P132407 – Completion Summary Terms of Reference of the RAS Work done Quality control Component 1: Preparation work to the utilization of the Financial Projection Model of the Bank. Helping the Recipient collect all necessary data, The Bank Team helped the BA Team develop The Bank Team reviewed the data and gave including balance sheets and income statements templates to collect financial data bank by and feedback to BA Team about data quality. over a minimum period of 2 years prior to the system-wide over the last 2 years. The BA team stress test exercises for all banks to be included in used the templates to collect data under the the study, liquidity and capital adequacy forms, supervision of the Bank Team. and maturity and re-pricing positions, and Assisting the Recipient during the phase of the The Bank Team helped the BA Team to map the The Bank Team created some control functions in mapping process to convert data in original format data in local format to the FPM’s format. This the Model to make sure data was inserted in a to the Financial Projection Model (FPM) format required day-to-day support to ensure that the data consistent way. was mapped to the FPM format appropriately. Component 2: Customizing the FPM and the Control Panel Based on a baseline projection results, the behaves The Bank Team developed behaves for each The projection results were put to reality check by set for each individual balance sheet and income balance sheet and income statement lines in the Bank and BA Teams jointly and the statement lines will be reviewed and customized discussions with the BA Team. assessment results were used to improve the behavioral rules. The FPM will be customized to the important The Bank Team customized the FPM to the main The customizations made in the Model reviewed accounting rules and regulations with regard to regulations, accounting rules, and banking internally by the Bank Team and by the BA Team, loan classification, provisioning, capital adequacy, practices. After the first round of customization, on many occasions. The Bank Team ensured that and liquidity the BA Team reviewed the customizations and the customization process aimed for a robust The Control Panel to be used for implementing gave feedback to Bank Team to fine tune the model based on the feedback from the BA Team. stress tests and generating results for all Algerian Model. The Control Panel were generated to allow banks on one platform will be customized to the the BA to perform stress testing on a bank-by-bank Algerian banking system. and system-wide basis. Component 3: Stress Testing Selected Banks on Credit Risk with Training Calibrating projection results generated based on The Bank Team created a feature for the BA Team The Bank Team provided hands-on training to the the baseline projection. to be able to calibrate the projection results BA Team on how to calibrate projection results. according to the expectations. This also involved The Ban Team has also provided feedback to the in teaching the BA Team how to change baseline BA team when there was any need for calibration. projection assumptions. In order to keep the track of changes with the projection assumptions, the Bank Team created a feature to warn the User about the changes. Developing up to three scenarios which will The Bank Team has developed various scenarios The Bank Team went through internal review include plausible shocks to credit quality in each as part of teaching the BA Team how to develop process to ensure the scenarios appropriate for the sector. stress scenarios. The training included both BA. Besides, the Bank Team reviewed all the historical and hypothetical scenarios. scenarios developed by the BA Team at the implementation process after an appropriate training. Implementing stress test scenarios into the FPM The Bank Team provided a user-guide to guide the The Bank Team reviewed the Model to ensure the BA Team how to insert scenarios into the Model. scenarios were implemented by the BA Team according to the user guide. Running the FPM to generate stress testing results The Bank Team created a feature to allow the BA This feature was reviewed by both the Bank and for the whole financial system to see the impact of Team to generate stress testing results on a system- BA Teams. contagious channels in the system. wide basis taking into account the contagion channels. Providing hands on training to the selected group The Bank Team provided a week long trainings to The training programs were reviewed by both the of Central Bank staff from the Supervision and BA Team on several occasions. The participants Bank and BA Teams in advance. The BA team Financial Stability department. were from Supervision, Financial Stability, played active role to design the program based on Monetary Policy, and Research departments. a gap analysis. After each training, the BA and Bank Teams assessed the achievements and identified the gaps for designing the follow ups. Developing recommendations to ensure the FPM The Bank Team recommended the BA Team to The Bank Team designed an implementation plan will be used for stress testing credit risk on a perform stress testing on a routine basis and for the BA in discussion with the BA Team. The routine basis. implement the results in supervision. This required Bank Team also communicated the developing methodology of applying the stress recommendations to the BA Management on every testing results to supervision. occasion. Under a macro-prudential perspective, assisting The Bank Team provided guidance to the BA The Bank Team and BA Team reviewed the the Beneficiary in its effort to elaborate linkages Team how to ling macro and financial variables to macro-micro linkages on a continues basis to between, on the one hand, relevant risk factors. This required identifying macro improve the econometric analysis analyses. macroeconomic variables (oil price, economic variables and risk parameters, collecting data, and growth, inflation, etc.), and, on the other hand, the running regression analyses. The Bank Team also input needed by the Financial Project Model (from provided methodology and guidance to link the amendment #5) results of regression analysis to the FPM. Component 4: Linking the FPM to the Reporting System. Reviewing the reporting system The Bank Team reviewed the reporting system and The Bank and BA Teams had in-depth discussions gave feedback to the BA Team. about the reporting system. Developing recommendations to improve the The Bank Team provided recommendations to the The Bank and BA Teams had in-depth discussions reporting system. BA Team to improve the reporting system for about the reporting system and how to improve it. more robust implementation of stress testing. Developing a plan for linking the FPM to the The Bank Team developed a plan to link the The Bank and BA Teams had various meetings reporting system. Model to the reporting system. As part of this, the with the IT Team to come up with a plan to link Bank and BA Teams lay out a plan to reach out the Model to the reporting system and calibrate it this goal together with the IT Team. The IT team along the way. has started the work already. Helping the Recipient create an interface between The Bank Team has helped the BA Team to create The Bank Team reviewed the interface and the reporting system and the Model an interface between the Model and the reporting provided feedback to the BA Team. system for the IT Team to be able to link them.