan

Define Aggregation Methodology for Capital computation

Prepare detailed road map for the smooth transition from standardized approach towards Internal Model Approach.




v. Phase v

Build/review the back-testing & stress testing policy and procedure for VaR models:

Comprehensive Back testing and exception handling policies and procedure for the Value-at-Risk Models

(a) Define Back Testing procedures;

(b) Develop an evaluation procedure of Back Testing results.

(c) Prepare MIS and other reporting formats required to communicate the Back-testing results to the Senior Management and the regulators on a periodic basis.

Comprehensive Back testing and exception handling policies and procedure for the Value-at-Risk Models

Develop a back-testing policy and procedure for VaR models; Build a

stress testing framework for all instruments in Trading Book. VaR based Stress testing and back testing of all tests as per the RBI prudential guidelines on capital adequacy/Basel Guidelines.

Build a stress testing framework for traded instruments:

Review the process of classification of traded instruments into standardized instrument classes and identification of stress parameters associated with different instrument classes

Establish a process of determination of Stress scenarios based on underlying stress parameters.

Generation of scenarios based on analysis of historical data for the defined stress parameters and simulated scenarios based on macroeconomic parameters

Review of back testing methods for general market risk and specific risk supported by the current software – accuracy, effectiveness and suggestions.

Review of stress testing methods for general market risk supported by the

existing VaR software – accuracy, merits and limitations, suggestions.

Review of general market risk VaR and stress testing methods for interest rate and FX derivatives, supported by the current software and comparison/benchmarking with the market best practices

Deliverables:

Enhance/build stress testing and back testing policy

Validation results of the valuation and VaR models.



Findings and recommendation related to back testing and stress testing framework

Final capital computation (aggregation of Market Risk capital using the Advanced Approach)


vi. Phase vi

Reporting framework for disclosure requirements, compliance and policies

Develop reporting framework for disclosure requirements related to market risk:

Define MIS framework for compliance with capital adequacy norms related to Market Risk.

Design reporting templates as required for Internal Models for the regulator (RBI) as well as the Bank‟s Senior Management and the Board.

Preparations of the general qualitative disclosure requirements for Market Risk including the portfolios covered by IMA.

Assist the bank in assessing the internal controls for market risk management and ensure their compliance with policies:

Review the procedures around monitoring and ensuring that the market risk management activities are compliant with the policies;

Assess the adequacy of the controls pertaining to

(1) The usage of market risk models,

(2) Authorization and escalation matrices (in times of breaches) and

(3) Access rights from a risk and regulatory viewpoint;

Assist in institutionalizing a governance framework for the model validation process (Market risk as well as the valuation models).

Compliance to the guidance / instructions for all types of Derivative Products with respect to regulations and market best practices.

Assist the bank in assessing the internal controls for market risk

management and ensure their compliance with policies both internal and external

Deliverables:

A report covering the following areas:

o Improvements in Bank‟s existing risk governance framework.

o Enhancements required in the available policies, documents or templates for any additional policies / documents required from regulatory perspective.



o Findings related to internal control environment and improvements for the same.

o Findings and recommendations related to IT systems and Data reliability

Framework for mapping the Bank‟s trading portfolio with various risk factors

Model validation and change management framework

MIS framework and report templates to satisfy regulatory disclosure requirements.


vii. Phase vii

Review existing software and IT systems and model validation:

Review the IT systems involved in the market risk management process

Review the various data feeds required in market risk

Management process including external market data as well as internal data transfer like updation of position data.

Review of the controls built by the Bank to maintain sanctity of the market data fed into the Risk Analytic Engine.

Consultant should assist the Bank in designing the database

Requirements for collecting historical data required for VaR computation.

Review the IT control environment and assess the suitability of the same in line with the regulatory requirements.

Review the model validation documentation / UAT documents prepared by the Bank at the time of system implementation and suggest enhancements.

Comprehensive Validation of VaR models for various risks under the present KVaR software of Thompson Reuters.

Comprehensive Validation of VaR models for various risks under the

present KVaR software of Thompson Reuters.

Define Model validation standards for periodic as well as on-going validation. It should include at the minimum

Procedures for validation of MTM as well as VaR models

Frequency of periodic validation and trigger point for on-going validation.

Responsibility matrix and scope of the validation exercise

Documentation requirement for model validation



Define criteria for Regular review of the performance of vendor based models.

Define criteria for introduction of new products.

Establish a change management framework for methodologies, processes

and system. It should include

Change in the methodologies of MTM or VaR calculation

Change in source or type of input data

Changes in processes and procedures related to market risk management, capital calculation.

Change in software systems

Impact analysis of the changes

Internal approval process related to change management.

Deliverables

Review the IT control environment and assess the suitability of the same in line with the regulatory requirements.

Review existing software and IT systems and model Validation and suggest on any required software solution

Consultant should assist the Bank in designing the database requirements for collecting historical data required for VaR computation.

Review the model validation documentation / UAT documents prepared by the Bank at the time of system implementation and suggest enhancements.

Comprehensive Validation of VaR models for various risks under the present KVaR software of Thompson Reuters.

Define criteria for Regular review of the performance of vendor based models.


f) Other scope of work of Consultant for domestic and international operations shall include but not limited to:

i. Phase i

Overseas Business

Gap Analysis of the existing systems and processes.

Develop Framework /models for country risk exposure.

All aspects related to credit risk, market risk, operational risk mentioned in the above scope is to be carried out with respect to Overseas Business/ Territories.



Suggest improvements/modifications in the techniques, analysis and monitoring/reporting structure to align with advanced approaches of Basel II and RBI guidelines.

Suggest/develop methods and improvements in the existing system with respect to guidelines/documents issued by other regulators and

International bodies where Banks operations are undertaken.

Suggest framework for group entities as per Basel II and RBI guidelines and respective regulatory guidelines where the countries operations is undertaken.

Build framework for measuring sovereign risk

Suggest suitable corporate governance structure

Deliverables

Models for country risk exposure.

All aspects related to credit risk, market risk, operational risk mentioned

in the above scope is to be carried out with respect to Overseas Business/ Territories.

Suggest improvements/modifications in the techniques, analysis and monitoring/reporting structure to align with advanced approaches of Basel II and RBI guidelines.

Build framework for measuring sovereign risk

Establish/enhance Corporate governance structure

ii. Phase ii

Pillar II - Capital Planning & Capital Allocation

Evaluate the capital planning process in the Bank and arrive at a holistic design for capital planning and budgeting based on the envisaged risk environment.

Method/framework to compute credit VaR, Operational Risk VaR and Market VaR. Framework for allocation of capital and risk aggregation.

Enable the Bank to move over to RAROC and EVA. Assist in risk return

analysis and risk adjusted performance measurement at account level/ portfolio level/ each business unit level etc.

Bank plans to implement Matched Fund Transfer Pricing Solution for Profitability Management. Consultant to help the Bank integrate risk and performance management which would help promote growth and profitability

Consultant to help bank measure and meet risk-adjusted performance objectives, price products to reflect their true risk, and monitor possible threats to liquidity and capital adequacy.



Evaluate the risk in MIS currently available and suggest enhancements.


Review the reporting mechanism and help in designing intuitive dashboards covering various risk areas.

Suggest suitable framework for corporate governance standards as per Basel II guidelines/ industry best practices.

Review the existing compliance framework/ set up vis-à-vis regulatory / statutory requirements and suggest modifications / improvements, on par with industry standards.

Review the reporting mechanism and suggest modifications / improvements

Assess the need for system and manpower support for compliance function.

Methods to improve the existing MIS through gap analysis and cover all risk areas.

Design dashboards for capturing various risk areas.

Deliverables

Fine tune the disclosure policy and enable an environment for automating the process of generation of Pillar 3 disclosures.

Capital Planning & Capital Allocation

Build framework for economic capital allocation and risk aggregation.

Enable the Bank to move over to RAROC and EVA. Assist in risk return analysis and risk adjusted performance measurement at account level/ portfolio level/ each business unit level etc.

Documented recommendations and setting up system for risk-adjusted performance objectives, price products to reflect their true risk, and monitor possible threats to liquidity and capital adequacy.


Suggest suitable framework for corporate governance standards as per Basel II guidelines/ industry best practices.

Methods to improve the existing MIS through gap analysis and cover all risk areas.

Design dashboards for capturing various risk areas.




iii. Phase iii

Pillar 3 – Disclosure Aspects

Compliance to disclosure standards as per Advanced approaches of Basel II / RBI guidelines.

Evaluation of Pillar 3 disclosures made by the Bank and suggesting suitable modification.

Fine tune the disclosure policy and enable an environment for automating the process of generation of Pillar 3 disclosures.

2.2. Required RFP document preparation and procurement of software.

Vendor(s) Selection Exercise: Identifying required software for moving to advanced approach. Consultant will discuss with Bank and assist, in selection process of the required software vendors. The major steps involved (which are not exhaustive) include –

Request for Proposal (RFP) Document Preparation for Procurement of

Software.

Define the scope of the project

Define the evaluation methodology

Define the eligibility criteria.

Define the payment terms.

Define functional and technical requirements.

Define the formats & schedules for the bidders to submit the technical

information

Define the format for the commercial bid

Define the penalty clauses

Define the terms and conditions for the project

Discuss the defined documents with the Bank representatives and obtain

consensus

Collate all the documents including the defined and agreed service levels

and formulate the final RFPs for selection of vendors.

Delivery of the final RFP(s) documents to the Bank for floating the same.

Define fair cost estimation of RFPs to be floated.

RFP(s) Evaluation and Selection of Software Vendor:

Conduct pre-bid meetings

Technical Evaluation



Assist Bank to evaluate the responses to RFP(s) based on defined

criteria for respective RFP(s).

Understand the Hardware benchmark, with the expected volume

levels as specified by Bank.

As specified in RFP(s), evaluate the proposed models based on

product walkthroughs.

Provide a report to Bank listing all technically qualified vendors for

respective RFP(s).

Commercial Evaluation

Assist Bank in opening commercial bids of technically qualified

vendors

Assist Bank to carry out commercial bid evaluation based on

defined criteria and format in RFP.

Total Cost of Ownership (TCO) analysis.

Provide a report to Bank detailing the results of commercial evaluation.

Hardware and Network Related Issues.

The Bank expects the consultant to process the hardware configurations required to implement the proposed solution. This hardware configuration should include sizing of server (CPU, main memory required, storage requirements etc.) which takes into consideration the present and future volume estimates, current technology and path for upgrade/growth.

The Consultant will define the requirements of various other service providers, assist in evaluating and selecting the prospective service providers. Consultant will also monitor and assist the Bank in execution of services by said service providers.

The consultant should also present a hardware topology diagram depicting the following:

Overall hardware architecture

Hardware requirements including sizing of the hardware

Operating system and Relational Database Management System (RDBMS) requirements.

While advising on Network, connectivity and infrastructure issues, the “Consultant” will ensure connectivity with expected levels of availability, fault tolerance, performance and scalability.

Consultant will analyse the networking requirement. Consultant to provide solutions ensuring compatibility and integration of various existing/proposed networks.

While preparing the Implementation Strategy and Plan, the Consultant



needs to ensure that the process of switching over to the new systems/projects/processes is smooth and assures prompt and continuous uninterrupted customer service.

The systems and procedures for migration to the new projects/systems should be clearly defined for archiving the past data for access at a later

date.

The consultant will study and appraise risks associated with various IT systems such as:

IT related risk in different IT systems, such Basic transaction framework as Real Time Gross Settlement (RTGS), NATIONAL ELECTRONIC FUND TRANSFER (NEFT), Internet banking, Phone banking, Lending Automation Processing System (LAPS) etc.

Networking.

2.3. Awareness Training Program

The consultant is expected to provide training on the following aspects:

1) Credit Risk: Modeling PD, LGD, EAD, and M separately for large and retail credit portfolios.

2) Validation of rating models: Internal validation of models and testing and measurement of non-quantifiable risk areas/ICAAP

3) Market Risk: VaR modeling, Internal Validation, testing etc.

4) Asset Liability Management: Interest rate risk and liquidity risk – all aspects

5) Operational Risk Areas: RCSA, KRIs, Loss Data Management, Scenario Analysis, AMA methodology etc. (Data capturing, analysis of LFHS events, Building external Data)

6) Use of statistical tools in risk modeling, Quantitative Risk Analytics

The target group will be

(i) Officers/executives of Risk Management Department, Regional Offices, Zonal Offices, Branches (domestic and international)

(ii) Trainers/faculty members from different staff training colleges

(iii) Inspectors, auditors. Etc

The number of sessions and number of trainees will depend upon the adequacy required to implement the concepts in the organization.

3) DELIVERABLES

All observations of the Consultant will be thoroughly discussed with Bank, before finalization of report.

Documents/Reports will be submitted as soft copy in doc (Excel format acceptable for tables) and PDF format as well as one signed hard copy.



4) ELIGIBILITY CRITERIA.

Consultants who wish to bid should conform to the following criteria.

SL No

Eligibility Criteria.

Details of Proofs

1 Should be either a Government Organization/PSU/PSE/ partnership firm or a limited Company under Indian Laws or /and an autonomous Institution approved by GOI/RBI promoted

Reference of Act/Notification, Registration Certificate, etc

2 Should have existence in India for five years as on date of RFP i.e. 13.10.2010. (In case of mergers/acquisitions/restructuring or name change, the date of establishment of earlier/original Partnership Firm/Limited Company/Institution can be taken into account).

Letter of Commencement of Business in case of Company, Registration in case of others.

3 Should have a minimum average annual turnover of Rs.25.00 crores during last three financial years for its India located office. (Not applicable for non-profit making organizations).

Balance Sheet/P&L statement (Audited). Alternatively a suitable Chartered Accountant Certificate may be furnished

4 Should have made profits for the past 3 years in succession (Not applicable for non-profit making organizations).


5 The firm should have never been blacklisted / barred / disqualified by any regulator / statutory body.

Self Declaration

6 The consulting firm or its subsidiaries engaged in providing software solution may bid for this RFP, subject to the condition that any of their software

solutions under this project will not be considered by the Bank for purchase during the period of assignment, if the bidder is engaged by the Bank for consultancy.

Self Declaration

7 Must have worked with public/private sectors banks (but not Regional Rural Banks, Co-operative Banks, and Local Area Banks) in India for atleast six months in respect of risk management areas during last four years preceding from 31.03.2010.

Appropriate Documentary Evidence



Those who fulfill all the eligibility criteria as mentioned above are only eligible to take part in this bid exercise.

A successful bidder may subcontract any part of the consultancy job to another firm/person subject to point number 30 of Section II.

The bidder should submit their responses along with documentary proofs and self declaration wherever required for the above eligibility criteria.

Selected Bidder will not be eligible to participate as vendor/partner/collaborator for any of the software solutions.

Bidder/bidders who have been appointed by the Bank for any other project and whose contract has been terminated before completion of the project are not eligible to bid in the proposed project.

Proposals of those bidders, who do not fulfill the Eligibility Criteria as stated above fully, will be rejected.

5) SUBMISSION OF BIDS

Please also refer to Section –I, Point-12 Bidder will submit two separate demand drafts/banker‟s cheques/pay orders drawn in favor of Bank of Baroda payable at Mumbai towards Application Money for Rs 10,000/- and EMD for Rs 2,50,000/- respectively.

The Technical Proposal shall be to the requirement of the Bank in prescribed formats as per Annexure – A, C, D, E, F, G, and H.

The Commercial Proposal shall be submitted in the format as per Annexure B.

The bidder shall submit the proposals properly filed so that the papers are not loose. The Bidder shall submit the proposal in suitable capacity of the file such that the papers do not bulge out and tear during scrutiny. All the pages of the proposals including documentary proofs should be numbered as “Page ____ (current page) of _____ (Total pages)" and be signed by authorized signatory. The current page number should be a unique running serial number across the entire proposal.

The Technical Proposal shall be organized and submitted as per the following

sequence:

Table of Contents (list of documents enclosed)

Technical Proposal with detailed activities broken down, effort estimate, and manpower estimated to be deployed team profile in prescribed formats as per Annexure A, Annexure D, Annexure E and Annexure F, and Annexure G.

Compliance certificate for all the terms and conditions as per Annexure-C

All copies of certificates, documentary proofs etc.

A CD containing soft copy of the proposal



Masked Annexure B (i.e. a copy of the Commercial Bid without price figures)

It should be noted that in case of any discrepancy in information submitted by the bidder in hard-copy and soft-copy, the hard-copy will be given precedence. However, in case of non-submission of any hard copy document, if the same is found submitted in the soft-copy, Bank reserves right to accept the same at its discretion.

The bid not accompanying Application Money and EMD is liable to be rejected.

Clarifications:

It may be noted that all queries, clarifications, questions etc., relating to this RFP, technical or otherwise, must be in writing only and should be addressed to the nominated point of contact as mentioned below.

Name: Shri. Rajesh Mahajan (General Manager)

Address: Bank of Baroda,


3rd Floor, (Risk Management)

Bandra Kurla Complex, Mumbai, 400 051

Tel No: 022-66985282/ 66985222

E-mail ID: [email protected]

Bidders should provide their E-mail address in their queries without fail since replies will be sent by e-mail.

The bidder will submit an undertaking specifying that the bidder has obtained all necessary statutory and obligatory permission to carry out project works, if any.

FORMATS OF BIDS:

The bidders should use the formats prescribed by the Bank in the RFP for submitting both technical and commercial bids. Any deviation in this regard entails the bidder for disqualification.

The Technical Proposal will be evaluated first for eligibility and then technical suitability for eligible bidders only.

Commercial Proposal shall be opened only for the short-listed bidders who have qualified in the Technical Proposal evaluation.



6) EARNEST MONEY DEPOSIT (EMD)

Earnest Money Deposit of Rs 2, 50,000/- (Rupees Two Lakh Fifty Thousand only) has to be submitted by way of Demand Draft / Banker's Cheque / Pay Order drawn in flavor of "Bank of Baroda” payable in Mumbai. Earnest Money will not carry any interest. The Earnest Money Deposit of unsuccessful bidders will be refunded while

intimating the rejection of the bid. The Earnest Money Deposit of the successful bidder will be adjusted towards security deposit. The Demand Draft / Banker's Cheque / Pay Order towards Earnest Money Deposit should be delivered separately along with the sealed envelopes containing RFP responses and it should not be kept inside the sealed envelopes containing RFP responses.

The Earnest Money Deposit will be forfeited if:

The bidder withdraws his tender after opening of the envelop containing eligibility criteria documents.

The bidder violates any of the provisions of the terms and conditions of this RFP specification.

7) GENERAL TERMS AND CONDITIONS (Please also refer to Section – I)

7.1. Term of Assignment:

The Consultant under this RFP will be appointed for a period extending till setting up of Enterprisewide Integrated Risk Management System as mentioned in the above scope as per Basel II and RBI guidelines, includes successful implementation of Pilot phase as mentioned in the scope.

The consultant will be expected to assist Bank in preparing application to RBI, getting its approval and all follow up matter in respect of the same.

7.2. Adherence to Terms and Conditions

The bidders who wish to submit responses to this RFP should note that they should abide (in true intent and spirit) by all the terms and conditions contained in the RFP. If the responses contain any extraneous conditions put in by the Respondents, such responses may be disqualified and may not be considered for the selection process.

7.3. Execution of PA/NDA and Certificate of Originality

The consultant should execute (a) Principal Agreement (PA), which must include all the services and terms and conditions of the services to be extended as detailed herein and as may be prescribed or recommended by the Bank and (b) Non-disclosure Agreement (NDA). The consultant should execute the PA and NDA within one month from the date of acceptance of Letter of Appointment. The consultant will also provide Certificate of Originality, certifying the originality of the dossiers/models submitted by the consultant to the Bank on their letter head.



The date of agreement shall be treated as date of engagement and the completion of the assignment shall be workout in reference to this date.

7.4. Period of Contract

The consultant is expected to complete the entire period of assignment excluding application to RBI and approval from RBI within a period of 18 months which will commence from the date of agreement of consultancy with the bank. For the purpose of contractual agreement the period of assignment will be construed as extending up to the time till RBI approval is in place for the Bank.

7.5. Other terms and conditions

The Bank reserves the right to:

Reject any and all responses received in response to the RFP.

Waive or Change any formalities, irregularities, or inconsistencies in proposal format delivery.

To negotiate any aspect of proposal with any bidder and negotiate with

more than one bidder at a time.

Extend the time for submission of all proposals.

Select the most responsive bidder (in case no bidder satisfies the eligibility criteria in totality).

Select the next most responsive bidder if negotiations with the bidder of choice fail to result in an agreement within a specified time frame.

Share the information/ clarifications provided in response to RFP by any bidder, with any other bidder(s) /others, in any form.

Cancel the RFP/Tender at any stage, without assigning any reason whatsoever.

8) WORK SPACE/STAFF MEMBERS REQUIRED FOR CARRYING OUT ACTIVITIES

The key persons identified by the Consultant for the project should carry out their activities from Bank Corporate Centre, Bandra Kurla Complex, Mumbai or any other suitable location as provided by the Bank. The consultant has to furnish the work

space required by them minimum one month in advance.

The requirement of the staff members from the Bank along with their expected skill set should be requested a month in advance for different phases and areas of implementation. The expected skill set should be from the available resource of the bank that can be put at the disposal of the consultancy contract.



9) PROJECT TEAM MEMBERS

The key persons identified by the Consultant should posses at the minimum any two of the following qualification/experience.

Should have in-depth banking domain knowledge with minimum five years of

work experience in banking.

MBA/PG - Finance/Masters in Mathematics/Statistics/Econometrics.

FRM-GARP/International-CFA/CA/P G (Diploma) in Risk Management/ Financial Engineering.

Should have been a part of team which has provided financial /managerial consultancy to public/private sector banks in India.

10) SUBSTITUTION OF PROJECT TEAM MEMBERS

During the assignment, the substitution of key staff identified for the assignment will not be allowed unless such substitution becomes unavoidable to overcome the undue delay or that such changes are critical to meet the obligation. In such circumstances, the Consultant, as the case may be, can do so only with the prior written concurrence of the Bank and by providing the replacement staff of the same level of qualifications and competence. If the Bank is not satisfied with the substitution, the Bank reserves the right to terminate the contract and recover whatever payments(including past payments and payment made in advance) made by the Bank to the Consultant during the course of the assignment pursuant to this RFP besides claiming an amount equal to the contract value as liquidated damages. However, the Bank reserves the unconditional right to insist the Consultant to replace any team member with another (with the qualifications and competence as required by the Bank) during the course of assignment pursuant to this RFP.

11) PROFESSIONALISM

The Consultant should provide professional, objective and impartial advice at all times and hold the Bank‟s interest paramount and should observe the highest standard of ethics, values, code of conduct, honesty and integrity while executing the assignment.

12) ADHERENCE TO STANDARDS

The Consultant should adhere to all the applicable laws of land and rules, regulations and guidelines prescribed by various regulatory, statutory and Government authorities.

The Bank reserves the right to conduct an audit/ongoing audit of the consulting services provided by the Consultant.



The Bank reserves the right to ascertain information from the other banks and institutions to which the bidders have rendered their services for execution of similar projects.

13) EXPENSES

It may be noted that Bank will not pay any amount/expenses / charges / fees / traveling expenses / boarding expenses / lodging expenses / conveyance expenses / out of pocket expenses other than the “Agreed Professional Fee”.

However, if the appointed Consultant is required to undertake visit(s) to any Banks site visit outside Mumbai to carry out any discussion/study/assessment within the scope of his work, Bank will pay traveling, boarding, lodging expenses/Diem Allowance as per current entitlement of an officer in the Bank in the cadre of Middle Management, Scale – III, provided the specific prior approval of tour plan was obtained from the Bank for undertaking visit(s). Reimbursements towards such expenses will be against the production of actual tickets and other invoices. Further, in case of visits where the original starting place of journey is other than Mumbai,

reimbursement of traveling expenses will be the actual amount incurred or the amount of fare entitlement by entitled mode and class, for the distance of the place visited from Mumbai by shortest route, whichever is shortest such payment will be, in addition to the Agreed Professional Fee.

14) PAYMENT TERMS

Bank will release the payment after deduction of applicable taxes at source of the agreed Professional Fees to the Consultant, for which contract will be executed, in stages on completion of the various major activities given below. No advance payments will be made. Further, it may be noted that the below mentioned criteria is only for the purpose of effecting professional fees payment. The Consultant shall cover the entire scope mentioned in Section III and deliver all the “Deliverables” as mentioned under Section - III of this RFP document.

Payments will be based on the Phases covered as per the time schedule mentioned in point 35 of Section III.

Payment will be based in phases on the basis of progress of the consultancy contract.



I. Tentative schedule of payment of agreed Professional fees to the consultant.

Phases

Credit Risk

Pillar II and ICAAP

Operational Risk

Market Risk

Other

Scope of Work of

Consultant

Training

Total

25% 7% 15% 15% 15% 8% 85.00%

Phase I 2.00% 0.50% 0.50% 1.00% 3.00% 0.00% 7.00%

Phase II 2.00% 1.00% 1.00% 1.50% 4.00% 0.00% 9.50%

Phase III 3.00% 1.50% 2.00% 1.50% 3.00% 0.00% 11.00%

Phase IV 4.00% 2.00% 2.50% 2.50% 0.00% 0.00% 11.00%

Phase V 6.00% 0.00% 2.50% 3.50% 0.00% 2.00% 14.00%

Phase VI 6.00% 1.00% 3.00% 2.00% 0.00% 3.00% 15.00%

Phase VII 2.00% 1.00% 3.50% 3.00% 5.00% 3.00% 17.50%

Bank will release the payment within 15 working days from the date of receipt of invoice. In case of dispute/s the payment will be made within 10 working days of resolution of the dispute/s. No penal interest will be payable for delayed payment.

II. Ten percent (10%) of the professional fees would be paid post successful pilot phase implementation of all the systems and successful setting up of Enterprisewide Integrated Risk Management System in the Bank in respect of Pillar I, Pillar II, and Pillar III of Basel II guidelines.

III. Five percent (5%) of the contract amount will be retained by the Bank as Retention Money and will be released one year after successful approval by RBI under Basel II guidelines as under:

1) Approval of bank‟s applications under advanced approaches (AMA-Operational Risk, IMA-Market Risk and AIRB - Credit Risk) by RBI.

2) Conduct of SREP by RBI and rectification of all deficiencies indicated by RBI during SREP.

* The release of payments and retention money will be further subject to conditions mentioned below.

The Consultant should delegate all the scope into deliverables.

All the deliverables as mentioned under section III point number 3 should be covered phase wise.

The documents, reports and drafts submitted by the consultant are subject to acceptance by the Bank. (Should comply as per Basel II and RBI guidelines)



All the recommendations submitted by the Consultant should be supported by documentary evidence.

The bidder can not change the Project Manager during entire period of execution of the scope unless consented in written by the Bank.

The bidder should make outlay of resource proposed to be deployed in the bid document for the project which includes, inter-alia, the number of personnel, skill profile of each personnel, duration etc.

15) CHARGES TERMS

By submitting the bid for consultancy, the bidder will be deemed to have

accepted all the terms and conditions mentioned in the RFP document. The

rates quoted by the bidder/consultant shall be adequate to complete the assignment according to the specification and conditions attached thereto

The bidder/consultant should take into account all conditions and difficulties

that may be encountered during the course of assignment and quote the amount, which shall include agreed professional fee/ contract amount with

taxes, royalties, VAT and other duties and the value and all details of other

facilities and services necessary for proper completion of the assignment, except such as may be otherwise provided in the contract document for

completion of the assignment.

The TDS amount on prevailing rate and work contract tax etc. shall be deducted from consultants running account/Final bills. Necessary certificates

shall be issued to the consultants by the Bank.

All taxes including work's contract tax etc in respect of this contract shall be

payable by the consultant and the bank will not be liable for any claim

whatsoever in this respect during the period of contract..

However service tax payable on the payment of contract amount will be borne

by the bank

16) CONTRACT PERFORMANCE GUARANTEE

The selected bidder has to provide an unconditional and irrevocable Performance Bank Guarantee for 10% of the contract value from a Public Sector Bank (but not Bank of Baroda) towards due performance of the contract in accordance with the specifications, terms and conditions of this RFP document, within 15 days from the date of letter of appointment. The Performance Guarantee shall be kept valid for the entire period of assignment and to be released at the end of the period of assignment.



17) SECURITY DEPOSIT

The selected bidder has to deposit with the Bank an amount equivalent to 05 % of the contract value towards security deposit for the entire period of assignment, within 15 days from the date of letter of appointment. Interest on the Security Deposit will be calculated at applicable term deposit rate for one year prevailing as

on date of placing the deposit and will be credited to the term deposit.

18) SINGLE POINT OF CONTACT

The selected bidder should have a local office in India and has to provide details of single point of contact viz. name, designation, address, e-mail address, telephone/mobile no., etc. Escalation matrix should also be provided with full details.

19) APPLICABLE LAW AND JURISDICTION OF COURT

The Contract with the selected bidder shall be governed in accordance with the Laws of India for the time being enforced and will be subject to the exclusive jurisdiction of Courts at Mumbai.

20) LIQUIDATED DAMAGES (LD)

If the selected bidder fails to complete the due performance of the contract in accordance with the specifications and conditions agreed during the final contract negotiation as per para 37 of this section, the Bank reserves the right to recover penalty / liquidated damages @ 0.5% of the contract value per week or part thereof, subject to a maximum of 10 % of contract value as Liquidated Damages for non-performance/delayed performance.

LD is not applicable for reasons attributable to the Bank and Force Majeure. However, it is the responsibility of the bidder to prove that the delay is attributed to the Bank or Force Majeure. The bidder shall submit the proof authenticated by the bidder and Bank‟s official that the delay is attributed to the Bank or Force Majeure along with the bills requesting payment.

If the delay is attributable to the bank, or Force Majeure, or any other circumstances beyond the control of the Consultant then the bank will extend the period of contract

to the extent of delay without charging any Liquidated Damage.

21) PROFESSIONAL LIABLITY INSURANCE

The Consultant shall obtain an insurance policy covering Professional Indemnity Risk to the minimum extent of @10% of the professional fees and endorse such policy in Banks favour and /or otherwise make the claim of any under the policy payable directly to the Bank by the Insurance Company till the completion of the project.



All the disputes arising out of or in connection with the agreement shall be deemed to have arisen in Mumbai. Only the courts/s in Mumbai shall have the jurisdiction to determine the same.

22) FORCE MAJEURE

Any failure or delay by selected bidder or Bank in the performance of its obligations, to the extent due to any failure or delay caused by fire, flood, earthquake or similar elements of nature, or acts of God, war, terrorism, riots, civil disorders, rebellions or revolutions, acts of governmental authorities or other events beyond the reasonable control of non-performing party, is not a default or a ground for termination. The affected party shall notify the other party within reasonable time period of the occurrence of a Force Majeure Event.

23) AUTHORIZED SIGNATORY

The selected bidder shall indicate the authorized signatories who can discuss and

correspond with the Bank, with regard to the obligations under the contract. The selected bidder shall submit at the time of signing the contract, a certified copy of the resolution of their Board, authenticated by Company Secretary/Director, authorizing an official or officials of the company or a Power of Attorney copy to discuss, sign agreements/contracts with the Bank. The bidder shall furnish proof of signature identification for above purposes as required by the Bank.

24) INDEMNITY

The Bidder shall indemnify Bank and keep indemnified for any loss or damage, cost or consequences that Bank may sustain, suffer or incur on account of violation of patent, trademarks, etc. by the bidder. The bidder shall always remain liable to the Bank for any Losses suffered by the Bank due to any technical error or negligence or fault on the part of the bidder, and the bidder also shall indemnify the Bank for the same. The total liability of the selected bidder under this clause and contract shall not exceed the total contract value.

25) ERASERS OR ALTERATIONS:

The offers containing erasers or alterations may not be considered. There should be

no hand written material corrections or alterations in the offer. Technical details must be completely filled up. Correct technical information of the services being offered must be filled in. Filling up of the information using terms such as OK, ACCEPTED, NOTED, AS GIVEN IN BROCHURE/MANUAL or any Special Characters such as -, “, @, _,# is not acceptable. The Bank may treat offers not adhering to these guidelines as unacceptable.



26) RIGHT TO REJECT BIDS

Bank reserves the absolute and unconditional right to reject the response to this RFP if it is not in accordance with its requirements and no correspondence will be entertained by the Bank in the matter. The bid is liable to be rejected if

It is not in conformity with the instructions mentioned in this RFP document.

It is not accompanied by the requisite Application Money & EMD.

It is not properly/duly signed.

It is received through Telex / Telegram/ Fax/E-mail.

It is received after expiry of the due date and time.

It is incomplete including non-furnishing the required documents.

It is evasive or contains incorrect information.

There is canvassing of any kind.

It is submitted anywhere other than the place mentioned under Section-I, point 12.4.

27) NON PAYMENT OF PROFESSIONAL FEES

If any of the items/activities as mentioned in the price bid and as mentioned in annexure D are not taken up by the Bank during the course of this assignment, the Bank will not pay the professional fees quoted by the Consultant in the Price Bid against such activity/item.

28) ASSIGNMENT

Neither the contract nor any rights granted under the contract may be sold, leased, assigned, or otherwise transferred, in whole or in part, by the Consultant without advance written consent of the bank and any such sale, lease, assignment or otherwise transfer shall be void and of no effect.

29) NON – SOLICITATION

The Consultant, during the term of the contract and for a period of two years thereafter shall not without the express written consent of the Bank, directly or indirectly: a) recruit, hire, appoint or engage or attempt to recruit, hire, appoint or engage or discuss employment with or otherwise utilize the services of any person who has been an employee or associate or engaged in any capacity, by the Bank in rendering services in relation to the contract; or b) induce any person who shall have been an employee or associate of the or Bank at any time to terminate his/ her relationship with the Bank.



30) NO EMPLOYER-EMPLOYEE RELATIONSHIP

The Consultant or any of its holding/subsidiary/joint-venture/ affiliate / group / client companies or any of their employees / officers / staff / personnel / representatives/agents shall not, under any circumstances, be deemed to have any employer-employee relationship with the Bank or any of its employees/officers/

staff/representatives/ personnel/agents.

31) VICARIOUS LIABILITY

The Consultant shall be the principal employer of the employees, agents, contractors, subcontractors etc., engaged by the Consultant and shall be vicariously liable for all the acts, deeds, matters or things, whether the same is within the scope of power or outside the scope of power, vested under the contract. No right of any employment in the Bank shall accrue or arise, by virtue of engagement of employees, agents, contractors, subcontractors etc., by the Consultant, for any assignment under the contract. All remuneration, claims, wages dues etc., of such employees, agents, contractors, subcontractors etc., of the Consultant shall be paid by the Consultant alone and the Bank shall not have any direct or indirect liability or obligation, to pay any charges, claims or wages of any of the Consultant‟s employees, agents, contractors, subcontractors etc. The Consultant shall agree to hold the Bank, its successors, assigns and administrators fully indemnified, and harmless against loss or liability, claims, actions or proceedings, if any, whatsoever nature that may arise or caused to the Bank through the action of Consultant‟s employees, agents, contractors, subcontractors etc.

32) SUBCONTRACTING

This RFP permits only submission of a single Proposal/Bid by a consultant. In case of a consortium the Lead or the Partner-in-charge of the consortium shall be the Prime Proponent/ Prime Vendor for this RFP. For the purpose of this RFP the Prime Proponent/Vendor shall take overall responsibility for performance of the work. The prime proponent must become the Contractor for the purposes of Agreement, negotiation and any resulting agreement and the prime proponent would be bound by the action/inaction of the member of the subcontractee or consortium.

Only the prime vendor needs to comply with the eligibility criteria and evaluation of eligibility or merit of the consultant will be evaluated on the basis of the parameters

applicable to the prime proponent.

While providing consent for subcontract, the Bank will consider merits of the subcontract in terms of the below mentioned criteria:

(1) Reputation, size and business experience of the firm

(2) Qualification and experience of the team leader and members of the team who will work with the Bank.

(3) Understanding of the Banks risk management requirements and conceptual clarity about the deliverables.



The subcontract will be bound to the Bank by the same terms as that with the prime bidder and any breach by the subcontractor will be deemed to breach by the contractor.

Note: The Consultant shall not subcontract or permit anyone other than its personnel to perform any of the work, service or other performance required of the consultant under the contract without the prior written consent of the Bank.

33) CANCELLATION OF CONTRACT AND COMPENSATION

33.1. By the Bank

The Bank reserves the right to cancel the contract of the selected bidder and recover expenditure incurred by the Bank in any of the following circumstances. The Bank would provide 30 days notice to rectify any breach/ unsatisfactory progress.

The selected bidder commits a breach of any of the terms and conditions of

the bid/contract.

The bidder becomes insolvent or goes into liquidation voluntarily or otherwise.

An attachment is levied or continues to be levied for a period of 7 days upon effects of the bid.

The progress regarding execution of the contract, made by the selected bidder is found to be unsatisfactory.

If deductions on account of penalty and liquidated damages exceeds more than 10% of the total contract price.

If the selected bidder fails to complete the due performance of the contract in accordance with the agreed terms and conditions.

After the award of the contract, if the selected bidder does not perform satisfactorily or delays execution of the contract, the Bank reserves the right to get the balance contract executed by another party of its choice by giving one month‟s notice for the same. In this event, the selected bidder is bound to make good the additional expenditure, which the Bank may have to incur to carry out for the execution of the balance of the contract. This clause is also applicable, if for any reason, the contract is cancelled.

The Bank reserves the right to recover any dues payable by the selected bidder from any amount outstanding to the credit of the selected bidder, including the pending bills and/or invoking Bank Guarantee/Security Deposit, if any, under this contract.

33.2. By the Consultant

The consultant reserves the right to terminate the contract on the following grounds giving three months prior notice in writing to the Bank:



1. If the Bank fails to make the payment due under the contract for a period of 30 days after notice in writing is given by the Consultant to the Bank to pay the same.

2. If any proceedings are initiated under the Banking Regulation Act, 1949 against the Bank for winding up of the same.

34) DISPUTE RESOLUTION

If a dispute, controversy or claim arises out of or relates to the contract, or breach, termination or invalidity thereof, and if such dispute, controversy or claim cannot be settled and resolved by the Parties through discussion and negotiation, then the Parties shall refer such dispute to arbitration. Both Parties may agree upon a single arbitrator or each Party shall appoint one arbitrator and the two appointed arbitrators shall thereupon appoint a third arbitrator. The arbitration shall be conducted in English and a written order shall be prepared. The venue of the arbitration shall be Mumbai. The arbitration shall be held in accordance with the Arbitration and Conciliation Act, 1996. The decision of the arbitrator shall be final

and binding upon the Parties, provided that each Party shall at all times be entitled to obtain equitable, injunctive or similar relief from any court having jurisdiction in order to protect its intellectual property and confidential information.

35) CONSULTANT’S SELECTION/EVALUATION PROCESS

35.1. Evaluation of Technical Bid

First, Technical bid documents will be examined from the Eligibility Criteria angle. Bidders, who fulfill the eligibility criteria conditions related to bidder‟s financial stability and experience fully as mentioned in point no. 4 of Section III, their bids only will be taken up for further evaluation/selection process rejecting the remaining bids.

The evaluation/selection process will be done with combination of, technical competence and commercial aspects as detailed here below. A maximum of 100 marks will be allocated for the technical bid. The evaluation of functional and technical capabilities of the bidders of this RFP will be completed first as per the following guidelines.

The technical proposals only will be subjected for evaluation at this stage. The

bidders scoring less than 75 marks (cut-off score) out of 100 marks in the technical evaluation shall not be considered for selection process. Once the evaluation of technical proposals is completed, the bidders who score equal to, or more than the prescribed cut-off score will only be short listed.

In case there is only one bidder having technical score of 75 or more, the Bank may, at its discretion, also consider the next highest technical score with minimum score of 50. In case, none of the participating bidders qualify on technical criteria and reach or exceed the cut-off score of 75, then the



Bank, at its sole discretion, may qualify two bidders on the basis of the top 2 scores with a minimum score of 50.

The evaluation of technical proposals, among other things, will be based on the following:

Prior experience of the bidder in undertaking projects of similar nature.

Professional qualifications and experience of the key staff proposed/ identified for this assignment.

Methodology/Approach proposed for accomplishing the proposed project.

Activities / tasks, project planning, resource planning, effort estimate etc.

Various stages of technical evaluation are presented below:

Matching the eligibility criteria as indicated under Para 2.3 above.

Short-listing of the bidders based on the fully matched criteria

Paper evaluation based on response

Arriving at the final score on technical proposal after Presentation –cum – Interview.

35.2. Presentation-cum Interview

The short-listed bidders of this RFP have to give presentation/interactions before panel of representatives of Bank on the methodology/ approach, time frame for various activities, strengths of the bidders in implementation of the proposed Enterprisewide Integrated Risk Management System (EIRMS).

The technical competence and capability of the bidder should be clearly reflected in the presentation. If any short listed bidder fails to make such presentation, they will be eliminated from the selection process. It may be noted that the marks awarded for “methodology/approach proposed for carrying out the proposed project” while evaluating the technical proposal initially may be changed by the Bank after the presentations/interactions.

At the sole discretion and determination of the Bank, the Bank may add any other relevant criteria for evaluating the proposals received in response to this RFP.

Bank may, at its sole discretion, decide to seek more information from the Respondents in order to normalize the bids. However, Respondents will be notified separately, if such normalization exercise as part of the technical evaluation is resorted to.

The commercial proposals of technically short listed bidders will then be opened.



35.3. Commercial Bid Evaluation Criteria

It may be noted that commercial bids will be subjected to following evaluation process.

Based on the technical evaluation criteria, each bidder will be given certain

marks. Only those bidders scoring 60% (60 marks out of 100) or above in the technical evaluation will be short-listed for commercial evaluation

Nominal quote provided by the bidder whose Technical Bid qualifies will be discounted as per the formula given below. A comprehensive “Score (S)” will be arrived at after considering the nominal commercial quote and the marks obtained in technical evaluation with relative weights of 30% for commercials and 70% for technicals. The bidder with the highest score will be declared successful:

Computation Methodology for arriving at “Least Price / Least Quote”

Cut - Off score for technical bid will be 60 marks (or the top score in case none of the bidders reaches the cut-off)

In case there is only one bidder having technical score of 60 or more, the next highest technical scorer will be considered with minimum score of 50. In case, no bidder is having score of 60, Bank may, at its discretion, take up 2 top scoring bidders, on technical evaluation with minimum score of 50 and compute the “Score” as per the table below

Bank will give 70% weightage to technical score while comparing the commercial quote. The procedure is as under:

A ‟Score (S)‟ will be calculated for all qualified bidders using the following

formula:

Where C stands for nominal price quoted, CLow stands for the price quote of the lowest nominal bid. T stands for technical evaluation score and THigh stands for the score of the technically highest bidder. X is equal to 0.3.



Example:

S.No. Bidder Technical Evaluatio

n Marks (T)

Nominal Bid Price

(C)

(CLow / C) * 0.30

(T / THigh) * 0.70

Score (S)

1 ABC 95 71 0.85 * 0.30= 0.25

1.00 * 0.70 = 0.70

0.95

2 XYZ 85 65 0.92 * 0.30=

0.28

0.89 * 0.70 = 0.62

0.90

3 UVW 80 60 1.00 * 0.30= 0.30

0.84 * 0.70 = 0.59

0.89

In the above example, ABC, with the highest score becomes the successful Least Price bidder. The price quoted by the Least Price bidder will be called „Least Price‟.

Bank reserves the right to negotiate the price with the finally short listed bidder before awarding the contract. It may be noted that Bank will not entertain any price negotiations with any other bidder, till the Least Price bidder declines to accept the offer.

In the case of tie between two or more bidders a fresh commercial bid will be called upon from these bidders for evaluation and selection of the consultant.



36) TECHNICAL EVALUATION CRITERIA

Criteria Evaluation Parameters Max Marks

EXPERIENCE OF THE ORGANISATION 65

Experience of

consulting on various aspects of financial risks

Experience of assignments executed/executing as Technical/Risk Consultant for Implementing Risk Management System for Advanced Measurement Approaches in Credit risk, Market risk, Operational risk, ICAAP in 1(one) International and 1 (one) Public/private Banks (but not Regional Rural Bank, Co-operative Bank or Local Area Bank) in India.

Which would include

Defining risk management strategy and technical requirements, designing risk management architecture, security architecture, project management and implementation, assisting in vendor(s) evaluation (software) and selection process.

OR

Experience of assignments as under:

45

1) Credit Risk Rating Model evaluation – 2, Framework for capturing credit risk components (PD, LGD, EAD & effective maturity)- 2, Mapping/ categorization of assets as per requirements of for IRB approach- 2, Credit analytics- Risk modeling- 2, RWA computation methodology for advance approaches- 2.

10

2) Operational Risk Revision/ Formulation of ORM Policy- 1, RCSA framework- 2, KRI framework- 2, Loss event management framework- 2, Capital calculation under AMA- 2, Loss data modeling framework- 1.

10

3) Market Risk Gap analysis- 1, Review and validation of VaR model- 3, Framework for improved technical analysis/monitoring/reporting framework- 2, Enhancement in ALM framework- 2, Assisting in Vendor selection- 2.

10

4) Pillar II & Pillar III aspects, etc. Review/ improvement in ICAAP framework- 3, Evaluation, measurement and management framework for Pillar II risk- 3, Review of stress testing framework- 2, Review of disclosure standards under Pillar-III- 2.

10



5) Integration of Risk Management System (Demonstrated a good understanding of business process related risks associated with various lines of business like Treasury, International Banking, Retail banking, Corporate banking and Trade finance)

05

Reference site visit by BOB team:

Experience in implementing Risk Management system in Banks/Financial Institution in India having diversified business.

-Whether objectives of engaging the Consultant are met fully- 2

-Adhering to time line of consultancy and final selection of solution- 2

-Whether they are satisfied with the team support- 2

-Post implementation support by Consultant- 2

(Only written evidence of above specifications and satisfactory completion/execution of Project synopsis to be submitted along with contact details)

08

Experience of Software Selection and Pilot phase

Implementation

Risk Management Consulting which would involve software selection and successful pilot phase implementation will be the criteria for awarding marks under this criterion.

Evidence of SOW/Work Order of projects under progress or completed will be considered

References to be given for experience.

(Only written evidence of above specifications and satisfactory completion/execution of Project along with synopsis to be submitted)

06

Risk

consulting in a banking institution and across the

banking group

Experience in providing risk consulting services for a Bank and the group companies of the Bank (Such as Associate Banks, Subsidiaries and Non Banking Entities.

Evidence of SOW/Work Order of projects under progress or completed will be considered

References to be given for experience.

(Only written evidence of above specifications and satisfactory completion/execution of Project along with synopsis to be submitted)

06



PEOPLE OF THE ORGANISATION 15

Experience and

Professional Qualification

Engagement Manager should have minimum 05 years experience of working in any public/private sector bank. He

should have handled at least three risk management projects in India. He should have handled minimum two similar projects in International Banks.

(Evidence to be produced as per Annexure E).

05

Proposed team should have experience in executing similar projects (Credit Risk/Market Risk/Operational Risk/ICAAP) in bank(s) and should have international exposure in similar projects. (minimum 3 members)

(Evidence to be produced as per Annexure E)

05

Does the member of the proposed team including Engagement

Manager and Overall person responsible is qualified CFA or FRM/PRM or CA or PG(Diploma) in Risk or Financial Engineering with IT project experience.

(Evidence to be produced as per Annexure E).

05

SOUNDNESS OF THE PROPOSED APPROACH AND METHODOLOGY 20

Methodology/ Approach Proposed for carrying out the Proposed

Project

Demonstration of in-depth understanding of the Bank‟s project requirements through the technical proposal supplemented by Presentation & interactions.

(Evaluation to be done on the basis of interaction with the bidders and their presentation)

10

Technical Proposal with detailed broken-down activities to be performed, effort estimation, manpower to be deployed on a project-to-project basis.

(Evaluation to be done on the basis of Annexure D)

10

Total Marks 100

Note: The Consultant is required to provide documentary evidence for each of the above criteria and the same would be required on the client‟s letter head in case of credentials.



37) PROJECT TIMELINES

The scope mentioned in Section III is only major indicative scope that has been covered. The scope may increase as and when any guidelines/documents are issued by the Regulators or any Authority during the consultancy period which has to be complied by the Bank.

The Responsibilities mentioned in Section III has to covered during implementation of various phases as indicated by the bank.

The scope mentioned in Section III should be covered in full in accordance with the flow chart mentioned below.

The selected bidder shall furnish a schedule of implementation of the contract of consultancy encompassing its entire scope, discuss the same with the bank officials and arrive finally at a mutually agreed implementation schedule. The Bank and the Consultant shall be bound by the Implementation schedule so agreed

Integration

Domestic

Solo/Group Basis

Reporting System

WORK FLOW CHART

Overseas Solo/Group Basis

Pillar II risks &

Stress Testing

Disclosures

Market

Risk

Credit

Risk

Operational

Risk

Capital

Planning



ANNEXURE - A

Technical Proposal format:

Particulars to be provided by the bidder in the technical proposal –

No

Particulars

Details furnished by the bidder

1 Name of the bidder

2 Year of establishment and constitution. Certified copy of “Partnership Deed” or “Certificate of Incorporation/commencement of business”, Memorandum of Association, Articles of Association should be submitted as the case may be.

3 Location of Registered Office /Corporate Office and address

4

Mailing address of the bidder

5

Names and designations of the persons authorized to make commitments to the Bank.

6

Telephone and fax numbers of contact persons

7

E-mail addresses of contact persons

8

Details of:

Description of business and business background

Service Profile & client profile

Domestic & Int‟l presence

Alliance and joint ventures.

9

Whether the bidder is in to Risk consulting business, if yes then mention the period (evidence to be enclosed).

Whether the consulting process conforms to ISO 9001(2000) or any other international standards in the areas of risk if so, furnish details of compliance.



No

Particulars


10 Details of experience/knowledge possessed in the areas of Risk

Management,

Role and Responsibility definition, Co-ordination across multiple teams, Project risk analysis and containment.

11

Gross annual turnover of the bidder during last three financial years for its India located office. (not of the group)

(Not applicable for non-profit making organizations).

(Balance Sheet/P&L statement (Audited). Alternatively a suitable Chartered Accountant Certificate may be furnished)

12

Profit of the bidder during last three financial years for its India located office (not of the group)

(Not applicable for non-profit making organizations).

(Balance Sheet/P&L statement (Audited). Alternatively a suitable Chartered Accountant Certificate may be furnished)

13 Experience of assignments executed successfully as Technical Consultant, for implementing end to end Risk Management System Indian Bank and International Banks that would included:

Defining strategy and technical requirements, designing risk management architecture, security architecture, project management and implementation, assisting in vendor(s) evaluation (software) and selection process.

(Name of the bank, time taken for execution of the assignment and documentary proofs for above from the bank are to be furnished)

14

Details of any other similar assignments executed by the bidder in

India/Internationally.

(Name of the bank, time taken for execution of the assignment and documentary proofs for above from the bank are to be furnished)

15 Details of the similar assignments on hand as on date (Name of the bank, time projected for execution of the assignment and documentary proofs from the bank are to be furnished)



No

Particulars


16

Name of the Engagement Manager & Overall person

responsible(team leader) identified for this assignment and their professional qualifications and experience/expertise

Details of similar assignments handled by the said team leader. Documentary proofs for all the assertions are to be enclosed

As per

annexure E

17

Names of the other team members identified for this assignment and their professional qualifications and experience/expertise. (Should possess qualifications as mentioned in the RFP)

Details of similar (Credit/Market/Operational Risk /ICAAP) assignments handled by the said team members.

Documentary proofs for all the assertions are to be enclosed.

As per annexure E

18 Estimated work plan and time schedules for providing services for this assignment

19

Effort estimate and elapsed time are to be furnished in Annexure D As per annexure D

20 Details of inputs, infrastructure requirements required by the bidder to execute this assignment.

21

Details of the bidder‟s proposed methodology/approach for providing services to the Bank with specific reference to the scope of work.

22

Details of deliverables, other than the Deliverables specified by the Bank, the bidder proposes with specific reference to the scope of work as mentioned in section III of the Project scope



Declaration:

1. We confirm that we will abide by all the terms and conditions contained in the RFP.

2. We hereby unconditionally accept that Bank can at its absolute discretion apply whatever criteria it deems appropriate, not just limiting to those criteria set out in the RFP, in short listing of bidders.

3. All the details mentioned by us are true and correct and if Bank observes any misrepresentation of facts on any matter at any stage, Bank has the absolute right to reject the proposal and disqualify us from the selection process.

4. We confirm that this response, for the purpose of short-listing, is valid for a period of

six months, from the date of expiry of the last date for submission of response to RFP.

5. We confirm that we have noted the contents of the RFP and have ensured that there is no deviation in filing our response to the RFP and that the Bank will have the right to disqualify us in case of any such deviations.

Place:

Date:

Seal & Signature of the bidder



ANNEXURE - B

Commercial Bid Format

Project Scope

Estimited

Time

Efforts

Commer

cial Bid

Price Phase I

Credit Risk Management


· The consultant should conduct a gap study to identify the missing data elements which are currently not being captured and/or stored in any of current data source systems.

· Enhance credit risk management policy as per Basel II and RBI requirements.

· The gap assessment should be done based on Basel II requirements and leading global practices in credit risk management and suggest methods to bridge the gaps.

· Evaluate the preparedness for moving over to IRB approach, identify the gaps.

· Assist Bank in developing reporting policy as per Pillar I, II and III of Basel II and RBI guidelines.

Pillar II and Internal Capital Adequacy Assessment Policy (ICAAP)


· Gap analysis in the existing framework of Pillar II of Basel II and suggest improvements as per Basel II & RBI guidelines

· Identification of Bank specific risks, framework for testing materiality of risks to the Institution.

· Review the existing frame work and risks identified under

Pillar II and suggest missing elements as per Pillar II of Basel II.

Operational Risk Management


· Conduct a gap analysis against the desired state of risk management at the Bank.

· Designing risk reporting system and develop strategies to identify, measure, monitor and control/mitigate operational risk.



· Review of existing operational risk management policy compliant to regulatory and Basel II requirements

· Advise on risk governance architecture suitable to the organizational structure of the bank as a whole and for each business unit and detail the roles and responsibilities at each level.

· Develop operational risk management strategy and objectives for the Bank.

· Re-defining the roles and responsibilities and accountability of the risk management committees and authorities, with regard to operational risk management.

· The roles and responsibilities of the bank wide operational risk management function and line of business management.

· A description of the internally derived analytical framework that quantifies the operational risk exposure of the Bank.

· Define qualitative and quantitative factors and risk mitigants and incorporated them into the operational risk management

framework.

· A documentation of the testing and verification of the processes and procedures with respect to enterprise wide has to be submitted.

· Regular reporting of critical risk issues faced by the banks and its control/mitigations has to be submitted to senior management and Board.

· Provisions for review, treatment, and resolution of non-compliance issues.

· System for validating/reviewing the operational risk management processes and assessment has to be built.

· Methodology for risk reporting and risk analysis covering operational risk exposures, material operational risk losses, material near-misses has to be built

· Suggesting techniques for creating incentives to improve the management of operational risk throughout the Bank.

Market Risk Management


· Conduct a Diagnostic Study and prepare a Gap Analysis Report, which should cover the existing governance structure, policies, procedures, and systems.



· Gap Analysis Report should include alternate approaches addressing the identified gaps and recommendations covering Market Risk Management goals, process description, assessment methods, and any escalation framework.

· Identify the gaps in the existing system and assess the

readiness of the Bank towards regulatory compliance.

· Assess incremental approach and develop a Road Map to transition from Standardized method to Internal Model Approach.

· Prepare and discuss a detailed report with the Bank, covering all findings along with a detailed project plan and implementation road map by the end of this phase.

Phase II



· The consultant should identify the data source systems (such CBS, loan origination system, recovery system etc.) which contain the required data for implementation of advanced approaches.

· Review data maintenance and credit analysis and establish the data collection model for data elements required to compute Risk Weighted Assets (RWA) under IRB approach.

· Review the data captured by the bank for estimation of key Basel II parameters (PD- LGD- EAD-M) vis-a-vis Basel-II requirements. Guide and introduce a system for data capturing where data is currently not captured.

· Determine data to be captured by the Bank for LGD and EAD models for its various exposures.

· Develop and suggest on data collection through existing system.

Pillar II and Internal Capital Adequacy Assessment Policy


· All the Pillar II aspects are to be covered as per Basel II and RBI guidelines.

· Study the risk philosophy of the Bank, future growth strategies and stakeholder expectations to formulate the risk appetite of the Bank for various risks faced.

· Develop more sophisticated and data-intensive methodology models for quantitative assessment.



· Develop governance structure for the Bank‟s ICAAP and identify the roles and responsibilities of Risk, Finance teams and senior management.

· Develop standards and framework to integrate ICAAP in the day to day management and business decisions.

· Defining qualitative and quantitative tolerance level for key risk of the Bank and framing risk appetite of the Bank

· Define capital cushion to cover other risks dealt in Pillar II


Installation of TSA and road map for moving ahead to

advanced approaches.

· Develop methodology to meet Qualifying criteria as per TSA.

· Identification of -8- Business Lines with reference to our Bank.

· Mapping of Income / Expenditure Heads as per -8- Business Lines as per the directives of RBI guidelines on TSA.

· Integration of ORMS with that of internal audits.

· Develop framework for capital computation as per The Standardized Approach (TSA) for operational risk of Basel II

· Setting up Qualitative & Quantitative standards as per Basel II and RBI guidelines (AMA soundness standard)

· Build framework for quantifying operational risk under AMA and perform capital computation (including stress testing) for key business areas

· Develop framework for assessing operational risk in new products/policies

· Develop methodology for recognizing insurance under the AMA which will need to capture elements thorough appropriate discounts or haircuts in the amounts of insurance recognition.

· Identify Operational risk which form a part of Pillar II




· Advising on risk governance architecture suitable to the organizational structure of the Bank as a whole and for each business unit.

· It should cover all the aspects of Market Risk management as mentioned in the new guidelines.



· Re-define the roles and responsibilities and accountability of the risk management committees and authorities, with regard to Market Risk Management.


· Assist the Bank in designing new market risk related policies, if needed, after a detailed study of the existing policies, and its relevance in a Basel II environment. Identify gaps / enhancements so as to align them with the regulatory expectations. It should cover at least the following policies but not limited to:

· Market Risk and ALM Policy; Valuation, Investment, Risk Appetite document and Limit Structures / Frameworks; IT Security Policy and Procedures.

· Suggest qualitative factors and risk mitigants and how they can be incorporated into the Market Risk Framework.

· Comment upon the adequacy of the existing mid office policy

with particular reference to: a) Regular reporting of critical risk issues facing the banks and its control/mitigations to senior management and Board. b) Provisions for review, treatment, and resolution of non-compliance issues. c) System for validating/reviewing the Market Risk Management processes and assessment.

· Develop methodologies for risk reporting covering Market Risk exposures, limit breaches, risk Management and risk analysis.

· Suggest techniques for creating incentives to improve the management of Market Risk throughout the Bank.

· Define policy requirements for qualitative and quantitative disclosures.

Phase III



· Assessment of the existing retail credit rating framework and

its data maintenance including assessment of existing retail rating models and suggest any required updates

· Develop prototypes for retail pooling and tests to assess homogeneity within a pool and heterogeneity across pools to differentiate default behavior.

· Develop reporting templates to monitor pool stability and migration



· Grouping / pooling the asset portfolio of the Bank to various asset classes as prescribed by Basel-II, IRB approach based on statistical methods.

· Evolve mechanism to capture data and to estimate PD, LGD, and EAD for each retail pool.

· Suggest any software solution required to undertake the process



· Suggest improvements in existing Stress testing framework. The framework should facilitate assessing the impact of macroeconomic stress scenarios on the capital position (for all quantifiable risks) and P&L of the Bank.

· Suggest improvements, if required in measurement techniques for quantifiable risks such as Concentration risk, Liquidity risk,

IRRBB, Business risk, Residual Risk, Counterparty Credit Risk etc.

· Suggest improvements, if required risk management techniques for non-quantifiable risks like Strategic risk, Reputational risk etc.

· Identify data elements to be captured for RAROC, Risk Based pricing and suggest data remediation

· Conduct counter party credit risk stress testing

· Develop a risk based pricing framework containing: o Methodology to estimate hurdle rate for individual business units. o Mechanism to allocate costs to a new transaction and assess the marginal capital requirement for a new transaction o Methodology to compute RAROC and SVA on an ex-ante basis and price a new loan



· Develop criteria to assess risk and control, identification of alternate approaches available, selection of a suitable approach or combination of approaches, on the basis of size, structure and business mix of the Bank by analyzing cost benefit analysis of various approaches.

· Advising on the process of risk identification. The scope of the exercise and the areas/units to be covered and the priority of identification. Risk Identification should include monitoring of the external environment and industry trends.



· Develop credible methodology to determine top risks, top concerned (weakness areas) areas, prioritize areas of improvement.

· Develop methodology for conducting risk and control assessment and the roll out plan across various units. The

methodology should include setting up of rating scales for risks and controls and evaluation of residual risks.

· Develop reports for the most detailed level (eg. Report for process owners) to the Bank. (Eg. Risk map, heat map, etc).

· Conduct RCSA for all business and process of the Bank. The key business should include but not limited to: Treasury, Retail banking, Trade finance and corporate banking, Rural/Priority sector, IT, International Banking. The RCSA should be considered for pilot branch for the above business, including centralized operations as applicable.

· MIS templates for monitoring and analyzing the RCSA results. The consultant will also develop an implementation strategy for

rolling out the RCSA across the Bank.


Defining the approach and methodology for addressing the quantitative Standards required for Internal Models approach by Basel II and RBI guidelines:

· Systems and procedures for monitoring stop loss/take profit limits across various portfolios on real time basis under Treasury Operations.

· Documented report on systems and procedures for on line monitoring of regulatory limits, operational limits, counterparty limits /Settlement limits & Country limits under all portfolios of Treasury Operations as set out in various policies of the Bank. (Investment Policy, Forex Risk Management Policy, Off-Balance Sheet Policy, Policy on exposure limits on counter party banks, Mid Office Policy, CRMS etc. Study the existing systems and procedures in Treasury branch and suggest improvements in the systems/procedures/new systems, if required for compliance /monitoring/reporting of Regulatory Guidelines/

Internal Limits.

· Computation of capital charge including illiquid position on market risk as per RBI master circular-Prudential Guidelines on Capital Adequacy Framework (NCAF). {Ref: RBI/2009-10/308 DBOD.No.BP.BC.73/21.06.001/2009-10 dated 8th Feb 2010.

· Suggest methods in computing capital for incremental risk in the trading book.( ref: BCBS doc July 2009)



· Validation of Mark to Market methodology for the Bank‟s trading book including all the asset classes (Equity, Fixed Income and Forex) and Derivatives.

· Validation of calculation methodology of various risk factors such as PV01 for interest rate risk, Greeks for option portfolio,

Duration and convexity for fixed income instruments.

· Framework & Validation [Simulation-based & Scenario Analysis] Methodology for Value-at-Risk Model

· Suggest the appropriate methodology in case the existing methodologies are insufficient or inappropriate.

· Articulate the methodologies for compliance with the “Prudent Valuation Guidance” for positions held in the Trading Book.

· Review of existing VaR methods for general market risk supported by the existing software – assumptions, merits and limitations, computational accuracy using internal data

· Develop methodology for Specific risk measurement capacity of the current software – equity, fixed income and derivatives:

comments and suggestions

· Develop methodology for Specific and liquidity risk computation for fixed income and derivatives using internal data – model selection and choice between VaR methods and Stress Testing Specific and liquidity risk. The specific risk should have special emphasis on computation of product specific credit estimation factors on account of market variables.

· Review the existing VaR and mark to market valuations methodologies, and suggest improvements if required across all asset classes

· Monitoring of the realized and the unrealized gains/losses in various asset classes.

· Risk vs. return of various asset classes

· Rating migration of issuers with respect to Non-SLR asset class

· Analysis of profits earned from merchant transactions in foreign exchange dealing

· Portfolio management from a risk perspective and suggesting hedging strategies of various asset classes.

· Computation of General Market Risk, Specific Risk, (Default Risk, Credit Migration Risk, Credit Spread Risk) & Incremental Risk Charge as per RBI guideline/Basel guidelines.

· Develop VaR based Computation of capital requirement under IMA comprising Normal VaR measure (general market risk and specific risk), Stressed VaR measure (for general market risk and specific risk) and Incremental Risk Charge (IRC) (for positions subject to interest rate specific risk capital charge).



· Comprehensive Validation of VaR models for various risks.

· Define methodology for Value adjustment for illiquid positions as required under Prudential Guidelines on Capital Adequacy and Market Discipline- New Capital Adequacy Framework (NCAF) issued by Reserve Bank of India.

· Study the Investment Valuation systems and procedures of investment portfolios in Treasury books as per RBI guidelines and suggest improvements/customizations etc.

· Study the Duration and Modified Duration of SLR/Non SLR portfolio of Investments in Treasury Branch and methodology of computation. Suggest improvements in systems/procedures and Ideal Duration/Modified Duration of SLR/Non SLR portfolios under different market conditions.

· Study of the Stress testing policy of the Bank and suggest improvements /formulate requirements as per extant RBI guidelines on stress testing of various portfolios.

· Feasibility Study/Systems and procedures for VaR based STOP LOSS limits across various portfolios.

· Documented manual/systems & procedures for Market Risk Model (MRM) Dossier as per the RBI prudential guidelines on capital adequacy-implementation of IMA for market risk.

· Study of existing risk measurement systems related to Interest Rate Sensitive Portfolios, Foreign exchange exposures and equity exposures and suggestions/methods for improvement / compliance of said criteria‟s in RBI prudential guidelines on capital adequacy-implementation of IMA for market risk.

· Assistance with software installation for specific risk. Program management for software UAT.

Other scope of work of Consultant

Overseas Business

· Gap Analysis of the existing systems and processes.

· Develop Framework /models for country risk exposure.

· All aspects related to credit risk, market risk, operational risk

mentioned in the above scope is to be carried out with respect to Overseas Business/ Territories.

· Suggest improvements/modifications in the techniques, analysis and monitoring/reporting structure to align with advanced approaches of Basel II and RBI guidelines.

· Suggest/develop methods and improvements in the existing system with respect to guidelines/documents issued by other regulators and International bodies where Banks operations are undertaken.



· Suggest framework for group entities as per Basel II and RBI guidelines and respective regulatory guidelines where the countries operations is undertaken.

· Build framework for measuring sovereign risk

· Suggest suitable corporate governance structure

Phase IV



· Build LGD and EAD predictor models and conduct stress testing on LGD and EAD.

· Develop standards and operating guides for PD, LGD, and EAD model development. The standards should cover the following aspects: o Governance and controls over the model development process. o Process to approve and use a model. o Guidance on portfolio segmentation to determine the number of rating models to be developed and allocation of exposures to various rating models. o Guidelines on data collection for model development, sample creation process and time weighting of historical data. o Guidelines on the usage of statistical techniques and expert judgment in model development and incorporation of conservatism in model development exercise. o Guidelines to calibrate PD and LGD to borrower and facility rating grades. o Standards of model documentation

· Provide user guides and prototypes for model development, detailing the various statistical techniques of PD, LGD, and EAD model development.



· Develop a documented report on the process for assessing overall capital adequacy in relation to risk profile.

· Assistance in formulation of group ICAAP and consolidated ICAAP and review of existing stress testing policy.

· Formulation of a documented copy of the procedures used to evaluate the correlation between various risks.

· Ensure compliance with the New Capital Adequacy Framework of RBI and all other related guidelines issued from time to time including those for Supervisory Review Process (SREP), Internal Capital Adequacy Assessment Process (ICAAP) as well as



Market Discipline.



· Develop loss data management framework and develop templates for capturing all kinds of Operational risk incidents.

· Develop process to capture non financial losses, near misses, potential losses and develop mechanism to follow up and update loss event until the event is closed.

· Develop methodology for avoiding double counting of operational risk losses and reconciliation of these losses with those in books of accounts/General Ledger.

· Design MIS for capturing the loss, potential loss and near-

miss events.

· Developing methodology to identify loss events to classify events to as a Risk Type. Eg. Market Risk, Credit Risk etc.


· Development of methodology and process to quantify Operational risk including scenario analysis, the use of external loss data, considering the business environment and internal control factors of the Bank.

· Develop methodology for integration of external loss data with internal loss data.

· Suggest methods for scaling external data with that of internal data.

· Root cause analysis of all the losses captured recommended by the consultant.



· Develop framework for capturing Interest rate risk (general and specific), Equity price risk (general and specific) exchange risk and other risk as per guidelines.

· Define the Market Risk f+B197actors involved in Bank‟s Trading Book. Factors like Re-pricing Risk, Yield Curve Risk, Basis Risk, and Embedded Options Risk should be covered in this process (Both on balance sheet items and off balance sheet items should be covered).



· Assist the Bank in segregating the trading book positions into the different categories like Interest Rate risk, Equity position risk, Foreign Exchange risk, Commodities risk (as applicable to Indian banking scenario).

· Cover the second order risk factors like skew adjustment in

case of option portfolio and correlated risk factors.

· Systems and procedures for monitoring regulatory guidelines and various risks under all Derivative Products/Off balance sheet items.

· Market Risk in Banking Book

Liquidity Risk

a) Structural Liquidity Report: Þ Conduct behavioral study on distribution of assets & liabilities for liquidity risk Þ Conduct back testing and Stress testing for liquidity risk

b) Dynamic Liquidity Report:

Þ Study the existing software and suggest improvements/customization etc. in Treasury Front Office/Back Office systems as well as Bank‟s other systems/ software. Þ Future estimation of Inflows and outflows, back testing of dynamic liquidity.

c) Contingency Funding Plan: Þ Reviewing the present system of CFP. Þ CFP under various stress test scenarios Interest Rate Risk

Interest Rate Risk

d) Statement of Interest Rate Risk Report Þ Behavioral study on distribution of assets & liabilities for interest rate risk. Þ Estimation of RSA and RSL. Back testing and Stress testing for interest rate risk.

e) Earning at Risk Report Þ Computation of duration of assets and liabilities analysis and assessment of duration of equity

f) Duration of Equity Þ Computation of duration of assets and liabilities analysis and assessment of duration of equity




· Define Aggregation Methodology for Capital computation Þ Define the products to be covered under IMA Þ Define the products / risk factors to be covered using standardized approach and document the reasoning for the same. Þ Define the methodology to be adopted for calculation of Stress VaR

· Review the netting and correlation benefits availed during VaR calculation

· Prepare detailed road map for the smooth transition from standardized approach towards Internal Model Approach.

Phase V



· Review the use of rating for credit sanction and pricing and loan administration.

· Suggestions for having Through the Cycle (TTC) rating as per Basel II and IRB requirements.

· Assist in ensuring compliance to minimum requirements for both FIRB & AIRB approaches.

· Identification of Credit risk in Derivatives and other treasury products

· Identification of Credit losses at portfolio level: Product wise, Rating wise, Branch wise, Region wise, Industry wise.

· Identification of portfolio loss estimation, correlation analysis, assessing portfolio granularity for meeting Basel II IRB requirements.

· Map Asset Classes/Subclasses to Approach Type (Standardized /IRB, etc) by a defined rule as per Basel II/ RBI guidelines

· Review the credit risk mitigation framework in the bank.

· Provide guiding principle on credit risk capital computation process Develop the supervisory slotting criteria for specialized

lending to map the credit rating of specialized lending exposures to supervisory slots.

· Provide guiding principle on collateral management detailing the methodology to capture, store, update and manage collateral information.

· Provide guiding principle on treatment of counterparty credit risk covering the eligible instruments, methodology to assess various measures of exposure amount, methodology to identify cross product netting. The consultant has to provide guidance on the suitable method to compute exposure.



· Identify the information requirements for the advanced approaches of all risk areas.

· Compliance to securitization requirements as indicated in Basel II and RBI guidelines as and when Bank undertakes securitization deals.

· Study on various aspects of credit risk management at portfolio level. (sectoral deployment, group borrower, industry wise exposure caps, etc)



· Develop KRI‟s for all key risks for various processes, including capture of source system, threshold and calculation methodology.

· Develop KRI monitoring process (including KRI data collection). Develop KRI validation process and methodology to ensure effectiveness of KRI in measuring risk level.

· Develop KRI specification and definition, such as purpose of KRI, usage of KRI, threshold and frequency of reporting, frequency of KRI data collection. Etc.

· It should also support evidential data (Loss Events) of the organization, which can be furnished to the model in a useable manner. Conduct training sessions on KRI identification and monitoring methodology including calibration of thresholds for key risk indicators.

· Develop a Risk dashboard providing periodic snapshot of a top down assessment of key risk, mitigation plans and effectiveness of controls.

· Suggest on minimum and maximum number of KRI‟s at Bank level and reporting of such KRI at the Board Level, Business line Level, Zone level.

· Develop methods on scaling of KRI with that of Industry trends.

· Developing KRI monitoring and Validation process to ensure effectiveness of KRI‟s.



· Comprehensive Back testing and exception handling policies and procedure for the Value-at-Risk Models (a) Define Back Testing procedures; (b) Develop an evaluation procedure of Back Testing results. (c) Prepare MIS and other reporting formats required to communicate the Back-testing results to the Senior Management and the regulators on a periodic basis.



· Comprehensive Back testing and exception handling policies and procedure for the Value-at-Risk Models

· Develop a back-testing policy and procedure+B249 for VaR models; Build a stress testing framework for all instruments in Trading Book. VaR based Stress testing and back testing of all tests as per the RBI prudential guidelines on capital adequacy/Basel Guidelines.


· Review the process of classification of traded instruments into standardized instrument classes and identification of stress parameters associated with different instrument classes;

· Establish a process of determination of Stress scenarios based on underlying stress parameters.

· Generation of scenarios based on analysis of historical data for the defined stress parameters and simulated scenarios based on macroeconomic parameters;

· Review of back testing methods for general market risk and

specific risk supported by the current software – accuracy, effectiveness and suggestions.

· Review of stress testing methods for general market risk supported by the existing VaR software – accuracy, merits and limitations, suggestions.

· Review of general market risk VaR and stress testing methods for interest rate and FX derivatives, supported by the current software and comparison/benchmarking with the market best practices

Phase VI



· Review the existing rating framework / scoring framework in the Bank for both retail and non retail and suggest modification / improvements such as : Corporate, SME, Retail Models, (including agricultural loans)

· Perform validation of models and develop policy for model validation, calibration and benchmarking the model using internal data.

· Perform qualitative validation of the current rating models to assess the model design, governance, documentation, and usage of models in business decision making.

· Perform quantitative validation to assess the discriminatory power (in case of borrower ratings only), calibration and stability of the models.



· Provide recommendation on the usability of the current models in Basel II implementation, need for re-calibration or re-building of models.

· The Bank has 13 corporate models and 6 Retail models that are to be validated and recalibrated as a part of this

exercise.



· Develop statistical methodologies including the capture and use of internal and external operational risk loss data including data potential events (including the use of Scenario Analysis).

· Build framework for quantifying operational risk under AMA and perform capital computation (including stress testing) for key business areas:

· Methodology for integration of external loss data with internal loss database.

· The development and incorporation of business environment and internal control factor assessments framework.

· Use of scenario analysis, internal loss data, BE&ICF and External loss data for quantification

· Data collection templates and road map for operational risk modeling under AMA.

· Perform Capital computation including stress testing for key business areas refer RCSA section for key business areas) of the Bank.




· Define MIS framework for compliance with capital adequacy norms related to Market Risk.

· Design reporting templates as required for Internal Models for the regulator (RBI) as well as the Bank‟s Senior Management and the Board.

· Preparations of the general qualitative disclosure requirements for Market Risk including the portfolios covered by IMA.


· Review the procedures around monitoring and ensuring that the market risk management activities are compliant with the policies;



· Assess the adequacy of the controls pertaining to o The usage of market risk models, o Authorization and escalation matrices (in times of breaches) and o Access rights from a risk and regulatory viewpoint

· Assist in institutionalizing a governance framework for the model validation process (Market risk as well as the valuation models).

· Compliance to the guidance / instructions for all types of Derivative Products with respect to regulations and market best practices.

· Assist the bank in assessing the internal controls for market risk management and ensure their compliance with policies both internal and external


· Compliance to disclosure standards as per Advanced

approaches of Basel II / RBI guidelines.

· Evaluation of Pillar 3 disclosures made by the Bank and suggesting suitable modification.

· Fine tune the disclosure policy and enable an environment for automating the process of generation of Pillar 3 disclosures.

Phase VII



· Assist the Bank in developing a policy for Pillar 3 disclosures and rating based MIS. The policy should provide guidelines on the reporting templates, governance of reporting process and controls over the reporting process.

· Implement the Pillar 3 disclosures and rating based MIS by identifying the various source systems, developing reporting formats as per the regulatory and business needs.

· Strengthening of Risk Based Internal Audit in line with

international best practices and Basel II RBI guidelines.



· Consultant is required to identify any require system of software solution for the purpose of ICAAP

· All work or assignment to be accomplished with respect to software solution (including preparation of RFP and UAT of the software)





· The Consultant will design the security architecture required for the Operational Risk.

· Ensuring effective IT governance relating to ORM

· Internal audit convergence, new product/process approval and use test approaches

. Assist bank in developing document for integration of operational risk management with Internal Audit

. Develop framework for assessing operational risk in new products/policies

. Build framework to embed risk management in the day to day operations of the bank

· Preparation of RFP and selection of software vendor



· Review the IT systems involved in the market risk management process

· Review the various data feeds required in market risk

· Management process including external market data as well as internal data transfer like updation of position data.

· Review of the controls built by the Bank to maintain sanctity of the market data fed into the Risk Analytic Engine.

· Consultant should assist the Bank in designing the database

· Requirements for collecting historical data required for VaR computation.

· Review the IT control environment and assess the suitability of the same in line with the regulatory requirements.

· Review the model validation documentation / UAT documents prepared by the Bank at the time of system implementation and suggest enhancements.

· Comprehensive Validation of VaR models for various risks under the present KVaR software of Thompson Reuters.




· Define Model validation standards for periodic as well as on-going validation. It should include at the minimum Þ Procedures for validation of MTM as well as VaR models Þ Frequency of periodic validation and trigger point for on-going validation. Þ Responsibility matrix and scope of the validation exercise Þ Documentation requirement for model validation

· Define criteria for Regular review of the performance of vendor based models.

· Define criteria for introduction of new products.

· Establish a change management framework for methodologies, processes and system. It should include Þ Change in the methodologies of MTM or VaR calculation Þ Change in source or type of input data Þ Changes in processes and procedures related to market risk management, capital calculation. Þ Change in software systems Þ Impact analysis of the changes

Þ Internal approval process related to change management.

Other Scope of Work of Consultant


· Evaluate the capital planning process in the Bank and arrive at a holistic design for capital planning and budgeting based on the envisaged risk environment.

· Method/framework to compute credit VaR, Operational Risk VaR and Market VaR. Framework for allocation of capital and risk aggregation.

· Enable the Bank to move over to RAROC and EVA. Assist in risk return analysis and risk adjusted performance measurement at account level/ portfolio level/ each business unit level etc.

· Bank plans to implement Matched Fund Transfer Pricing Solution for Profitability Management. Consultant to help the Bank integrate risk and performance management which would help promote growth and profitability

· Consultant to help bank measure and meet risk-adjusted performance objectives, price products to reflect their true risk, and monitor possible threats to liquidity and capital adequacy.

· Evaluate the risk MIS currently available and suggest enhancements.


· Review the reporting mechanism and help in designing intuitive dashboards covering various risk areas.

· Suggest suitable framework for corporate governance standards as per Basel II guidelines/ industry best practices.



· Review the existing compliance framework/ set up vis-à-vis regulatory / statutory requirements and suggest modifications / improvements, on par with industry standards.

· Review the reporting mechanism and suggest modifications / improvements

· Assess the need for system and manpower support for compliance function.

· Methods to improve the existing MIS through gap analysis and cover all risk areas.

· Design dashboards for capturing various risk areas.

Terms & Conditions:

The fee quoted above is in lump sum (fixed price) amount and any additional amount will not be payable by the Bank for whatsoever reasons.

The fee quoted is inclusive of all taxes, duties, levies, etc.,

Bank will deduct applicable TDS, if any, as per the law of the land.

The fee quoted also includes the cost of all deliverables mentioned under point no. 3 in Section - III.

Further, we confirm that we will abide by all the terms and conditions mentioned in the Request for Proposal document.

Place: Date: Seal & Signature of the bidder

Note:

There are various items/tasks/activities that are covered under scope of work but not included in the table above, the same should be considered /included while quoting the various items/tasks/activities referred above.

Please also furnish the following:

Average cost per man-day (in Rupees) :

Rate per man-day for Senior Resource (in Rupees) :

Rate per man-day for Junior Resources (in Rupees) :

Rate per man-day external site duty (Composite Rate) :



ANNEXURE - C

Compliance Certificate

To Date:

General Manager,

(Risk Management)

Bank of Baroda, Baroda Corporate Centre,


Bandra (East), Mumbai 400 051.

Dear Sir,

Ref: -

1. Having examined the Request for Proposal (RFP) including all annexure, the receipt of which is hereby duly acknowledged, we, the undersigned offer to provide the desired services for the assistance in Implementation of Enterprise wide Integrated Risk Management System in conformity with the said RFP and in accordance with our proposal and the schedule of Prices indicated in the Price Bid and made part of this bid.

2. If our bid is accepted, we undertake to complete the project within the scheduled time lines.

3. We confirm that this offer is valid for six months from the last date for submission of RFP to the Bank (RFP closing date).

4. This bid, together with your written acceptance thereof and your notification of award, shall constitute a binding Contract between us.

5. We undertake that in competing for and if the award is made to us, in executing the

subject Contract, we will strictly observe the laws against fraud and corruption in force in India namely “Prevention of Corruption Act 1988”.

6. We agree that the Bank is not bound to accept the lowest or any bid that the Bank may receive.

7. We have not been barred/black-listed by any regulatory / statutory authority and we have the required approval to be appointed as a consultant to provide the services to Bank.



8. We shall observe confidentiality of all the information passed on to us in course of the tendering process and shall not use the information for any other purpose than the current tender.

Signed at:

Seal & Signature of the bidder

Phone No.: Fax: E-mail:



ANNEXURE - D

Estimated Effort and Elapsed Time

Elapsed Time (ET)

Efforts in Man Days (EiMD)

Number of Members Who Will be Deployed (NMD)

Project Scope ET EiMD NMD Remarks

Phase I




· Enhance credit risk management policy as per

Basel II and RBI requirements.







· Identification of Bank specific risks, framework for

testing materiality of risks to the Institution.

· Review the existing frame work and risks identified under Pillar II and suggest missing elements as per Pillar II of Basel II.


Gap analysis and Operational risk management

governance





· Review of existing operational risk management policy compliant to regulatory and Basel II

requirements

· Advise on risk governance architecture suitable to the organizational structure of the bank as a whole and for each business unit and detail the roles and responsibilities at each level.



· The roles and responsibilities of the bank wide

operational risk management function and line of business management.


· Define qualitative and quantitative factors and risk mitigants and incorporated them into the operational risk management framework.













· Identify the gaps in the existing system and assess the readiness of the Bank towards regulatory

compliance.



Phase II




· Review data maintenance and credit analysis and establish the data collection model for data

elements required to compute Risk Weighted Assets (RWA) under IRB approach.









· Study the risk philosophy of the Bank, future growth strategies and stakeholder expectations to formulate the risk appetite of the Bank for various risks faced.


· Develop governance structure for the Bank‟s ICAAP and identify the roles and responsibilities of

Risk, Finance teams and senior management.





Installation of TSA and road map for moving

ahead to advanced approaches.









· Build framework for quantifying operational risk under AMA and perform capital computation

(including stress testing) for key business areas





Assist the Bank to comply with the qualitative

requirements defined by Basel II/ RBI guidelines on Advanced Approaches.






· Assist the Bank in designing new market risk

related policies, if needed, after a detailed study of the existing policies, and its relevance in a Basel II environment. Identify gaps / enhancements so as to align them with the regulatory expectations. It should cover at least the following policies but not limited to:





· Comment upon the adequacy of the existing mid office policy with particular reference to:

a) Regular reporting of critical risk issues facing the banks and its control/mitigations to senior management and Board. b) Provisions for review, treatment, and resolution of non-compliance issues. c) System for validating/reviewing the Market Risk Management processes and assessment.




Phase III


Build retail pool and develop methodologies to

perform retail pooling

· Assessment of the existing retail credit rating framework and its data maintenance including assessment of existing retail rating models and suggest any required updates



· Grouping / pooling the asset portfolio of the Bank to various asset classes as prescribed by Basel-II,

IRB approach based on statistical methods.



Pillar II and Internal Capital Adequacy

Assessment Policy





· Suggest improvements, if required in measurement techniques for quantifiable risks such as Concentration risk, Liquidity risk, IRRBB, Business risk, Residual Risk, Counterparty Credit Risk etc.

· Suggest improvements, if required risk management techniques for non-quantifiable risks like Strategic risk, Reputational risk etc.



· Develop a risk based pricing framework containing: o Methodology to estimate hurdle rate for individual

business units. o Mechanism to allocate costs to a new transaction and assess the marginal capital requirement for a new transaction o Methodology to compute RAROC and SVA on an ex-ante basis and price a new loan



· Develop criteria to assess risk and control, identification of alternate approaches available, selection of a suitable approach or combination of approaches, on the basis of size, structure and business mix of the Bank by analyzing cost benefit analysis of various approaches.

· Advising on the process of risk identification. The scope of the exercise and the areas/units to be covered and the priority of identification. Risk

Identification should include monitoring of the external environment and industry trends.


· Develop methodology for conducting risk and control assessment and the roll out plan across various units. The methodology should include setting up of rating scales for risks and controls and evaluation of residual risks.




· Conduct RCSA for all business and process of the Bank. The key business should include but not

limited to: Treasury, Retail banking, Trade finance and corporate banking, Rural/Priority sector, IT, International Banking. The RCSA should be considered for pilot branch for the above business, including centralized operations as applicable.

· MIS templates for monitoring and analyzing the RCSA results. The consultant will also develop an implementation strategy for rolling out the RCSA across the Bank.


Defining the approach and methodology for addressing the quantitative Standards required

for Internal Models approach by Basel II and RBI guidelines:


· Documented report on systems and procedures for on line monitoring of regulatory limits, operational limits, counterparty limits /Settlement limits & Country limits under all portfolios of Treasury Operations as set out in various policies of the Bank. (Investment Policy, Forex Risk Management Policy, Off-Balance Sheet Policy, Policy on exposure limits on counter party banks, Mid Office Policy, CRMS etc. Study the existing systems and procedures in Treasury branch and suggest improvements in the systems/procedures/new systems, if required for compliance /monitoring/reporting of Regulatory Guidelines/ Internal Limits.

· Computation of capital charge including illiquid position on market risk as per RBI master circular-Prudential Guidelines on Capital Adequacy Framework (NCAF). {Ref: RBI/2009-10/308 DBOD.No.BP.BC.73/21.06.001/2009-10 dated 8th Feb 2010.





· Validation of calculation methodology of various risk factors such as PV01 for interest rate risk,

Greeks for option portfolio, Duration and convexity for fixed income instruments.




· Review of existing VaR methods for general market

risk supported by the existing software – assumptions, merits and limitations, computational accuracy using internal data

· Develop methodology for Specific risk measurement capacity of the current software – equity, fixed income and derivatives: comments and suggestions

· Develop methodology for Specific and liquidity risk computation for fixed income and derivatives using internal data – model selection and choice between VaR methods and Stress Testing Specific and liquidity risk. The specific risk should have special emphasis on computation of product specific credit estimation factors on account of market variables.










· Develop VaR based Computation of capital

requirement under IMA comprising Normal VaR measure (general market risk and specific risk), Stressed VaR measure (for general market risk and specific risk) and Incremental Risk Charge (IRC) (for positions subject to interest rate specific risk capital charge).



· Study the Investment Valuation systems and procedures of investment portfolios in Treasury books as per RBI guidelines and suggest improvements/customizations etc.




· Documented manual/systems & procedures for Market Risk Model (MRM) Dossier as per the RBI

prudential guidelines on capital adequacy-implementation of IMA for market risk.






Overseas Business



· All aspects related to credit risk, market risk, operational risk mentioned in the above scope is to be carried out with respect to Overseas Business/ Territories.

· Suggest improvements/modifications in the techniques, analysis and monitoring/reporting structure to align with advanced approaches of Basel II and RBI guidelines.





Phase IV






· Develop standards and operating guides for PD, LGD, and EAD model development. The standards should cover the following aspects: o Governance and controls over the model development process. o Process to approve and use a model. o Guidance on portfolio segmentation to determine the number of rating models to be developed and allocation of exposures to various rating models. o Guidelines on data collection for model development, sample creation process and time weighting of historical data. o Guidelines on the usage of statistical techniques and expert judgment in model development and incorporation of conservatism in model development exercise. o Guidelines to calibrate PD and LGD to borrower and facility rating grades.



Pillar II and Internal Capital Adequacy

Assessment Policy





· Ensure compliance with the New Capital Adequacy Framework of RBI and all other related guidelines issued from time to time including those for Supervisory Review Process (SREP), Internal Capital Adequacy Assessment Process (ICAAP) as well as Market Discipline.






· Develop process to capture non financial losses, near misses, potential losses and develop

mechanism to follow up and update loss event until the event is closed.


· Design MIS for capturing the loss, potential loss and near- miss events.


· Develop methodology for avoiding double counting

of operational risk losses and reconciliation of these losses with those in books of accounts/General Ledger.








· Define the Market Risk f+B197actors involved in Bank‟s Trading Book. Factors like Re-pricing Risk, Yield Curve Risk, Basis Risk, and Embedded Options Risk should be covered in this process (Both on balance sheet items and off balance sheet items should be covered).




· Cover the second order risk factors like skew adjustment in case of option portfolio and correlated risk factors.



Liquidity Risk

a) Structural Liquidity Report: Þ Conduct behavioral study on distribution of assets & liabilities for liquidity risk Þ Conduct back testing and Stress testing for

liquidity risk

b) Dynamic Liquidity Report: Þ Study the existing software and suggest improvements/customization etc. in Treasury Front Office/Back Office systems as well as Bank‟s other systems/ software. Þ Future estimation of Inflows and outflows, back testing of dynamic liquidity.

c) Contingency Funding Plan: Þ Reviewing the present system of CFP. Þ CFP under various stress test scenarios Interest Rate Risk

Interest Rate Risk

d) Statement of Interest Rate Risk Report Þ Behavioral study on distribution of assets & liabilities for interest rate risk. Þ Estimation of RSA and RSL. Back testing and Stress testing for interest rate risk.

e) Earning at Risk Report Þ Computation of

duration of assets and liabilities analysis and assessment of duration of equity





· Define Aggregation Methodology for Capital computation Þ Define the products to be covered under IMA Þ Define the products / risk factors to be covered using standardized approach and document the reasoning for the same. Þ Define the methodology to be adopted for calculation of Stress VaR



Phase V








· Identification of portfolio loss estimation, correlation analysis, assessing portfolio granularity for meeting Basel II IRB requirements.



· Provide guiding principle on credit risk capital computation process Develop the supervisory slotting criteria for specialized lending to map the credit rating of specialized lending exposures to supervisory slots.











· Develop KRI monitoring process (including KRI data collection). Develop KRI validation process and methodology to ensure effectiveness of KRI in measuring risk level.



· Develop a Risk dashboard providing periodic snapshot of a top down assessment of key risk,

mitigation plans and effectiveness of controls.









(a) Define Back Testing procedures; (b) Develop an evaluation procedure of Back Testing results. (c) Prepare MIS and other reporting formats required to communicate the Back-testing results to the Senior Management and the regulators on a periodic basis.


· Develop a back-testing policy and procedure+B249 for VaR models; Build a stress testing framework for all instruments in Trading Book. VaR based Stress

testing and back testing of all tests as per the RBI prudential guidelines on capital adequacy/Basel Guidelines.



· Establish a process of determination of Stress scenarios based on underlying stress parameters.


· Review of back testing methods for general market risk and specific risk supported by the current software – accuracy, effectiveness and suggestions.

· Review of stress testing methods for general

market risk supported by the existing VaR software – accuracy, merits and limitations, suggestions.

· Review of general market risk VaR and stress testing methods for interest rate and FX derivatives, supported by the current software and comparison/benchmarking with the market best practices

Phase VI





· Review the existing rating framework / scoring framework in the Bank for both retail and non retail and suggest modification / improvements such as :

Corporate, SME, Retail Models, (including agricultural loans)





· The Bank has 13 corporate models and 6 Retail models that are to be validated and recalibrated as a part of this exercise.




· Build framework for quantifying operational risk under AMA and perform capital computation (including stress testing) for key business areas:





· Perform Capital computation including stress testing for key business areas refer RCSA section for key business areas) of the Bank.





Develop reporting framework for disclosure

requirements related to market risk:





· Review the procedures around monitoring and

ensuring that the market risk management activities are compliant with the policies;

· Assess the adequacy of the controls pertaining to o The usage of market risk models, o Authorization and escalation matrices (in times of breaches) and o Access rights from a risk and regulatory viewpoint


· Compliance to the guidance / instructions for all types of Derivative Products with respect to regulations and market best practices.



· Compliance to disclosure standards as per Advanced approaches of Basel II / RBI guidelines.



Phase VII







· Strengthening of Risk Based Internal Audit in line with international best practices and Basel II RBI guidelines.











. Develop framework for assessing operational risk

in new products/policies









· Management process including external market data as well as internal data transfer like updation of position data.








· Define Model validation standards for periodic as well as on-going validation. It should include at the minimum Þ Procedures for validation of MTM as well as VaR models Þ Frequency of periodic validation and trigger point for on-going validation. Þ Responsibility matrix and scope of the validation exercise

Þ Documentation requirement for model validation





· Establish a change management framework for methodologies, processes and system. It should include Þ Change in the methodologies of MTM or VaR calculation Þ Change in source or type of input data Þ Changes in processes and procedures related to market risk management, capital calculation. Þ Change in software systems Þ Impact analysis of the changes Þ Internal approval process related to change management.



· Evaluate the capital planning process in the Bank and arrive at a holistic design for capital planning and budgeting based on the envisaged risk

environment.











· Review the existing compliance framework/ set up vis-à-vis regulatory / statutory requirements and suggest modifications / improvements, on par with industry standards.

· Review the reporting mechanism and suggest

modifications / improvements




Place:

Date: Seal and Signature of Bidder:



ANNEXURE - E

Proposed Team Profile.

Sl No

Name of Proposed Engagement Manager/Proposed Overall person responsible/ Proposed Team Member

Prof. Qualifications

Certifications/

Accreditations

Risk Management expertise

(Mention if he has worked in banks earlier)

In terms of years and areas of expertise

IT Expertise

In terms of years and areas of expertise

Number of similar assignments (Credit/Market/Operational Risk/ICAAP) involved in Public/Private Sector Banks in India and Internationally.

Documentary proofs are to be enclosed to substantiate the claims made.

Place:

Date: Seal and signature of the bidder



ANNEXURE - F

Comments on the Terms & Conditions, Services and Facilities provided:

Please provide your comments on the Terms & Conditions in this section. You are requested to categorize your comments under appropriate headings such as those pertaining to the Scope of Work, Approach, Work plan, Personnel schedule, Terms & Conditions etc. You are also requested to provide a reference of the page number, state the clarification point and the comment/ suggestion/ deviation that you propose as shown below.

Sr. No.

Page #

Point / Section #

Clarification point as stated in the tender

document

Comment/ Suggestion/ Deviation

1

2

3

4

5

6

7

8

9



ANNEXURE – G

Consultants who wish to bid should conform to the following criteria.

SL No

Eligibility Criteria.

Details of Proofs

1 Should be either a Government Organization/PSU/PSE/ partnership firm or a limited Company under Indian Laws or /and an autonomous Institution approved by GOI/RBI promoted

Reference of Act/Notification, Registration Certificate, etc

2 Should have existence in India for five years as on date of RFP i.e. 13.10.2010. (In case of mergers/acquisitions/restructuring or name

change, the date of establishment of earlier/original Partnership Firm/Limited Company/Institution can be taken into account).

Letter of Commencement of Business in case of

Company, Registration in case of others.

3 Should have a minimum average annual turnover of Rs.25.00 crores during last three financial years for its India located office. (Not applicable for non-profit making organizations).


4 Should have made profits for the past 3 years in succession (Not applicable for non-profit making organizations).


5 The firm should have never been blacklisted / barred / disqualified by any regulator / statutory body.

Self Declaration



6 The consulting firm or its subsidiaries engaged in providing software solution may bid for this RFP, subject to the condition that any of their software solutions under this project will not be considered by the Bank for purchase during the period of assignment, if the bidder is engaged by the Bank for consultancy.

Self Declaration

7 Must have worked with public/private sectors banks (but not Regional Rural Banks, Co-operative Banks, and Local Area Banks) in India for atleast six months in respect of risk management areas during last four years proceeding from 31.03.2010.

Appropriate Documentary Evidence

Those who fulfill all the eligibility criteria as mentioned above are only eligible to take part in this bid exercise.

The bidder should submit their responses along with documentary proofs and self declaration wherever required for the above eligibility criteria.

Proposals of those bidders, who do not fulfill the Eligibility Criteria as stated above fully, will be rejected.



ANNEXURE - H

Scope of work to be undertaken by the Consultant

Project Scope

Whether

Covered In

The Scope Y/N

Remark

s

Phase I




· Enhance credit risk management policy as per Basel II and RBI requirements.







· Identification of Bank specific risks, framework for testing materiality of risks to the Institution.

· Review the existing frame work and risks identified under Pillar II and suggest missing elements as per Pillar II of Basel II.







· Review of existing operational risk management policy compliant to regulatory and Basel II requirements

· Advise on risk governance architecture suitable to the organizational structure of the bank as a whole and for each business unit and detail the roles and responsibilities at each

level.



· The roles and responsibilities of the bank wide operational risk management function and line of business management.


· Define qualitative and quantitative factors and risk mitigants and incorporated them into the operational risk management

framework.













· Identify the gaps in the existing system and assess the readiness of the Bank towards regulatory compliance.



Phase II




· Review data maintenance and credit analysis and establish the data collection model for data elements required to compute Risk Weighted Assets (RWA) under IRB approach.







· Study the risk philosophy of the Bank, future growth

strategies and stakeholder expectations to formulate the risk appetite of the Bank for various risks faced.


· Develop governance structure for the Bank‟s ICAAP and identify the roles and responsibilities of Risk, Finance teams and senior management.







Installation of TSA and road map for moving ahead to advanced approaches.







· Build framework for quantifying operational risk under AMA and perform capital computation (including stress testing) for key business areas






Assess the market risk management standards at the Bank and benchmark them with the regulatory standards and leading industry practices. The following items should be

covered:







· Assist the Bank in designing new market risk related policies, if needed, after a detailed study of the existing policies, and its relevance in a Basel II environment. Identify

gaps / enhancements so as to align them with the regulatory expectations. It should cover at least the following policies but not limited to:



· Comment upon the adequacy of the existing mid office policy with particular reference to: a) Regular reporting of critical risk issues facing the banks and its control/mitigations to senior management and Board.

b) Provisions for review, treatment, and resolution of non-

compliance issues.

c) System for validating/reviewing the Market Risk Management processes and assessment.




Phase III



· Assessment of the existing retail credit rating framework and its data maintenance including assessment of existing retail rating models and suggest any required updates



· Grouping / pooling the asset portfolio of the Bank to various asset classes as prescribed by Basel-II, IRB approach based on statistical methods.








· Suggest improvements, if required in measurement techniques for quantifiable risks such as Concentration risk, Liquidity risk, IRRBB, Business risk, Residual Risk, Counterparty Credit Risk etc.

· Suggest improvements, if required risk management techniques for non-quantifiable risks like Strategic risk,

Reputational risk etc.



· Develop a risk based pricing framework containing: o Methodology to estimate hurdle rate for individual business units.

o Mechanism to allocate costs to a new transaction and assess the marginal capital requirement for a new transaction

o Methodology to compute RAROC and SVA on an ex-ante basis and price a new loan



· Develop criteria to assess risk and control, identification of alternate approaches available, selection of a suitable approach or combination of approaches, on the basis of size,

structure and business mix of the Bank by analyzing cost benefit analysis of various approaches.

· Advising on the process of risk identification. The scope of the exercise and the areas/units to be covered and the priority of identification. Risk Identification should include monitoring of the external environment and industry trends.




· Develop methodology for conducting risk and control assessment and the roll out plan across various units. The methodology should include setting up of rating scales for risks and controls and evaluation of residual risks.


· Conduct RCSA for all business and process of the Bank. The key business should include but not limited to: Treasury, Retail banking, Trade finance and corporate banking, Rural/Priority sector, IT, International Banking. The RCSA should be considered for pilot branch for the above business, including centralized operations as applicable.

· MIS templates for monitoring and analyzing the RCSA results. The consultant will also develop an implementation strategy for rolling out the RCSA across the Bank.


Defining the approach and methodology for addressing the quantitative Standards required for Internal Models approach by Basel II and RBI guidelines:


· Documented report on systems and procedures for on line monitoring of regulatory limits, operational limits, counterparty limits /Settlement limits & Country limits under all portfolios of Treasury Operations as set out in various policies of the Bank. (Investment Policy, Forex Risk Management Policy, Off-Balance Sheet Policy, Policy on exposure limits on counter party banks, Mid Office Policy, CRMS etc. Study the existing systems and procedures in Treasury branch and suggest improvements in the systems/procedures/new systems, if required for compliance /monitoring/reporting of Regulatory Guidelines/ Internal Limits.

· Computation of capital charge including illiquid position on

market risk as per RBI master circular-Prudential Guidelines on Capital Adequacy Framework (NCAF). {Ref: RBI/2009-10/308 DBOD.No.BP.BC.73/21.06.001/2009-10 dated 8th Feb 2010.





· Validation of calculation methodology of various risk factors such as PV01 for interest rate risk, Greeks for option portfolio, Duration and convexity for fixed income instruments.




· Review of existing VaR methods for general market risk supported by the existing software – assumptions, merits and limitations, computational accuracy using internal data

· Develop methodology for Specific risk measurement capacity of the current software – equity, fixed income and derivatives: comments and suggestions

· Develop methodology for Specific and liquidity risk

computation for fixed income and derivatives using internal data – model selection and choice between VaR methods and Stress Testing Specific and liquidity risk. The specific risk should have special emphasis on computation of product specific credit estimation factors on account of market variables.








· Develop VaR based Computation of capital requirement under IMA comprising Normal VaR measure (general market risk and specific risk), Stressed VaR measure (for general market risk and specific risk) and Incremental Risk Charge (IRC) (for positions subject to interest rate specific risk capital charge).





· Study the Investment Valuation systems and procedures of

investment portfolios in Treasury books as per RBI guidelines and suggest improvements/customizations etc.




· Documented manual/systems & procedures for Market Risk

Model (MRM) Dossier as per the RBI prudential guidelines on capital adequacy-implementation of IMA for market risk.




Overseas Business



· All aspects related to credit risk, market risk, operational risk mentioned in the above scope is to be carried out with respect to Overseas Business/ Territories.

· Suggest improvements/modifications in the techniques,

analysis and monitoring/reporting structure to align with advanced approaches of Basel II and RBI guidelines.







Phase IV




· Develop standards and operating guides for PD, LGD, and EAD model development. The standards should cover the following aspects: o Governance and controls over the model development process.

o Process to approve and use a model.

o Guidance on portfolio segmentation to determine the number of rating models to be developed and allocation of

exposures to various rating models.

o Guidelines on data collection for model development, sample creation process and time weighting of historical data.

o Guidelines on the usage of statistical techniques and expert judgment in model development and incorporation of conservatism in model development exercise.

o Guidelines to calibrate PD and LGD to borrower and facility rating grades.








· Ensure compliance with the New Capital Adequacy Framework of RBI and all other related guidelines issued from time to time including those for Supervisory Review Process (SREP), Internal Capital Adequacy Assessment Process (ICAAP) as well as Market Discipline.






· Develop process to capture non financial losses, near misses, potential losses and develop mechanism to follow up and update loss event until the event is closed.


· Design MIS for capturing the loss, potential loss and near- miss events.










· Define the Market Risk f+B197actors involved in Bank‟s

Trading Book. Factors like Re-pricing Risk, Yield Curve Risk, Basis Risk, and Embedded Options Risk should be covered in this process (Both on balance sheet items and off balance sheet items should be covered).


· Cover the second order risk factors like skew adjustment in case of option portfolio and correlated risk factors.





Liquidity Risk

a) Structural Liquidity Report: Þ Conduct behavioral study on distribution of assets & liabilities for liquidity risk

Þ Conduct back testing and Stress testing for liquidity risk

b) Dynamic Liquidity Report: Þ Study the existing software and suggest improvements/customization etc. in Treasury Front Office/Back Office systems as well as Bank‟s other systems/ software.

Þ Future estimation of Inflows and outflows, back testing of dynamic liquidity.

c) Contingency Funding Plan: Þ Reviewing the present system of CFP.

Þ CFP under various stress test scenarios Interest Rate Risk

Interest Rate Risk

d) Statement of Interest Rate Risk Report Þ Behavioral study on distribution of assets & liabilities for interest rate risk.

Þ Estimation of RSA and RSL. Back testing and Stress testing for interest rate risk.

e) Earning at Risk Report Þ Computation of duration of assets and liabilities analysis and assessment of duration of equity



· Define Aggregation Methodology for Capital computation Þ Define the products to be covered under IMA

Þ Define the products / risk factors to be covered using

standardized approach and document the reasoning for the same.

Þ Define the methodology to be adopted for calculation of Stress VaR





Phase V








· Identification of portfolio loss estimation, correlation analysis, assessing portfolio granularity for meeting Basel II

IRB requirements.



· Provide guiding principle on credit risk capital computation process Develop the supervisory slotting criteria for specialized lending to map the credit rating of specialized lending exposures to supervisory slots.











· Develop KRI monitoring process (including KRI data collection). Develop KRI validation process and methodology to

ensure effectiveness of KRI in measuring risk level.



· Develop a Risk dashboard providing periodic snapshot of a top down assessment of key risk, mitigation plans and effectiveness of controls.






· Comprehensive Back testing and exception handling policies and procedure for the Value-at-Risk Models (a) Define Back Testing procedures;

(b) Develop an evaluation procedure of Back Testing results.

(c) Prepare MIS and other reporting formats required to communicate the Back-testing results to the Senior Management and the regulators on a periodic basis.


· Develop a back-testing policy and procedure+B249 for VaR models; Build a stress testing framework for all instruments in Trading Book. VaR based Stress testing and back testing of all tests as per the RBI prudential guidelines on capital adequacy/Basel Guidelines.





· Establish a process of determination of Stress scenarios

based on underlying stress parameters.


· Review of back testing methods for general market risk and specific risk supported by the current software – accuracy, effectiveness and suggestions.

· Review of stress testing methods for general market risk supported by the existing VaR software – accuracy, merits and limitations, suggestions.

· Review of general market risk VaR and stress testing methods for interest rate and FX derivatives, supported by the current software and comparison/benchmarking with the

market best practices

Phase VI



· Review the existing rating framework / scoring framework in the Bank for both retail and non retail and suggest modification / improvements such as : Corporate, SME, Retail Models, (including agricultural loans)





· The Bank has 13 corporate models and 6 Retail models that are to be validated and recalibrated as a part of this exercise.






· Build framework for quantifying operational risk under AMA

and perform capital computation (including stress testing) for key business areas:





· Perform Capital computation including stress testing for key business areas refer RCSA section for key business areas) of

the Bank.








· Review the procedures around monitoring and ensuring that

the market risk management activities are compliant with the policies;

· Assess the adequacy of the controls pertaining to o The usage of market risk models,

o Authorization and escalation matrices (in times of breaches) and

o Access rights from a risk and regulatory viewpoint




· Compliance to the guidance / instructions for all types of Derivative Products with respect to regulations and market

best practices.



· Compliance to disclosure standards as per Advanced approaches of Basel II / RBI guidelines.



Phase VII





· Strengthening of Risk Based Internal Audit in line with international best practices and Basel II RBI guidelines.













. Develop framework for assessing operational risk in new

products/policies







· Management process including external market data as well

as internal data transfer like updation of position data.








· Define Model validation standards for periodic as well as on-going validation. It should include at the minimum

Þ Procedures for validation of MTM as well as VaR models

Þ Frequency of periodic validation and trigger point for on-going validation.

Þ Responsibility matrix and scope of the validation exercise

Þ Documentation requirement for model validation



· Establish a change management framework for methodologies, processes and system. It should include



Þ Change in the methodologies of MTM or VaR calculation

Þ Change in source or type of input data

Þ Changes in processes and procedures related to market risk management, capital calculation.

Þ Change in software systems

Þ Impact analysis of the changes

Þ Internal approval process related to change management.



· Evaluate the capital planning process in the Bank and arrive at a holistic design for capital planning and budgeting based on the envisaged risk environment.









· Review the existing compliance framework/ set up vis-à-vis regulatory / statutory requirements and suggest modifications

/ improvements, on par with industry standards.

· Review the reporting mechanism and suggest modifications / improvements






Definitions of Major terms/abbreviations used in the Document

SL No Terms/Abbreviations Expanded Form

1 AIRB Internal Rating Based approach

2 ALM Asset Liability Management

3 AMA Advanced Measurement Approach

4 BE&ICF Business Environment and Internal Control Factors

5 CBS Core Banking System

6 CFA Certified Financial Analyst

7 CFP Contingency Funding Plan

8 CFP Contingency Funding Plan

9 EAD Exposure at Default

10 EIRMS Enterprisewide Integrated Risk Management

11 EMD Earnest Money Deposit

12 EVA Economic Value of Added

13 FIRB Foundation Internal Rating Based Approach

14 FRM Financial Risk Manager

15 GOI Government Of India

16 ICAAP Internal Capital Adequacy Assessment

17 ICAAP Internal Capital Adequacy Assessment Policy

18 IMA Internal Model Approach

19 IRB Internal Rating Based approach

20 IRC Incremental Risk Charge

21 KRI Key Risk Indicators (KRI)

22 KRI Key Risk Indicator

23 LAPS Lending Automation Processing System

24 LD Liquidated Damages

25 LFHS Low frequency and high severity

26 LGD Loss Given Default

27 M Maturity

28 MIS Management Information System

29 MRM Market Risk Model

30 MRM Mark to Market

31 NCAF New Capital Adequacy Framework

32 NDA Non Disclosure Agreement

33 NDA Non Disclosure Agreement

34 NEFT National Electronic Fund Transfer



35 ORM Operational Risk Management

36 PA Principal Agreement

37 PA Principal Agreement

38 PD Probability of Default

39 RAROC Risk-Adjusted Return on Capital

40 RAROC Risk Adjusted Return on Capital

41 RBI Reserve Bank of India

42 RCSA Risk & Control Self Assessment (RCSA)

43 RCSA Risk Control Self Assessment

44 RDBMS Relational Database Management System

45 RFP Request for Proposal document

46 RSA Risk Sensitive Assets

47 RSA Risk Sensitive Assets

48 RSL Risk Sensitive Liabilities

49 RSL Risk Sensitive Liabilities

50 RTGS Real Time Gross Settlement

51 RWA Risk Weighted Assets

52 SOW Service Work Order

53 SREP Supervisory Review Process (SREP),

54 SRS Software Requirement Specifications

55 SVA Share Holder Value Added

56 TCO Total Cost of Ownership

57 TSA The Standardized Approach

58 TTC Through the Cycle (TTC)

59 UAT Use Acceptance Test

60 VaR Value at Risk

Bank of Baroda,



Bandra (East),

Mumbai 400 051.

End of Document

