implementation completion and results report...

Document of

The World Bank FOR OFFICIAL USE ONLY

Report No: ICR00004417

IMPLEMENTATION COMPLETION AND RESULTS REPORT

4505-VN

ON A

CREDIT

IN THE AMOUNT OF SDR 38.2MILLION

(US$ 53.9 MILLION EQUIVALENT)

TO THE

The Socialist Republic of Vietnam

FOR THE

Financial Sector Modernization and Information Management System

November 2018

Finance, Competitiveness And Innovation Global Practice East Asia And Pacific Region

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CURRENCY EQUIVALENTS

(Exchange Rate Effective Jul 27, 2018)

Currency Unit = Dong

23,232.50 Dong= US$1

1.41 US$ = SDR 1

FISCAL YEAR

July 1 - June 30

Regional Vice President: Victoria Kwakwa

Country Director: Ousmane Dione

Senior Global Practice Director: Zoubida Kherous Allaoua

Practice Manager: Ganesh Rasagam

Task Team Leader: Ulle Lohmus

ICR Main Contributor: Xiaofeng Hua

ABBREVIATIONS AND ACRONYMS

ADB Asian Development Bank ASA Advisory Services and Analytics Program ASEAN Association of Southeast Asian Nations CIC Credit Information Center BCP Basel Core Principles BSA Banking Supervision Authority CI Credit Institution CIDA The Canadian International Development Agency CPS Country Partnership Strategy DIV Deposit Insurance of Vietnam ERP Enterprise Resource Planning FDIC Federal Deposit Insurance Corporation FSAP Financial Sector Assessment Report FSMIMS Financial Sector Modernization and Information Management System GTZ The German Organization for Technical Cooperation HR Human Resources IADI International Association of Deposit Insurers IAS International Accounting Standards ICT Information and Communication Technology IDA International Development Agency IT Information Technology IFRS International Financial Reporting Standards IMF International Monetary Fund JICA The Japan International Cooperation Agency M&E Monitoring and Evaluation MOF Ministry of Finance OMO Open Market Operation PAD Project Appraisal Document PCFs People’s Credit Funds PCR Public Credit Registry PDO Project Development Objectives PIU Project Implementation Unit PMU Project Management Unit QCBS Quality and Cost Based Selection SEDP Socio-Economic Development Plan SBV The State Bank of Vietnam SMART Specific, Measurable, Attributable and Time-bound TA Technical Assistance USAID The United States Agency for International Development VAS Vietnamese Accounting Standards VBARD AgriBank WB The World Bank WTO World Trade Organization

https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=2ahUKEwif2YHXvcDcAhXmmOAKHe9LBO8QFjAAegQIBhAC&url=https%3A%2F%2Fwww.fdic.gov%2F&usg=AOvVaw0esefYzgwTeIHf04wDC9-P

TABLE OF CONTENTS

DATA SHEET ........................................................................................................................... 1

I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES ........................................................ 5

A. CONTEXT AT APPRAISAL ........................................................................................................... 5

B. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) ...................................... 10

II. OUTCOME ...................................................................................................................... 13

A. RELEVANCE OF PDOs .............................................................................................................. 13

B. ACHIEVEMENT OF PDOs (EFFICACY) ........................................................................................ 14

C. EFFICIENCY ............................................................................................................................. 19

D. JUSTIFICATION OF OVERALL OUTCOME RATING ..................................................................... 21

E. OTHER OUTCOMES AND IMPACTS (IF ANY) ............................................................................. 21

III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME ................................ 22

A. KEY FACTORS DURING PREPARATION..................................................................................... 22

B. KEY FACTORS DURING IMPLEMENTATION .............................................................................. 23

IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME .. 26A. QUALITY OF MONITORING AND EVALUATION (M&E) ............................................................. 26

B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE ..................................................... 27

C. BANK PERFORMANCE ............................................................................................................. 27

D. RISK TO DEVELOPMENT OUTCOME ........................................................................................ 29

V. LESSONS AND RECOMMENDATIONS .............................................................................. 29

ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS ............................................................ 31

ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION ......................... 54

ANNEX 3. PROJECT COST BY COMPONENT............................................................................. 56

ANNEX 4. EFFICIENCY ANALYSIS ............................................................................................ 57

ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS ... 59

ANNEX 6. SUPPORTING DOCUMENTS (IF ANY) ...................................................................... 65

The World Bank Financial Sector Modernization and Information Management System (P088759)

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DATA SHEET

BASIC INFORMATION Product Information Project ID Project Name

P088759 Financial Sector Modernization and Information Management System

Country Financing Instrument

Vietnam Investment Project Financing

Original EA Category Revised EA Category

Not Required (C) Not Required (C)

Organizations

Borrower Implementing Agency

The Socialist Republic of Vietnam The State Bank of Vietnam

Project Development Objective (PDO)

Original PDO The objective of the Project is to assist the State Bank of Vietnam, the Credit Information Center and the Deposit Insurance of Vietnam to improve the delivery of their main functions in accordance with relevant international standards for the banking sector, through (a) developing a centralized and integrated system of advanced business processes and a modern information technology architecture; and (b) strengthening their institutional capacity in carrying out their operations.


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FINANCING

Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) World Bank Financing IDA-45050 60,000,000 60,000,000 48,729,480

TF-93085 830,000 830,000 830,000

Total 60,830,000 60,830,000 49,559,480

Non-World Bank Financing Borrower 11,000,000 11,000,000 9,420,000 JAPAN: Ministry of Finance - PHRD Grants 830,000 830,000 830,000

Total 11,830,000 11,830,000 10,250,000

Total Project Cost 72,660,000 72,660,000 59,809,480

KEY DATES

Approval Effectiveness MTR Review Original Closing Actual Closing 30-Oct-2008 21-Apr-2009 17-May-2013 31-Dec-2014 31-Dec-2017

RESTRUCTURING AND/OR ADDITIONAL FINANCING

Date(s) Amount Disbursed (US$M) Key Revisions 22-Dec-2014 16.08 Change in Results Framework

Change in Components and Cost Change in Loan Closing Date(s) Reallocation between Disbursement Categories Change in Institutional Arrangements Change in Procurement Change in Implementation Schedule Other Change(s)

29-Dec-2016 40.49 Change in Results Framework Change in Loan Closing Date(s) Change in Implementation Schedule


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KEY RATINGS

Outcome Bank Performance M&E Quality

Moderately Satisfactory Moderately Satisfactory Modest

RATINGS OF PROJECT PERFORMANCE IN ISRs

No. Date ISR Archived DO Rating IP Rating Actual

Disbursements (US$M)

01 11-Dec-2009 Satisfactory Satisfactory 1.24

02 30-Jun-2010 Satisfactory Satisfactory 1.40

03 30-May-2011 Satisfactory Satisfactory 1.54

04 28-Dec-2011 Moderately Satisfactory Moderately Satisfactory 2.26

05 16-Mar-2013 Moderately Satisfactory Moderately Satisfactory 3.58

06 21-Oct-2013 Moderately Satisfactory Moderately Satisfactory 4.69

07 27-May-2014 Moderately Unsatisfactory Moderately Satisfactory 9.22

08 08-Dec-2014 Moderately Unsatisfactory Moderately Unsatisfactory 17.02

09 22-Jan-2015 Moderately Satisfactory Moderately Satisfactory 20.31

10 17-Jun-2015 Moderately Satisfactory Satisfactory 24.47

11 14-Dec-2015 Moderately Satisfactory Satisfactory 30.09

12 29-Jun-2016 Moderately Satisfactory Satisfactory 37.16

13 11-Dec-2016 Moderately Satisfactory Satisfactory 39.89

14 16-Jun-2017 Satisfactory Satisfactory 45.22

15 08-Dec-2017 Satisfactory Satisfactory 47.43


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SECTORS AND THEMES

Sectors Major Sector/Sector (%)

Financial Sector 80

Banking Institutions 60 Other Non-bank Financial Institutions 20

Industry, Trade and Services 20

Services 20 Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Finance 101

Financial Stability 101 Financial Sector oversight and policy/banking regulation & restructuring 84

Financial Sector Integrity 17

ADM STAFF

Role At Approval At ICR

Regional Vice President: James W. Adams Victoria Kwakwa

Country Director: Martin G. Rama Ousmane Dione

Senior Global Practice Director: Khalid A. Mirza Zoubida Kherous Allaoua

Practice Manager: Tunc Tahsin Uyanik Ganesh Rasagam

Task Team Leader(s): Xiaofeng Hua Ulle Lohmus

ICR Contributing Author: Xiaofeng Hua


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I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES

A. CONTEXT AT APPRAISAL

Context 1. Vietnam was considered as one of the successful economic development stories. Major policy reforms introduced in the 1980s had led to the rapid economic growth and improved living standards. Between 1990-2008, the average annual growth rate was 7.4 percent and more than 20 million people were eradicated from poverty. A rising middle-income class and continuous monetization of economic transactions had accelerated financial deepening. The accession to the World Trade Organization (WTO) in 2007 had further boosted the global integration, but also led to the economic overheating, resulting from extraordinary capital inflows. Vietnam’s economy was holding up relatively well to the 2008 global crisis, mainly due to ambitious stimulus measures.

2. Vietnam’s banking sector had changed from a mono-bank system to a more diversified structure. It consisted of state-owned commercial banks (accounting for 60 percent of total banking sector assets), joint-stock commercial banks (20-30 percent), foreign bank branches and people’s credit funds (credit cooperatives). The basic building blocks for a modern banking system were in place. The State Bank of Vietnam (SBV) had become the country’s central bank and banking regulator in 1988; the Credit Information Center (CIC) was established in 1999, and the Deposit Insurance of Vietnam (DIV) in 2001. Financial markets, including the interbank market, had emerged. A real-time gross settlement interbank payment system was in operation.

3. A more open economy had brought about challenges to maintaining financial stability. Credit institutions (CIs) had limited experience in managing risks and their lending decisions were often politically influenced. While interest and exchange rates were largely determined administratively, competition between banks and with the emerging capital market had increased interest rate and exchange rate volatility. The legal and regulatory framework was oriented towards administrative directives and compliance checking, rather than prudential principles and forward-looking risk assessments. Noticeable gaps existed between the Vietnamese Accounting Standards (VAS) and International Accounting Standards and International Financial Reporting Standards (IAS/IFRS).

4. The SBV was aiming at strengthening banking supervision and having a more important role in the macroeconomic management. The SBV had started to manage money supply via open market operations (OMOs) and aimed at introducing risk-based supervision despite a very limited experience in regular off-site supervision. Regular coordination and information sharing between on-site inspections and off-site supervision did not exist. The SBV’s self-assessment showed a significant non-compliance with the Basel Core Principles for Banking Supervision (Basel 1).

5. Significant gaps were identified between the SBV’s information management practices and the ones of its peers in the Association of South East Asian Nations (ASEAN) countries. The poor quality, inconsistency, relevance and timeliness of data was a serious concern. Different SBV departments and branches collected their own data, resulting in duplicated reporting requirements and an additional burden on the CIs. Information sharing was problematic as data were processed and stored separately. SBV’s policy departments had difficulties with obtaining timely information. SBV had no research capabilities and there was no regular publication of basic statistics and research. Statistical reports


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submitted to the IMF had an elapse of 10-12 weeks. The supervision authority had difficulties with assessing the overall risk profile of CIs.

6. The SVB’s information and communication technology architecture had to be upgraded to meet the new challenges of a more open economy and a diversified and deeper banking system. Accounting and financial reporting, human resources (HR) and document management entailed cumbersome and lengthy processes. At appraisal, SBV could not produce a daily balance sheet of the whole bank, although it daily interacted with the national interbank payments system, the money and the forex markets. HR related transactions and management of documents were conducted through disintegrated processes. SBV’s information and communication technology (ICT) architecture was a fragmented system of isolated mini-databases, semi-manual data processing and a variety of in-house developed application software. The obsolete ICT architecture was a barrier towards achieving the SBV’s policy making and banking supervision goals.

7. The CIC had to significantly upgrade its operational system to become a fully-fledged public credit registry. Financial sector reforms in the 1990s and 2000s had transformed the CIC from a data collecting unit at the SBV to a semi-autonomous public credit registry (PCR). The CIC collected limited data on loans extended by CIs, such as on the borrowers’ legal status and outstanding loans. The CIC relied on CIs to submit data but could not conduct the required quality controls. The CIC’s reports were often based on the outdated data, limited information and had a questionable reliability. Despite the accumulation of close to 10 million credit profiles, CIC could not utilize information for providing statistical analysis to the SBV. The hardware of CIC’s information system was almost depleted, and the in-house developed applications deviated from the international standards.

8. The DIV needed to upgrade its operational system to be able to assess the overall risk exposures, safeguard the deposit insurance fund and move towards the risk-based regime. DIV was established under the dual management of the Ministry of Finance (MOF) and SBV. It had ambitious plans to develop into a Federal Deposit Insurance Corporation (FDIC) style risk minimizer and to play a more proactive role in providing timely financial assistance to the troubled CIs1. At appraisal, the Deposit Insurance Law was being drafted and debate was ongoing about DIV’s responsibilities (pay-box vs. FDIC style). However, even as a pay-box, DIV’s operational system was inadequate to support risk profiling of insured CIs, or to handle data for resolutions. Existing database had limited usability and information sharing between departments and with the SBV and was hindered by disconnected applications. There was no backup center, and the system security was a concern.

9. Restructuring of the financial sector was one of the key priorities under the Improving the Business Environment pillar of the Government’ 2006-11 Socio-Economic Development Plan (SEDP). The government strategy for financial sector reforms was embodied in the Government Decision No. 112 of 2006. This Decision approved the SBV’s overall financial sector strategy called “The Proposal on Development of Vietnam’s Banking Sector towards 2010 and Orientation towards 2020”. The primary goal was to reform the organization and operations of SBV to become “compliant with international practice and standards for central bank operation”, use the market-oriented instruments to manage money supply, interest and exchange rates, and “create the foundation to develop SBV into a modern central bank which matches the advanced level of Asian central banks after 2010.” Another key objective was to make the banking supervision system compliant with Basel 1. The strategy also aimed at improving the SBV’s human resource management and highlighted the importance of a modern ICT infrastructure.

1 Although the 2012 Deposit Insurance Law placed DIV under the SBV’s supervision and assigned responsibilities beyond the pay-box, DIV is not a full-ledged risk minimizer like the US FDIC. For details of the DI Law, please see http://www.div.gov.vn

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10. The World Bank’s Vietnam Country Partnership Strategy (CPS) for FY2007-11 was closely aligned with the SEDP and one of the Bank priorities was banking system reform and financial sector development. The Bank had worked with the SBV for 15 years in the areas of legal, regulatory, and accounting frameworks of the banking sector, interbank payments system, large banks’ core banking systems, strategic planning of the CIC and strengthening of deposit insurance scheme. The Banking System Technical Assistance Roadmap documented the main technical assistance (TA) needs in the banking system and in the SBV.

Theory of Change (Results Chain) 11. The Project responded to the Vietnam Government’s request to bring the core functions of the three critical banking sector institutions in Vietnam - the SBV, CIC and DIV – to the international level. This was to be done through the integrated business processes for information management, modern integrate ICT architecture, and capacity building. Please see Figure 1 below.

Figure 1: The Results Chain:


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12. The Project design assumed that adoption of international practices in the business processes and information technology (IT) infrastructure development would change the delivery of main functions at the SBV, CIC and DIV. By improving the core functions of these institutions, the Project could significantly contribute to the expected shift towards a market oriented financial system. Literature confirms linkages between IT and performance of an institution: there is demonstrated positive impact of IT development on banking, as in essence, banking is all about information. Additional technical assumptions were: (a) better chance of success when combining functional strengthening activities with investments (hence, the designed main activities in the change theory); and (b) institutional capacity of implementing institutions. Before the Project, SBV had implemented two large interbank payments system projects, financed by the World Bank (WB). The SBV, DIV and CIC had also received TA from development partners including WB, International Monetary Fund (IMF), Asian Development Bank (ADB), and the Japan International Cooperation Agency (JICA), among others. It was therefore expected that SBV and DIV had some capacity to manage IT projects (hence, the designed implementation arrangements to enable the realization of the change theory).

Project Development Objectives (PDOs) 13. The objective of the Project was to assist the SBV, the CIC and the DIV to improve the delivery of their main functions in accordance with relevant international standards for the banking sector through: (a) developing a centralized and integrated system of advanced business processes and a modern information technology architecture; and (b) strengthening their institutional capacity in carrying out their operations.

Key Expected Outcomes and Outcome Indicators 14. The key expected outcomes were the improved core functions of the SBV, CIC and DIV in line with the relevant international standards for the banking sector. There were five original indicators to monitor and assess the progress towards achieving the expected outcomes. The first three indicators were related to strengthened policy function, supervision function and accounting function of the SBV. The fourth indicator was on improved core functions of the CIC and the fifth indicator was related to the enhanced risk assessment function of the DIV.

Components 15. The Project had three main components: Part A, Modernizing SBV; Part B, Strengthening CIC; and Part C, Enhancing DIV. Under these components, consultant services, training activities and IT systems acquisition and installment were designed to address the identified weaknesses.

16. Part A, Modernizing the SBV: Under this component the following main TA activities/outputs were planned:

• Upgrade CIs reporting regime to centralize data collection and enhance input data quality; • Adopt a research program to support monetary policy analysis and execution; • Streamline/renew the core business processes of the policy/supervision/accounting functions to improve

operational effectiveness and enable timely information sharing and management reporting; • Develop a medium-term training program to provide systematical staff training; • Train staff on new regulations and operational policies and procedures and learn first-hand international

practices of information management via study tours to selected central banks abroad.


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17. Another group of main activities/expected outputs was to design and build a centralized ICT architecture. Specifically, the SBV was to:

• Procure and install the international standard applications to enable the new information and resource management regimes, such as:

a centralized data warehouse with business intelligence tools to collect, process, store and provide data from credit institutions, the interbank payments system, the central bank operations and accounting, as well as from the CIC and DIV;

a centralized core operational and Enterprise Resource Planning (ERP) system with consolidated general ledger and new chart of accounts to automate and account for central bank operations;

an automated human resource management system; an automated document management system;

• Upgrade computing and communication hardware/standard software to ensure speed and capacity for the new applications;

• Train staff on the operation of the new systems.

18. These activities were to be supported by three main consultant services contracts for (a) functional strengthening and implementation support (ST1), (b) international panel to verify the conceptual design of the new information management architecture (ST2), and (c) third-party verification and validation of the installed systems (ST3). Four main contracts for the supply and installation of the IT goods (SG1-SG4) were expected to provide the key building blocks of a centralized ICT architecture.

19. Part B, Strengthening the CIC: This component was to assist the public credit information registry to improve the credit reporting practices and procure and install a centralized ICT system for borrower credit reporting. The system would contain:

• A core data warehouse to capture inward data and process/merge them to meet the needs of the credit institutions and SBV;

• Database interrogation tools to support the production of credit reports; • Upgraded security features; • Connections with SBV’s data warehouse and ERP platform.

20. The design of the new system was supported by SBV’s consultant for functional strengthening and implementation support who provided staff training on the related business processes. The ICT system was to be acquired through a goods contract (CG1).

21. Part C, Enhancing DIV: Under this component, DIV was to upgrade the main business processes, develop a new ICT architecture and train staff. These activities were supported by a consultant (DT1). The new ICT system was to be procured through a goods contract (DG1) that should contain the following main features:

• A core data warehouse to capture all data needed by DIV; • Number of risk management modules with database interrogation tools to enable DIV to better monitor risk

exposures and produce customized reports; • An ERP to support DIV’s customer-centric model;


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• Connection with SBV’s data warehouse.

22. Project management arrangement: The SBV was responsible for the overall Project management. The Project Management Unit (PMU) reported directly to SBV senior management and was located at the IT Department, with the department’s Director-General acting as the PMU director. The PMU was also the implementation unit for the SBV and CIC components. For the DIV component, a Project Implementation Unit (DIV-PIU) was established at the DIV. Annex 6 describes the overall Project structure and the relationships between components and the main activities.

B. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE)

Revised PDOs and Outcome Targets 23. There were no changes to the original PDO and outcome targets. The Project was restructured three times: on August 5, 2010; December 22, 2014; and December 31, 2016 to specify some indicators and applicable international standards, and to allow more time for completion of Project activities.

Revised PDO Indicators 24. The PDO indicators remained relevant but were slightly revised during the 2014 restructuring to provide more specific definitions and target values. The modified Outcome Indicator 1(a) narrowed down the expected target for the SBV’s policy function, e.g. from the focus on coverage, timeliness and disclosure of statistics to the accuracy and consistency of statistics. The modified Outcome Indicator 1(b) highlighted one area for compliance with the Basel Core Principles as part of the measure to assess PDO achievement regarding SBV’s supervision function. The modified Outcome Indicator 1(c) added the Vietnamese Accounting Standards (VAS) in addition to the IAS/IFRS for the assessment of PDO achievement of the SBV’s accounting function and highlighted the need to present consolidated financial statements. The modified Outcome Indicator 2 (CIC component) specified the expected target. For the DIV, the 2014 restructuring added an Outcome Indicator which specified the original indicator. Table 1 presents the original and revised indicators and applicable international standards.

Table 1: Original and Revised PDO Indicators

Original Indicator Revised Indicator Applicable International Standards

Indicator 1(a)-SBV Policy Function: Coverage, timeliness and disclosure of monetary and financial statistics largely consistent with IMF guidelines.

Indicator 1(a): Statistics accuracy and consistency improved; Monthly Monetary Survey submitted to IMF; and results of two research programs regularly published.

IMF guidelines on the coverage, timeliness and disclosure of monetary and financial statistics as contained in the Monetary and Financial Statistics Manual (IMF 2000) and Guide on the General Data Dissemination System (IMF 2007).


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Indicator 1(b)-SBV Supervision Function: Offsite supervision partially compliant with BCP No. 16-20.

Indicator 1(b): Compliance with BCP Principles on offsite surveillance improved, regarding the regular offsite supervision reporting of banks’ risk profiles.

Core Principles number 16-20 of Basel Core Principles for Effective Banking Supervision (BIS, 1997)2.

Indicator 1(c)-SBV Accounting Function: Presentation, consolidation and timeliness of SBV’s financial statements in line with IAS/IFRS.

Indicator 1(c): Presentation, consolidation and timeliness of SBV’s financial statements in line with both Vietnamese Accounting Standards (VAS) and SBV management requirements on the one hand, and international practices and standards applicable to central banks on the other, in terms of presentation of consolidated financial statements in accordance with statutory requirements of Vietnam.

International practices/standards on presentation, consolidation and timeliness applicable to central banks.

Indicator 2-CIC: Core business strengthened consistent with practices of OECD PCRs.

Indicator 2(a): Credit information provided by CIC is comprehensive, covering repayment history, unpaid debts or credit outstanding by borrower and by contract.

OECD PCR good practices.

Indicator 3-DIV: Coverage of risk assessment exposure improved in line with the recommendations of the International Working Group on Deposit Insurance under the Financial Stability Forum.

Indicator 3(a): Coverage of risk assessment improved in line with recommendations of the International Working Group on Deposit Insurance under the Financial Stability Forum.

Recommendations of Financial Stability Forum.

Indicator 3(b): Risk assessment reports cover all material aspects of DIV exposures.

Recommendations of Financial Stability Forum.

Source: Project documents

Revised Components 25. Original components were maintained throughout the Project implementation period.

2 At appraisal, the BCPs applicable were the 1997 version in accordance with the Vietnamese regulations. Since then, progress has been made towards the adoption of Basel II.


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Other Changes 26. The closing date of the Project was extended twice for a total of three years, and the Intermediate Results indicators were revised to specify target values and reflect progress achieved to date. The 2014 restructuring extended the Project’s closing date from December 31, 2014 to December 31, 2016. The December 2016 restructuring extended the closing date by 12 months to December 31, 2017. Some of the Intermediate Results (IR) indicators were modified to reflect actions already completed (e.g. move from adopting new regulations/business processes to implementing them). The scope of the research program to be implemented was specified. A new IR indicator was added to highlight the importance of detecting data inconsistencies and errors. In addition, the 2014 restructuring resulted in: (a) IDA funding reallocations between the components; (b) removal of the WB prior review thresholds: and (c) updating the legal definitions of the CIC and DIV.

Rationale for Changes and Their Implication on the Original Theory of Change 27. A mid-term review (MTR) mission for FSMIMS was conducted in May 2013. The MTR found that the PDO remained valid, required no amendments and could reasonably be expected to be achieved. The MTR also found that overall, the original Results Framework (RF) remained relevant, specific and measurable. The MTR acknowledged the complexity of the Project and recorded the SBV, CIC and DIV senior management’s strong commitment to implement the Project as designed, as their institutions needed a more comprehensive approach of change. The statutory changes recommended by the MTR were: (a) extension of closing date to allow more time for implementation to compensate for the time lost in the early stages; and (b) modification of indicators in the RF so that they better reflect and measure the intended project-level outcomes and component-level targets within the extended timeline of the Project.

28. Changes improved the quality of Outcome Indicators and IR indicators by making them more specific and better linked to the applicable international standards. Based on the MTR recommendations, the Project restructuring of 2014 made the Outcome Indicators more specific, e.g. changed from a general mentioning of reports to the IMF to the specific mentioning of the Monthly Monetary Survey. They also took into consideration factors that were beyond the SBV’s control, i.e. the pace of the public finance reforms for adopting IAS/IFRS, and the government practices with transparency and disclosure of information.

29. Extensions of the Project closing date helped to ensure the achievement of PDOs. In the early stages of the Project, its design complexity was met by the initially inadequate capacity of the Project implementation teams to move the Project activities forward and secure the support from the implementation consultants for the SBV and DIV. This led to delays and the Project implementation activities began only in early 2011, i.e. 18 months after the IDA credit became effective. However, by the second half of 2011, the teams had collectively found the ways to address earlier difficulties and move forward. The WB team, for example, helped to review the requests for proposals for the consultants; provided intensive implementation support, and advice on project risk management and change management. At the time of MTR, 8.6 percent of IDA credit was committed mainly for the consulting services. By the 2014 restructuring, about 78 percent of IDA credit was committed and the main consulting services and goods contracts had been procured and were in implementation. Most of the TA activities for functional strengthening and conceptual designs of new information management architectures were completed, and CIC had achieved several intermediary results. By the 2016 restructuring, IDA credit was fully committed, 69 percent of funds were disbursed, most of the IT systems were already in operation and CIC component had achieved its development objectives. Extensions of closing date allowed for completing the Project activities and ensured a higher quality of the full system implementation as more time was available for system installation, customization, testing and acceptance, and tuning and stabilization. This helped to


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ensure that the new business processes and IT systems were internalized and used to their fullest potential by the management and staff of SBV, CIC and DIV.

30. Introduced changes did not have implications on the original theory of change.

II. OUTCOME

A. RELEVANCE OF PDOs

Assessment of Relevance of PDOs and Rating

Rating: High

31. The PDO was well aligned with the policy priorities of the Vietnam Government, as presented in the 2006-11 SEDP, and with the Government’s strategy for financial sector reforms. The CPS for FY2007-11 was closely aligned with the SEDP and one of the WB priorities was banking reform and financial sector development.

32. The PDO remains highly relevant at the ICR stage. The PDO is aligned with Vietnam’s SEDP for 2016-2020, aiming to “ensure the banking system safety and apply international banking governance standards and practices”. The CPF for 2017-22 aims to “enable inclusive growth and private sector participation”. The WB’s engagement under this group of priorities includes support to the government efforts to address macroeconomic vulnerabilities and maintain sustainability of financial system. The Project is in full alignment with the CPF. The SBV plays a crucial role in maintaining macroeconomic and financial system stability, CIC supports credit institutions’ efforts to better manage credit risk, and DIV supplements the SBV’s monitoring of CIs activities and helps to improve confidence in the banking sector. By improving delivery of these critical functions of the SBV, CIC and DIV, the PDO is highly relevant.

33. The 2014 Financial Sector Assessment Report (FSAP) has identified several reform priorities needed for maintaining the stability of financial sector. Such priorities included accurate needs-assessment and implementation of banks recapitalization, critical improvement of the financial infrastructure, and comprehensive regulatory and supervisory reforms. The WB’s ongoing Banking Sector Soundness and Development Advisory Services and Analytics Program (ASA) aims at enhancing the SBV’s capacity to address structural weaknesses as highlighted in the FSAP. A critical challenge to the WB’s advisory services has been the lack of timely and reliable data, which has been also the major obstacle to the realization of the Authorities’ financial sector stability and development goals. The Project results (e.g. enhanced data quality and centralized institutional arrangements) are expected to directly contribute to the adoption of the FSAP recommendations and achievement of the ASA objectives. Lessons from the 2008 global financial crises also highlight the relevance of the Project in terms of the importance of strengthening the functions of critical financial sector institutions and improving the quality of information, in addition to the regulatory reforms.


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B. ACHIEVEMENT OF PDOs (EFFICACY)

Assessment of Achievement of Each Objective/Outcome

34. The Project has substantially achieved the expected outcome of improved delivery of SBV’s, DIV’s and CIC’s main functions in line with the relevant international standards for the banking sector. The achievement was attributed to the (a) alignment of key business processes at the SBV, CIC and DIV with international standards3 in the areas of monetary policy, banking supervision, forecasting and statistics, accounting and finance, document management and regulation, human resource (HR) management, credit information and deposit insurance, and the related capacity building of the staff; and (b) delivery of a modern centralized ICT infrastructure. The achievement has been measured through the PDO indicators as presented in Table 2, showing, for example, improvements in the banks’ surveillance system of the Banking Supervision Authority (BSA) which can now provide early warning of risks and potential crisis, and can inform supervisory responses and actions (Outcome Indicator 1(b)). Improved quality of statistics as provided in the Monthly Monetary Survey, prepared in accordance with the IMF’s Monetary and Financial Statistics Manual (Outcome Indicator 1 (a)), could further implementation of sound macroeconomic and financial sector policies. Credit information provided by CIC is now of higher quality as recorded also in the depth of credit information index of the Doing Business Report 20184. This index measures rules and practices affecting the coverage, scope and accessibility of credit information. The Project contributed to better coverage, accuracy and reliability of CIC reports which help to improve the management of credit risk (Outcome Indicator 2(a)).

Table 2: Achievement of PDOs, Measured by Outcome Indicators5

Outcome Indicator Actual Achievement

1(a)-SBV’s Policy function:

Statistics accuracy and consistency improved; Monthly Monetary Survey submitted to IMF; and results of two research programs regularly published.

• Input data quality significantly improved as duplications and inconsistencies were minimized [integrated reporting regime and centralized data warehouse].

• Unwanted changes to original data prevented as responsibilities for data collection, processing and storage are separated from those of data consolidation and reports production [implemented Circular No. 35/2015].

• The Monthly Monetary Survey is submitted to the IMF within 45 days after the end of the previous month as compared to 60 days before [reporting regime, data warehouse, online interactive analytical tools].

• Results of the two research programs on inflation and interbank risks regularly shared within SBV [strengthened capabilities in uses of forecasting models and upgraded analytical skills, data warehouse].

Comment: Outcome Indicator 1(a) is considered largely achieved as there was no publication of relevant research papers, which is a policy decision, outside of the Project control (it requires further changes to the Government regulations on transparency and disclosure of information). Research papers have been prepared and their results have been regularly reported to the SBV management and shared within the SBV.

3 As presented in respective IMF Guidelines, Basel Core Principles, IADI Core principles, General Principles for Credit Reporting in OECD 4 http://documents.worldbank.org/curated/en/608731510222788341/pdf/121105-WP-PUBLIC-DB18-VNM.pdf 5 Based on the evidence collected by the ICR team and provided in the SBV’s post-implementation evaluation report.


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1(b)-SBV’ Supervision function:

Compliance with BCP Principles on offsite surveillance improved, regarding regular offsite supervision reporting of banks’ risk profiles.

• Supervision processes, onsite-offsite collaboration and consolidated supervision formalized and standardized in accordance with the relevant BCPs [implemented Circular No. 08/2017, Decision No. 2145/2017].

• Risk profiles of individual CIs and different groups of CIs assessed and reported on a quarterly basis. [reporting regime, data warehouse, online interactive analytical tools].

Comment: Outcome Indicator 1(b) is considered fully achieved.

1(c)-SBV’s Accounting function:

Presentation, consolidation and timeliness of SBV’s financial statements in line with both Vietnamese Accounting Standards (VAS) and SBV management requirements on the one hand, and international practices and standards applicable to central banks on the other, in terms of presentation of consolidated financial statements in accordance with statutory requirements of Vietnam.

• Presentation and consolidation of SBV’s financial statements in compliance with the 2015 VAS that is based on IAS/IFRS [implemented Decision 08/2013].

• Consolidation of daily balance sheet for the whole SBV enabled, Monthly balance sheet completed within shorter time and year-end closing was completed in 10 days compared to 15 days before project implementation [implemented Circular No. 19/2015, Document No. 9041&9164/2015, reporting regime, data warehouse, core banking and ERP].

Comment: Outcome Indicator 1(c) is considered largely achieved as the SBV’s accounting regime is in full compliance with the 2015 VAS which made progress towards IAS/IFRS although there are still gaps regarding the historical and fair value accounts recording. Full compatibility with IAS/IFRS of SBV’S accounting regime is a policy decision beyond the Project control since it requires changes to the legal framework for accounting and financial standards by the MOF. The Project has provided a new system, capable for handling IFRS accounting, and has trained the staff to become quickly compliant with international standards once the supportive legal and regularly framework is there.

2(a)-CIC’s main function:

Credit information provided by CIC is comprehensive, covering repayment history, unpaid debts or credit outstanding by borrower and by contract.

• CIC is now in compliance with the OECD PCR practices, regarding a) accurate and sufficient reports and assessment on credit, b) provision of credit scores and ratings, and c) enhanced privacy and confidentiality.

• According to the rankings under Getting Credit Scores of the Doing Business Indicators, the Depth of Credit Information in Vietnam improved from 3 in DB2008 to 7 in DB2018, and the public credit registry’s coverage of adults increased from 9.2 percent to 51 percent.

• Business volume increased significantly, enabling fee reductions [implemented Circular 02&03/2013, Decision No. 926/2017, new credit information system, completed training activities].

Comment: Outcome Indicator 2(a) is considered fully achieved.

3(a)-DIV’s risk assessment function:

Coverage of risk assessment improved in line with recommendations of the International Working Group on Deposit Insurance under the Financial Stability Forum.

• Assessment of insured CI failure probability includes both quantitative and qualitative aspects as the function is supported by timely CI data from SBV’s data warehouse and considers other information such as macroeconomic data, qualitative data on CIs and results of DIV’s own operations (e.g. findings of examination of insured CIs).


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• IADI Core Principle No. 4 largely compliant and compliance of IADI Core Principle No 13 improved6.

[implemented SBV circular No. 34/2016 on information sharing between SBV and DIV, implemented DIV’s new business processes and the new operational system, completed training activities].

Comment: Outcome Indicator 5 is considered largely achieved as the risk assessment modules require more time in operation for further evidence on their usability to become available. The Project has endowed DIV with advanced risk-analysis systems, and the information sharing between SBV and DIV indicates that the DIV systems can be used productively as an offsite supervisory tool.

3(b)-DIV’s risk management function:

Risk assessment reports cover all material aspects of DIV exposures.

• In addition to improved assessment of failure probability, capacity gained to provide reports to management on estimated risk-based premiums and estimated risk level of the business reserve fund.

• Compliance with IADI Core Principles No. 8 & 9 improved7.

[same attributions as these for Outcome Indicator 5].

Comment: Outcome Indicator 6 is considered largely achieved as more time in operation is required. DIV has now the capacity and advanced risk-analysis systems to rank the risk, give early warning to institutions, and report to the SBV and other authorities in the financial safety net to take proper and timely action for maintaining the stability of financial system. DIV has also the capacity to calculate risk-based premiums in line with the international practices but they have not been applied yet.

Note: Text in brackets denotes the causal relationship between output/interim results and the outcome. 35. Better-quality data and reports contribute to the improved policy functions. For example, CIC now provides monthly loan classification reports to the BSA based on the information available in the new system and informs CIs weekly on whether any debt has been reclassified. These new CIC products and services support more timely and effective monitoring of the quality of the credit portfolio by the regulator and CIs. Since the new system became operational and started receiving data from the SBV’s data warehouse, DIV has produced three quarterly Probabilities of Default Reports and has shared them with the SBV’s senior management. Such analyses support the DIV’s risk management function and were considered useful by the SBV for making strategic judgements and choices based on the timely analysis on the risk of failure as provided in the reports8.

36. The Project achieved additional outcomes. On-the-ground evidence shows that the main functions of the SBV, CIC and DIV have been improved also in the areas not captured by the PDOs. For example, in terms of the SBV’s monetary policy function, market interactions have become more effective as the OMOs are conducted daily. This is critical and important for ensuring financial stability in situations when liquidity demand increases sharply (e.g. before and during the Lunar New Year holidays) or when there is a need to neutralize the impact of capital inflows on the VND value. With the integrated system, the Central Banking Department of SBV can effectively support the OMOs and other operations (e.g. foreign reserve management, lending, client management, etc.). Integrated resource management systems of SBV and DIV (i.e. the HR, document management systems and the budgeting module) have also contributed to the achievement

6 IAID Core Principle No. 4, Relations with Other Safety-net Participants and Core Principle No. 13, Early Detection and Timely Intervention. 7 IAID Core Principle No. 8, Coverage and Core Principle No. 9, Sources and Uses of Funds. 8 This was mentioned by both the DIV and SBV management during the ICR mission.


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of Project outcomes as they have significantly enhanced the operational effectiveness and efficiency of the back-office functions. Additional examples on the Project achievements are provided in Table 3. Annex 1 also provides information on the achievement of outcomes and intermediate results, from baselines to actual results.

Table 3: Examples of Improved Delivery of the Main Functions of SBV, DIV and CIV

Before Project Implementation After Project Implementation

SBV’s Open Market Operations:

• Roles and responsibilities of relevant departments for OMOs were not clearly defined.

• OMOs were not always conducted on a regular basis and the planning was not well supported by timely and reliable liquidity forecasts.

• The OMO Executive Board has been established and is in operation with clear operating rules as well as the roles and responsibilities of the Chairman and each board member. [Circular No. 939/2014].

• Open market operations are conducted daily, based on regular liquidity forecasts that are in line with international experts’ recommendations and supported by more timely and comprehensive data. [Circular No. 42/2015 on OMO procedures, Decision 2745/2014 on liquidity forecasting, centralized data warehouse].

SBV’s forex management function:

• Information was fragmented with significant time elapse and there was no effective mechanism to ensure data quality.

• The new information management regime has enabled the SBV to better manage the limits on external debts for non-government-guaranteed borrowings and provide more timely inputs to the authorities regarding this type of Vietnam’s foreign debt level. [Centralized reporting regime and data warehouse].

SBV’s offsite supervision function:

• Limited use of statistics and market data to monitor banking.

• Consolidated supervision was not carried out in a systematic way, especially regarding the capital adequacy and large exposures.

• Data from the CI reporting regime, the CIC and the interbank markets are explored daily. [Decision No. 2145/2017 on offsite supervision manual, centralized data warehouse].

• The principle of consolidated supervision has been adopted regarding CIs and their branches and subsidiaries, non-financial parent companies, and foreign branches or subsidiaries and their offshore parent companies. [Circular No. 36/2016 on onsite supervision, Circular No. 08/2017 on offsite supervision].

SBV’s accounting function:

• Reports to management contained limited information and were generated manually.

• Budget plan and implementation suffered from fragmented accounting system and a lack of mechanisms to ensure data quality and monitor the implementation by the budget units.

• 197 reports are generated automatically on the results of SBV operations (e.g. accounts receivables and payables) and the internal resources utilizations (e.g. fixed assets, salaries, construction projects).

• Budget plan is consolidated in a real-time manner (30-60 minutes) with higher accuracy, and so is real-time exploitation of data on revenue, expenditure and uses of allocated expenditure.

[Circular 19/2015 on new chart of accounts, Guiding Document No. 9041/2015 on GL, core banking and ERP system].


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CIC’s credit information reporting function:

• No comprehensive credit reports and lack of the default of possible default, dynamic loan and repayment information. Each group of credit information (e.g. credit balances, collaterals) was provided as separate reports.

• Complaints about the usefulness of CIC reports.

• Credit information is provided in one report and contains more aspects of credit, such as (a) legal status, (b) loan details including on collateral, repayment history and status by contract and by borrower, (c) loan classifications and credit standing, and (d) CI investments in corporate bonds.

• New products are provided such as (i) Sector Analysis Report, (ii) Debt Analysis Report, and (iii) more comprehensive Personal Credit Information repots.

[Circular No. 2&3/2013, new CIC operational system].

DIV’s risk management function:

• There was no information sharing for SBV and DIV collected data from insured CIs via non-mandatory surveys. There was no capacity for early detection and early warning of risk.

• Information on investments of deposit insurance fund was fragmented and focused on time-deposit status and was available to management in 30 days.

• Early detection of risk is performed. It allowed for issuing an early warning in a case in 2017 as the information from the SBV’s data warehouse is comprehensive and updated daily and DIV’ now collects 4 filing reports directly from the insured CIs.

• Information is available on all DIV investment operations (e.g. demand and time deposits, buying and selling SBV bills) and is provided to the management daily.

[implemented SBV circular No. 34/2016 on information sharing between SBV and DIV, implemented DIV’s new business processes and the new operational system, completed training activities].

Note: Text in brackets denotes the causal relationship between output/interim results and outcome. 37. The Project has improved the risk management practices in CIs. Based on the information collected during the ICR mission, the Project has contributed to the improved risk management practices of commercial banks, as data from the various branches and operational units are consolidated, validated and verified. For example, the AgriBank (VBARD) now uses the data templates of the SBV’s centralized reporting regime to conduct its own risk analysis. In the case of smaller CIs, the unified reporting regime has reduced the reporting burden. According to the management of Duong Noi PCF, the small Hanoi credit cooperative had to provide data to at least five agencies before the centralized reporting regime became operational. Now it only needs to send the required information to the SBV’s Hanoi Branch, thereby saving time and operational costs. The PCF has also found the collected information useful for its own risk management purposes.

38. The Project has led to the upgrades in the CIs’ core banking systems. The SBV’s new, centralized CIs reporting regime required CIs to invest in upgrading their own core banking and reporting systems so that the Head Office of the bank could collect and consolidate data from branches and subsidiaries and provide them to the SBV on behalf of the whole bank. The SBV regulation (Circular No. 35/2015) required all commercial banks to have their new systems operational by December 31, 2016. This requirement gave the banks momentum to upgrade their operational systems, and by the deadline, all banks had met the requirement.

39. Through the SBV’s improved document management system, the Project contributed to the e-Government reform. The Project was cited by the Prime Minister’s Office as a good example of public administration reform in terms of eGovernment (Government document No. 36a/NQ-CP dated 14 October 2015). Because of the Project, the SBV automated its document management system and deployed it throughout the organization. This was a significant upgrade from the previous business model of manual and semi-manual management of individual documents to the centralized


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record keeping, transmission and storage of digitized documents. Document turnaround time was significantly reduced and the SBV management’s instructions and decisions are now circulated quickly.

Justification of Overall Efficacy Rating Rating: Substantial 40. The overall efficacy rating takes into consideration the achievements of the Outcome Indicators as presented in Table 2 (fully achieved and largely achieved), additional on-the-ground evidence on the Project outcomes and significant benefits to the banking market. At the end of the Project, the SBV, CIC and DIV have improved the delivery of their main functions in line with the relevant international standards through the enhanced business processes, a modern centralized IT infrastructure, and improved capacity to use the new systems to their fullest. The facts, such as the SBV and DIV staff becoming able to analyze data and produce customized reports to management on their own, without having to rely on the IT department as in the past, imply significant change in the business process and productivity gains. Two of the Outcome Indicators (1(a) and 1(c) were largely achieved only because they were subject to the policy decisions that were beyond the Project control. However, the new research is conducted, and its results are regularly reported to the SBV management. Also, the Project has provided the SBV staff with skills and tools to become quickly compliant with IFRS once the legal and regulatory framework is changed. Two other largely achieved indicators (3(a) and 3(b)) reflect the fact that the DIV’s risk assessment modules require more time in operation for further evidence on their usability to become available. However, information sharing between the SBV and DIV indicates that the DIV’s advanced risk-analysis systems can be used productively as an offsite supervisory tool. Project achievements go beyond the Outcome Indicators as evidenced, for example, by significantly improved operational effectiveness and efficiency of the SBV’s and DIV’s back-office functions; and improved risk management practices and operational efficiency of banks.

C. EFFICIENCY

41. An economic and financial analysis of the Project was not conducted. At appraisal, an economic analysis was not conducted as the expected benefits were considered difficult to quantify in monetary terms and attributions were too complex to establish. Conventional quantitative financial analysis was not conducted as the Project was not expected to directly generate revenues for the SBV, CIC and DIV. In addition, the accounting systems of these public-sector financial institutions could not produce and provide reliable information on the unit costs for delivering the main functions. These justifications remained valid at the time of ICR preparation and quantitative efficiency analyses could not be prepared. While the Project contributed to the increase in the CIC’s revenues, the unit cost of operation was still not available. Therefore, the ICR team used the qualitative approach to assess the Project efficiency.

42. Economic Benefits: The achieved PDO is directly linked to the macroeconomic and financial stability. The SBV, DIV and CIC play the key role in maintaining the macroeconomic and financial stability and the Project focused on improving their main functions in these areas, especially the SBV’s policy, banking supervision and accounting functions. In addition, improved delivery of CIC’s credit information reporting function helps the CIs to strengthen their credit risk management and helps the SBV to monitor the trends of credit risks in the banking sector. Improved delivery of the DIV’s management function has strengthened the Vietnam’s financial safety net. Clearly, the Project has improved and standardized the core functions and operations of the SBV, CIC and DIV that are now based on a more timely, reliable and complete data and has contributed to preserving financial stability.

43. Operational Cost Savings and Administrative Efficiency: All beneficiaries of the Project have reported efficiency gains in terms of time and reduced duplication of activities. For example, before the Project’s main activities were


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completed, data verification took days or weeks in each SBV department that collected data separately from CIs, SBV branches or the central banking operations. Data verification is now automatically conducted and verified data are available within a day. Capacity building efforts of the Project have increased the efficiency and efficacy of the staff in conducting their work. For example, the functional staff of the SBV and DIV has become able to analyze data and produce customized reports to management on their own, without having to rely on the IT department as in the past. This also implies some significant productivity gains. Before the Project, each branch and functional department had to keep a large group of accountants to record and verify accounts and conduct regular closing of accounts. Many of those duplicated activities have been now eliminated and the accounting function can focus more on the financial management. The reduced duplication of activities will bring cost savings to all three institutions over time. Furthermore, the Project has not only improved the productivity of the SBV, CIC and DIV but has also simplified and reduced the reporting burden for the supervised CIs.

44. Investment Cost Savings: The Project helps the three beneficiary institutions to save on their investment expenses. Before the Project achieved its objectives, the SBV, CIC and DIV acquired IT systems or developed them in-house per individual operational requests without having the strategy and implementation plan for the overall IT architecture. Instead, the patchworks of stand-alone IT systems were created. Such “piecemeal” approach did not enhance consistency with international standards. Contrary, international experience shows that this is a costlier approach for IT acquisition and upgrading. The Project adopted a holistic approach that anchored procurement and implementation of IT systems in the solid conceptual designs and secured upfront the multi-year warranties and maintenance service. The new IT systems adopted international standards (e.g. the data warehouse technology and the TIER III-standard SBV data center) and are expected to run without major upgrading for the next five years.

45. Implementation Efficiency: A significant amount of SDR financing was lost due to the exchange rate fluctuations. Thus, the Project could utilize only US$54.95 million compared to the original IDA credit of US$60 million equivalent to achieve the PDO. Annex 3 provides details on this. All large consultancy and goods packages were procured through the international competitive biddings. This resulted in significant cost savings (US$11.7 million, including the counterpart funds) which were reallocated to finance the acquisition and implementation of a state-of-the-art SBV’s data center and related TA services. The DIV used the saved funds to engage a consultant for the change management and the 3rd-party verification services. Improvements in the SBV, CIC and DIV were extensive and foundational and some of them were difficult and expensive, e.g. replacing the fragmented operational systems with centralized and integrated core banking systems. International experience shows that this type of IT-heavy projects typically have a low success rate (64 percent) and a high rate of budget overruns. In this context, the Project stands out for having largely achieved the expected outcomes without budget overruns.

46. Implementation Delays: The Project had implementation delays in the early stages, mainly due to the complexity of the Project and a low capacity of the implementation teams. The original closing date of the Project underestimated challenges associated with the large-scale banking IT projects and the closing date extensions greatly increased the chance of success. According to the McKinsey report, on average, the core banking projects in the late 1990s and up to 2010 were implemented in 10 years9. According to the clients’ responses to the ICR questionnaire, the appropriate implementation period for the Project should have been around 8 years, which is now largely accepted for many projects at the WB as a more realistic timeline for similar projects in a low capacity environment. Given these findings, the ICR team considers

9 McKinsey: Overhauling Banks’ IT Systems, https://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/overhauling-banks-it-systems.


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the long implementation period of the Project (as compared to the standard WB operations worldwide) as a secondary factor affecting the efficiency rating.

Assessment of Efficiency and Rating Rating: Modest 47. The qualitative approach to assess Project efficiency shows significant efficiency gains at the SBV, CIS and DIV in terms of time and reduced duplication of activities, as well as the improved capacity of staff. The Project has also simplified and reduced the reporting burden for CIs. Furthermore, the costs savings of the Project had helped the SBV to acquire and implement the state-of-the art data center which has improved IT operational efficiency. However, the Project had early implementation delays which could have been prevented to some extent if an efficient change management system was available from the beginning. The overall efficiency is therefore considered Modest.

D. JUSTIFICATION OF OVERALL OUTCOME RATING

Rating: Moderately Satisfactory

48. The Project achieved substantially its objectives. With the Project, the main functions of Vietnam’s three important financial sector institutions - the SBV, CIC and DIV - were largely transformed with the introduction of advanced business processes, a modern IT infrastructure, and major improvements in their institutional capacity. These changes are critical and important for preserving the financial stability in Vietnam. Given the high relevance of the PDO, substantial efficacy and modest efficiency ratings, the overall Project Outcome is rated Moderately Satisfactory, reflecting the moderate shortcomings in the implementation teams’ performance.

E. OTHER OUTCOMES AND IMPACTS (IF ANY)

Gender Not applicable

Institutional Strengthening This is an IT-based institutional strengthening project and the outcomes and impacts are discussed in the preceding sections.

Mobilizing Private Sector Financing

Not applicable

Poverty Reduction and Shared Prosperity Not applicable


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Other Unintended Outcomes and Impacts Not applicable

III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME

A. KEY FACTORS DURING PREPARATION 49. The Project preparation was well informed and underpinned by robust analytical studies. Two sets of comprehensive institutional analysis on the SBV, CIC and DIV were conducted by the WB team and the SBV’s project preparation support consultant. These technical analyses identified functional, institutional and technical weaknesses and constraints in information management and disclosure and facilitated the Project preparation. The Project design also benefited from the previous TA operations, such as the WB supported SBV’s self-assessment on BCP-compliance (Basel Core Principles, 1997), ASEM-funded CIC capacity building, ADB’s DIV project and the IMF’s technical assistance on the SBV’s monetary and statistical reporting. Close collaboration between the WB team and the SBV’s project preparation team ensured high-level alignment between the SBV’s pre-feasibility and feasibility studies and the Bank’s project appraisal document. The international consulting firm that supported the SBV in project preparation, provided the right expertise and experience. By appraisal, the following main technical building blocks for the Project readiness were available: (a) the main areas that needed functional strengthening and other TA activities; (b) the outline of the conceptual IT infrastructure; (c) the packaging of services and goods to be procured, and (d) the estimated costs of the procurement packages. Based on these building blocks, the Project was designed and appraised.

50. The Project design was structured logically among three components/institutions with institutional building combined with IT investments. The SBV-PMU has considered the combination of institutional building and IT investments as an important factor that contributed to the Project’s success. Stand-alone TA projects had often failed to motivate the beneficiaries to internalize and implement the TA recommendations while the IT-only projects had frequently suffered from fragmented responses to the business needs. Because the Project design closely integrated these two types of activities, TA was adopted into the day-to-day operations and an integrated IT architecture was established. According to the client’s feedback, these were the main factors that led to the improved efficiency and effectiveness in the delivery of their main functions.

51. The Project design was complex but associated challenges and risks were appropriately identified and acknowledged. The Project was acknowledged as the largest operational undertaking by the SBV, CIC and DIV. It provided the needed vision and challenge, and adequately raised the bar to bring improvements in the institutional leadership, implementation capacity, and developmental impact for the beneficiary institutions. The Vietnamese Authorities had recognized challenges but had decided to adopt the design, as the SBV, CIC and DIV needed a more comprehensive approach of change. In their responses to the ICR questionnaire, the Project counterparts considered benefits outweighing difficulties due to the complexity. All substantial risks as identified in the PAD materialized and in general, the mitigation measures proved helpful. The low risk of a mismatch between the users’ needs and the new systems did not materialize for the SBV and CIC. It materialized for the DIV who was expected to become a risk minimizer but remained largely as a pay-box for the banks10 . This risk was significantly mitigated by the SBV’s regulation

10 DIV has more intervention authority over smaller CIs such as the PCFs.


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on information sharing between the SBV and DIV that ensures that the findings produced through the DIV’s risk-analysis systems are regularly shared with the SBV management and the BSA.

52. Change management needs were not addressed in the Project design. The PAD rightly acknowledged the substantial risk that “a weak capacity in managing complex IT-based projects, lack of expertise on relevant technical subjects and time needed to digest new concepts and reach consensus of changes may significantly delay project implementation”. This risk materialized but could have been better mitigated if the change management support was available from the beginning. This shortcoming was addressed during the 2014 restructuring when the change management consultant was engaged to help with the communication on the Project benefits to the broad audiences at the SBV.

53. The Project design would have benefitted from a more agile approach if the IDA funding and the government’s foreign currency allocation could have been secured upfront beyond the original implementation period of five years. The new WB’s Multiphase Programmatic Approach type of an instrument would have suited better the Project. Under the phased-in program, the first phase/project could have focused on functional strengthening, conceptual design of the ICT infrastructure and preparation of bidding documents (three years) and the second phase/project could have been used for better sequenced systems procurement and implementation (five years). However, the Multiphase Programmatic Approach has been available only since July 2017.

54. The Project benefitted from an additional funding provided by the development partners. In addition to the Bank budget, three grants from the Government of Luxemburg, the Government of the Netherlands and the Government of Spain helped to finance the technical analyses and appraisal. The SBV’s project preparation work was supported by the Japanese Government PHRD grant. This additional funding helped to improve the Project design and reduced the Project preparation time, as it enabled to engage the former central bank executives with expertise in the policy function and banking supervision as well as a consultant experienced in the banking IT systems in the Project preparation. The availability of such strategic advice would have been useful throughout the Project implementation.

B. KEY FACTORS DURING IMPLEMENTATION 55. Strong management commitment in implementing the Project. Throughout the Project implementation, the SBV management maintained a well-funded PMU and kept the PMU leadership and core staff unchanged. The SBV management played a crucial role in making sure that the accepted design of the centralized information management system was intact, the WB procurement and financial management guidelines were followed, and the agreed-upon action plans on implementation schedules and anti-fraud and corruption procedures were implemented. The SBV management decisions helped the PMU to better manage the user expectations and their late-stage requests for the system changes. The DIV management also kept the leadership and core staff of the DIV-PIU unchanged and provided direct leadership to the PIU.

56. Dedicated PMU and PIU. The PMU was led by the SBV’s IT Department Director-General who was supported by two full-time deputy directors with experience in donor project management. The PMU had full-time staff in charge of procurement, financial management and administrative affairs (e.g. management reporting, interpretation and translation). Compared to their peers outside the PMU, the PMU staff worked extensive hours and often in weekends to coordinate with the WB project team, international experts and vendors. At the beginning of the Project, the PMU was relatively unexperienced in working with foreign experts and managing large consultancy and vendor contracts. Over the years, the PMU gained experience and confidence. For instance, the PMU managed several large system implementations at the same time and communicated well with the WB team and vendors. The overall Project


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management was effective. The DIV-PIU was dedicated in similar ways. The PIU adopted the international good practices in managing consultants and the system supplier. For example, once the tests were completed for the main module, PIU conducted a survey to collect user feedback and perform the statistical analysis on the frequency of the system glitches/errors and the nature and source of these issues. Such findings helped to provide a more targeted response11.

57. Committed implementation support consultants. International consultants that supported the SBV and DIV had the right experience and skills. Under the SBV component, at first there were communication problems which caused delays in the consultancy contract and the overall project implementation. These problems could be attributed to two main factors: (a) inadequate communication skills of some consultant team members, and (b) the functional departments had not yet seen the benefits of gap analyses. After the initial know-your-client (and know-your-consultant) phase, the communication under the Project improved significantly. Despite the implementation delays, the consultant maintained a capable team for more than eight years without increasing the contract value.

58. Joint system implementation teams. The SBV adopted a good approach in system implementation by having staff from the PMU/PIU, the IT departments and the functional departments working together with vendors as one team. This alleviated communication barriers and ensured the user and operational acceptance of the new systems. For example, the SBV’s implementation team for the central data warehouse systems (SG4) included 18 people from the IT Department, 47 people from the functional departments and 63 SBV branches. In addition, 123 CIs with 2,362 branches, 1,179 People’s Credit Funds, and three micro-finance institutions were mobilized for the SG4 operational acceptance tests. On the vendor’s side, 30 people worked closely with the SBV’s implementation team and the CIs for 25 months. Implementation team for the CIC’s operational system included 6 people from the IT Department, 15 people from the functional departments and more than 40 vendor staff to work closely for 28 months. In DIV, the system implementation team included 10 people from the IT department, 40 people from the functional departments and over 100 people on the vendors’ side to work closely together for 22 months. These figures also demonstrate the level of commitment by the clients and their contractor management.

59. Disciplined procurement and the WB support. The procurement activities, including the large consultancy and goods packages, were conducted in a disciplined manner and in accordance with the WB procurement guidelines and the Bank review procedures as stipulated in the Project’s Financing Agreement. The WB team’s diligent reviews of the procurement documents, the TORs and the TA outputs, as well as their timely responses in addressing related issues, helped clients to better manage procurement risks and ensure the quality of acquired consulting services and business IT systems.

60. Timely project restructurings. Project restructurings were timely and extensions of the Project closing date by three years significantly improved the likelihood of completing all project activities and achieving the PDOs. The restructuring of 2014 also reallocated some project funds, so that some new activities critical for the Project results and sustainability (e.g. Cybersecurity Strategy, Change Management) could be delivered.

61. Early implementation delays. There were considerable delays in engaging the two Project implementation support consultants under the SBV and CIC components. This can be attributed to (a) difficulties in consensus building between the relevant SBV departments on the consultant selection; (b) the counterparts’ lack of experience with the WB’s QCBS selection and evaluation of proposals methodologies; and (c) long time for accepting the outputs of consultant because of the change in SBV team (the staff who reviewed reports was new and had not been engaged in

11 It was found that most of the so-called system errors were due to the user unfamiliarity with the new system.


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the institutional assessment, gap analyses and selection of the consultant phases). The DIV component implementation had delays for similar reasons.

62. Delays due to regulatory changes in the middle of system implementation. Two cases were noticed under the SBV component. In the first case, the implementation of the centralized data warehouse system was delayed because the relevant regulation was amended right after the vendor had completed the specific system design. Because of this regulatory change, about 69 percent of templates had to be re-written. Exceptional efforts by the WB team and the joint implementation team helped to ensure that despite delays, the statutory deadline for the new system to go-live was met. In the second case, the module for reporting on the results of forex operations was customized per users’ request as to comply with the relevant Government regulation. This customization changed the standard function of reporting on daily re-evaluation of foreign exchange reserves to the monthly reporting. However, during the operational acceptance testing, one SBV department found out that they would also need daily reports for their operations (e.g. forex limit management). It took several months for the contractor to develop a bridging mechanism as a temporary solution, but it was done without an increase in the total contract value. Customization of this feature in the reporting module did not affect the overall system performance. However, in retrospective, it might have been more efficient not to customize the international standard of daily reporting function but develop a bridging mechanism for meeting the Government requirement of monthly reporting.

63. Customization of systems. Customization of the off-the-shelf systems is unavoidable, and it is also a typical source of failure for IT projects. The fact that none of the customizations required during the Project implementation threw the Project completely off-track deserves to be highlighted.

64. Change and expectations management. Systems replacement transformed the operating models of SBV, CIC and DIV and required to manage changes to the business and IT procedures, roles and responsibilities, policies and procedures, and the way of doing business. Transformation is all about the change and the Project significantly benefitted from engaging the change management consultant to effectively communicate on the Project benefits after the 2014 restructuring. Equally important was users’ expectations management on what the new systems can deliver. In several cases under the SBV component, users continued to request functional changes even after the user acceptance tests were completed. Direct involvement of the SBV management in setting the cut-off date for additional changes helped to avoid additional delays.


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IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME

A. QUALITY OF MONITORING AND EVALUATION (M&E)

M&E Design

65. Overall, the M&E design was assessed relevant in the context of the Project at time of preparation. At the Project design, the WB was applying the SMART principle in designing the M&E frameworks12 and the Project complied with this. The original PDO, maintained throughout the project life was clear. However, the second part of the PDO statement beginning with “through (a) developing …” set a limit to what can be done under the Project and might have reduced the chance for adding some new activities during the Project implementation. The applicable international standards were specified and benchmarks and targets in terms of reaching them were established. The set of PDO and IR Indicators (which were further defined by specific measurement) was logical and relevant. However, some of the indicators were related to policy decisions and thus, were beyond the project’s control (i.e. application of IAS/IFRS; publication of research). Also, the M&E design did not provide for a full-time M&E specialist at the PMU.

66. The 2014 project restructuring significantly improved the M&E. It provided better definition of indicators, further specified the application of international standards, and modified the Outcome Indicator for the SBV’s accounting function to accommodate regulatory constraints. However, some of the PDO and IR indicators could have been further strengthened. For example, connection with the policy decisions could have been changed. Also, the verification of overall ICT infrastructure design by the international panel and completion of all related training activities could have been replaced by better measurements, such as “an integrated overall ICT infrastructure in place with enhanced cyber security features” and “Periodic evaluations of training results show improved knowledge and skills”. Given that the cyber security threats were acknowledged and the SBV’s Cybersecurity Strategy was to be prepared, this could have been reflected also in the M&E framework. For example, given the substantial amount of training provided to the staff of three beneficiary institutions, the percentage of such effort oriented to delivering basic cyber security education to everybody interacting with the new systems would have been a good indicator.

M&E Implementation 67. The selected set of indicators were tracked regularly, and updates were provided by the PMU on implementation support missions. Data on implementation progress and outputs produced were collected regularly. In 2016, the WB team helped the selected staff of the PMU and PIU to attend training on M&E. This helped to improve the Project’s M&E capacity and for the last three years of Project implementation, data collection and reporting on the PDO and IR indicators was significantly improved. However, data consolidation capabilities at the PMU and PIU could have been further strengthened.

M&E Utilization 68. The PMU and WB team used the indicators to track progress towards achieving the PDO. For example, at the Mid-Term Review it was acknowledged that several original indicators needed to be readjusted through a formal project restructuring process to better reflect the reality. The WB team regularly assessed progress towards achieving the PDO level targets in its Implementation Status Reports (ISRs), and the implementation support mission’s Aide-Memoirs that

12SMART stands for specific, measurable, attributable and time-bound.


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were always shared with the clients’ management teams. Starting from 2015, Aide-Memoires included the full RF in the annex. During the last two years of implementation, when the Project had started to demonstrate results, the M&E was used for communication on the Project benefits to the broader audiences within the three beneficiary institutions.

Justification of Overall Rating of Quality of M&E Rating: Modest 69. The M&E system was in acceptable quality to measure progress towards achieving the PDOs but had several weaknesses and is therefore rated Modest. The PDO could have been less restrictive. Training on M&E was provided to the PMU and PIU staff, but the Project would have benefitted from having a full-time M&E specialist at the PMU since the beginning of the Project. This would have made better statistics and analysis of results available. The 2014 restructuring significantly improved the M&E system, but some indicators could have been further improved. For example, indicators related to policy decisions could have been modified to better reflect investments, and an indicator related to cybersecurity could have been incorporated. It is noticed, however, that M&E was used for communication on the Project benefits during the last two years of implementation.

B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE

70. The Project had no compliance issues. The Action Plan for Improved Governance and Transparency in Procurement was implemented throughout the project life. Although the Project was comprehensive and complex, including the procurement of large IT and multiparty consultancy packages, there were no fraud and corruption complaints to the Bank’s integrity vice-presidency.

71. No environmental and social safeguards policies were applied to this Project as it was classified as Category C during appraisal and implementation.

C. BANK PERFORMANCE

Quality at Entry 72. The Project design reflected the strong interest and commitment of the stakeholders to address their main institutional weaknesses in information management and disclosure that had hindered compliance with international standards in the delivery of key functions. The Bank team conducted extensive constraints analysis which were critical to the design of the Project; and played a crucial role in successfully convincing the Ministry of Planning and Investment and the MOF on the benefits of combining IT investments with functional strengthening and capacity building. The initial Government preference was to invest only in IT. The Bank team worked closely with the SBV’s project preparation team to ensure that there were no mismatches between the Government’s project design as presented in the pre-feasibility and feasibility study reports and the Bank’s appraisal document in terms of project objectives, scope, main activities, detailed costing and procurement packages. Given the SBV’s lack of experience in managing large scale and complex IT investments that were combined with the functional change, the Bank team’s inputs greatly facilitated the client’s project design activities. The participatory approach for the Project design ensured a broader Government buy-in which contributed to the timely Project effectiveness. At the request of the SBV, the Bank team provided additional TA on improving the Central Bank Law and CIs Law and the inputs of those TA activities in turn fed into the Project design for the functional strengthening activities. Given the complexity of the Project and governance issues under a few


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investment projects financed by the Vietnam’s development partners, the Project was subjected to the Regional Management Review before appraisal. This provided additional quality assurance of the Project design.

Quality of Supervision 73. Project implementation support was extensive and done in a timely manner. Regular supervision missions were undertaken twice a year to review progress and identify any issues. The WB team worked closely with counterparts during missions to assess the issues, understand the root causes, and agree on the next steps for each beneficiary institution. At the end of each mission, the team regularly prepared an Aide- Memoire to summarize mission findings, key issues for the SBV and DIV management attentions, and record all agreed actions to keep the Project on track and address any pending issues. During the life of the Project, the WB team submitted 15 ISRs to track and report to the WB management. Although there were no ISRs filed in 2012, Aide-Memoires were prepared, shared with the clients and followed.

74. Implementation support was enhanced by having the procurement and financial management experts based in Hanoi, which enabled constant and regular interaction with client. This proved highly important during the preparation of procurement packages for the large scale and complex IT systems. During the procurement processes, the Bank team’s inputs were critical in ensuring the clarity and adequacy of the procurement documents and the evaluation results determined by the counterparts. The Bank team’s involvement in the review process saved time as it provided the quality assurance. During the ICR preparation, clients provided highly positive feedback on the Bank team’s timely and value-added support during the challenging procurement and contract management processes of the large IT systems.

75. Throughout the Project implementation, the Bank maintained a task team with balanced expertise in the areas of banking technologies and IT systems procurement. The Bank team had experience in the supported functional areas, investment project management and commercial contract management. To support the development of the SBV’s Cybersecurity Strategy, the WB team engaged two technical experts from the Bank’s IT department to review and comment on the Strategy and advise the SBV on the cybersecurity matters. The Bank team played a crucial role in the Project implementation, e.g. when the benefits of gap analyses were not well understood and resulted in project delays, and when users continued to request changes at the very late stage of system implementation. Clients gave a high score for the Bank’s performance during supervision in their responses to the ICR questionnaire.

Justification of Overall Rating of Bank Performance Rating: Moderately Satisfactory 76. The Project benefited from extensive analytical work and consultations at the Project design and received intense and dedicated supervision and support from the WB team. The WB team had a strong working relationship with the client and there was a mutual trust. The WB supervisions were highly appreciated by the client and reinforced and guided the Project to address challenges and implementation issues. However, the complexity of the Project in relation to borrower capacity resulted in earlier implementation delays. The overall WB performance is rated Moderately Satisfactory.


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D. RISK TO DEVELOPMENT OUTCOME

77. The risk to the sustainability of PDO can arise if the new IT systems are not timely upgraded or capable IT staff were not available to assume the responsibility for the maintenance and further development. For example, the SBV’s data center needs to expand the data storage capacity soon and the CIC system needs to significantly enhance the hardware and standard software capacity. In addition, the institutional arrangements and IT devices for cyber security need to be revisited as to enhance system safety and security. One important aspect of the information security is that the remote back-up center needs to be fully capable of taking over in case of failure of the main site. These risks are being mitigated as the SBV has adopted a plan to enhance cyber security and DIV plans to launch an assessment on the cyber security of their operational system. Also, at the time of the ICR preparation, budget was expected to be allocated for upgrading the SBV data center and the CIC system’s HW/SW capacity.

78. The improved business models require strong management commitment to continuously upgrade the skills of staff and introduce new practices. The impact of Project outcomes on the staff skills requirements would become more obvious over time. However, there is clearly a need for continuous professional training on the theory and practice of financial risk management, especially at the SBV and DIV. The SBV needs to further enhance the economic research capacity and the CIC and DIV should improve the capacity on conducting statistical analyses. It is encouraging that the SBV’s Human Resource department has prepared a three-year training plan for staff at the Headquarter and in the branches, which is continuing the training program as provided under the Project. The CIC is preparing a long-term IT strategy for 2020-30 to adopt the latest technologies as to better service its clients at a low cost. These initiatives are positive signs of the outcome sustainability.

V. LESSONS AND RECOMMENDATIONS

. 79. The strong client ownership and capacity, and the World Bank’s strong supervision support are crucial for complex IT-based projects. The Project benefitted significantly from the strong management commitment of the SBV, CIC and DIV and from having the stable implementation teams. The WB team’s strong implementation support in the areas of functional and business requirements, IT, and IT procurement and contract management was important for addressing the many issues and challenges associated with acquisition and implementation of large-scale IT packages.

80. The project design must be based on solid analysis of institutional, operational and technological needs and feasible options. The Project implementation has highlighted the importance of developing a clear conceptual framework of functions to be upgraded, and detailed costing and basic packaging of services and technologies to be procured. Also, in a low-capacity environment, capacity gaps and training activities should be identified and filled early to drive the pace of project implementation. The early gap assessments are crucial for laying out the priorities and sequencing of activities with a staff training plan. The availability of experienced IT consultants, as well as expert support on risk identification and management are crucial for the project success.

81. It is important to remain flexible in the rapidly changing IT environment. For example, the cyber security concerns were not as relevant as nowadays during the Project preparation. Its importance was however noted and addressed during the Project restructuring and funds were allocated for the development of the Cybersecurity Strategy.


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82. Complex IT-based projects require longer implementation time. This Project has demonstrated that complex IT projects may take longer than expected time to complete since they require significant consensus-building among stakeholders before the finalization of the IT-systems design.

83. The technology alone does not deliver the change. Acquiring state-of-the-art IT systems is very important part of financial modernization, but it cannot lead to the desired results without changes to business models and new capacity and confidence to implement re-engineered processes. Therefore, a good communication on the project benefits throughout the project implementation is essential, as is the appropriate support to the end-users once the systems go live.


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ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS

A. RESULTS INDICATORS A.1 PDO Indicators Objective/Outcome: The objective of the Project is to assist the State Bank of Vietnam, the Credit Information Center and the Deposit Insurance of Vietnam to improve the delivery of their main functions in accordance wi

Indicator Name Unit of Measure Baseline Original Target Formally Revised Target

Actual Achieved at Completion

Strengthened main functions of SBV

Text 1 (a) Policy function

--Lack of sectorization of credit and coverage of certain loans and financial leases in particular regarding the state sector.

--Reports (6) submitted to IMF with a lag of 10 to 12 weeks.

--No regular publication of basic statistics and research results.

1(b) Supervision function

1(a) Coverage, timeliness and disclosure of monetary and financial statistics largely consistent with IMF guidelines

1(b) Offsite supervision partially compliant with BCP No. 16-20

1(c) Presentation, consolidation and timeliness of SBV’s financial statements in line with IAS/IFRS

1 (a) Statistics accuracy and consistency improved; Monthly Monetary Survey submitted to IMF; and results of two research programs regularly published.

1(b) Compliance with BCP Principles on offsite surveillance improved, in particular regarding regular offsite supervision reporting of banks’ risk profiles.

1(c) Presentation,

1 (a):

--Input data quality significantly improved as duplications and inconsistencies were minimized

--Unwanted changes to original data prevents as responsibilities for data collection, processing and storage are separated from those of data consolidation and reports production

--The Monthly


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--Materially non-compliant with BCPs on offsite supervision

1 (c) Accounting function

--Presentation of SBV’s financial statements without notes to the financial statements

--Difficulties in consolidating central banking operations and branch operations

--No daily balance sheet

consolidation and timeliness of SBV’s financial statements in line with both Vietnamese Accounting Standards (VAS) and SBV management requirements on the one hand, and international practices and standards applicable to central banks on the other, in particular in terms of presentation of consolidated financial statements in accordance with statutory requirements of Vietnam.

Monetary Survey was submitted to the IMF with less time elapse (in 45 days after the end of month as compared to 60 days before)

--Results of the two research programs on inflation and interbank risks regularly shared within SBV (publication of the results regulated by national laws and regulations)

The 1(a) target is considered largely achieved.

1(b):

--New operational policy/manual standardized supervision processes, required onsite-offsite collaboration and consolidated supervision, as well as other requirements in


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accordance with the relevant BCPs

--Risk profiles of individual CIs and different groups of CIs were assessed and reported on a quarterly basis

The 1(b) target is considered achieved.

1(c):

--Presentation and consolidation of SBV’s financial statements were in compliance with the 2015 VAS that is based on IAS/IFRS (although there are gaps in particular regarding historical and fair value accounting)

--Consolidation of daily balance sheet for the whole SBV was enabled and Monthly balance sheet completed within shorter time

--Year-end closing was


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completed with less elapse (in 10 days as compared to 15 days)

The 1(c) target is considered largely achieved

01-Nov-2008 31-Oct-2008 22-Dec-2014 31-Dec-2017

Strengthened SBV Accounting Function

Text --Presentation of SBV’s financial statements without notes to the financial statements

--Difficulties in consolidating central banking operations and branch operations

--No daily balance sheet

--Presentatio --Presentation, consolidation and timeliness of SBV’s financial statements in line with both Vietnamese Accounting Standards (VAS) and SBV management requirements on the one hand, and international practices and standards applicable to central banks on the other, in particular in terms of presentation of consolidated financial statements in accordance with

--Presentation and consolidation of SBV’s financial statements were in compliance with the 2015 VAS that is based on IAS/IFRS (although there are gaps in particular regarding historical and fair value accounting).

--Consolidated daily balance sheet for the whole SBV was available next day and Monthly balance sheet completed within shorter time.

--Year-end closing was


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statutory requirements of Vietnam.

completed with less elapse (in 10 days as compared to 15 days).

--The 1(c) target is considered largely achieved.

01-Nov-2008 31-Oct-2008 22-Dec-2014 31-Dec-2017

Strengthened SBV Supervision Function

Text Materially noncompliant with the BCPs on offsite supervision.

--Offsite supervision partially compliant with BCP No. 16-20.

--Compliance with BCP principles on offsite surveillance improved, in particular regarding regular offsite supervision reporting of banks’ risk profiles.

--New operational policy/manual standardized supervision processes, required onsite-offsite collaboration and consolidated supervision, as well as other requirements in accordance with the relevant BCPs.

--Risk profiles of individual CIs and different groups of CIs were assessed and reported on a quarterly basis.

--The 1(b) target is considered achieved.


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01-Nov-2008 31-Oct-2008 22-Dec-2014 31-Dec-2017

Strengthened SBV Policy Function

Text Lack of sectorization of bank credit and coverage of certain loans and financial leases in particular regarding state sector. Reports (6) submitted to IMF with a lag of 10-12 weeks. No regular publication of basic statistics and research results.

--Coverage, timeliness and disclosure of monetary and financial statistics largely consistent with IMF guidelines.

--Statistics accuracy and consistency improved; Monthly Monetary Survey submitted to IMF; and results of two research programs regularly published.

--Input data quality significantly improved as duplications and inconsistencies were minimized.

--Unwanted changes to original data prevents as responsibilities for data collection, processing and storage are separated from those of data consolidation and reports production.

--The Monthly Monetary Survey was submitted to the IMF with less time elapse (in 45 days after the end of month as compared to 60 days before).

--Results of the two research programs on inflation and interbank risks regularly shared


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within SBV (publication of the results regulated by national laws and regulations)

--The 1(a) target is considered largely achieved.

01-Nov-2008 31-Oct-2008 22-Dec-2014 31-Dec-2017

Comments (achievements against targets): Largely achieved.



Improved credit information provided by CIC

Text Information on credit and borrowers considered limited by users. No data reliability control mechanism in place. Rich data on general evolution of credit and total exposer by CI not utilized by SBV.

--Core business strengthened consistent with practices of OECD PCRs.

--Credit information provided by CIC is comprehensive, covering repayment history, unpaid debts or credit outstanding by borrower and by contract.

--CIC is now in compliance with the OECD PCR practices, in particular with regard to a) accurate and sufficient reports and assessment on credit, b) provision of credit scores and ratings, and c) enhanced privacy and confidentiality.

--According to the


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rankings under Getting Credit Scores of the Doing Business Indicators, the Depth of Credit Information in Vietnam improved from 3 in DB2008 to 7 in DB2018, and the public credit registry’s coverage of adults rose from 9.2% to 51%.

--Business volume increased significantly, enabling fee reductions.

01-Nov-2008 31-Oct-2008 22-Dec-2014 31-Dec-2017

Comments (achievements against targets): Fully achieved.



Enhanced risk management of DIV

Text Current systems and capacity not tested for bank risk assessment and payouts for banks.

--Coverage of risk assessment exposure improved in line with the recommendations of the International

--Coverage of risk assessment improved in line with recommendations of the International

-- IADI Core Principle No. 4 largely compliant and compliance of IADI Core Principle No 13


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Working Group on Deposit Insurance under the Financial Stability Forum.

Working Group on Deposit Insurance under the Financial Stability Forum

--Risk assessment reports cover all material aspects of DIV exposures

improved.

--Assessment of insured CI failure probability considered both quantitative and qualitative information as it was supported by timely data on insured CIs from SBV’s data warehouse, macro-economy information and findings/results of DIV’s own operations (e.g. examination of insured CIs).

01-Nov-2008 31-Oct-2008 22-Dec-2014 31-Dec-2017

Coverage of risk exposure assessment

Text Coverage of risk exposure assessment is insufficient and is not aligned with global good practices

Coverage of risk exposure assessment is insufficient and is not aligned with global good practices

Coverage of risk exposure assessment improved in line with the recommendations of the International Working Group on Deposit Insurance under the Financial

Coverage of risk exposure assessment is in line with the recommendations of the International Working Group on Deposit Insurance under the Financial


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Stability Forum Stability Forum

01-Nov-2008 31-Oct-2008 22-Dec-2014 31-Dec-2017

Risk assessment reports Text Risk assessment reports are materially short in covering all aspects of DIV exposures, due to lack of information resources

Risk assessment reports are materially short in covering all aspects of DIV exposures, due to lack of information resources

Risk assessment reports cover all material aspects of DIV exposures

DIV's risk reports comprehensive and cover all material aspects of DIV exposures

01-Nov-2008 31-Oct-2008 22-Dec-2014 31-Dec-2017

Comments (achievements against targets): Largely achieved

A.2 Intermediate Results Indicators

Component: Component 1: Modernizing SBV

Component 2: Strengthening CIC

Component 3: Enhancing DIV



Functions strengthened and business processes re-engineered

Text --Patchwork of existing regulations and operational policies and procedures mainly as

--New regulations and operational policies and procedures in place

--New/revised regulations and operational policies and procedures

--A number of new/revised regulations, policies and procedures implemented, for


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responses to administrative requirements

--New practices and products adopted without operational guidelines

implemented example: a) SBV Circular 35/2015 that centralized CI reporting regime, b) SBV Decision 08/2013 that upgraded SBV’s accounting regime in accordance with VAS, c) SBV Circular 02/2013 and SBV Circular 03/2013 that minimized gaps in credit information collection

--SBV standardized 16 main operational processes, CIC standardized 10 processes and DIV 8 main processes

This target was achieved

01-Nov-2008 31-Oct-2008 22-Dec-2014 31-Dec-2017

Medium-term training program implemented by SBV

Text --Ad hoc staff training without comprehensive medium-term program based on

--Medium-term training program adopted

--Medium-term training program implemented.

--Skills gaps of main functions were analyzed

--A 3-year training program (2013-15)


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solid skills gap analysis containing 270

courses was adopted and implemented (8,656 attendants)

--In general feedback from trainees were positive


01-Nov-2008 31-Oct-2008 22-Dec-2014 31-Dec-2017

Research program adopted by SBV

Text Limited research and statistics capability

Research program adopted

Research program on two topics implemented: (i) inflation forecasting and (ii) assessment of interbank risk contagion

--The research on Inflation Forecasting and Determination of Inflation Targets was carried out regularly which included the following main activities: a) inflation forecasting modelling and b) regular reports to management

--The research produced other reports e.g. on impacts on inflation of


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fuel price changes, electrical price adjustment and credit growth

--The research on Assessment of Contagious risks in Interbank Market turned out several reports which were shared within SBV


01-Nov-2008 31-Oct-2008 22-Dec-2014 31-Dec-2017

New/revised regulations and operational policies and procedures implemented

Text --Patchwork of existing regulations and operational policies and procedures mainly as responses to administrative requirements

--New practices and products adopted without operational guidelines

--New regulations and operational policies and procedures in place

--New/revised regulations and operational policies and procedures implemented

--A number of new/revised regulations, policies and procedures implemented, for example: a) SBV Circular 35/2015 that centralized CI reporting regime, b) SBV Decision 08/2013 that upgraded SBV’s accounting regime in accordance with VAS,


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c) SBV Circular

02/2013 and SBV Circular 03/2013 that minimized gaps in credit information collection

--SBV standardized 16 main operational processes, CIC standardized 10 processes and DIV 8 main processes


01-Nov-2008 31-Oct-2008 22-Dec-2014 31-Dec-2017

Comments (achievements against targets): Achieved.



Centralized ICT platform established

Text Dispersed and semi-automated systems led to inefficiency and weak risk control

System design endorsed by International Panelists

Automated and operational procedures in place to detect inconsistencies

--The new systems in operation (3 in SBV, 1 in CIC and 1 in DIV) contained automated


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or errors in information provision and transmission

mechanisms to detect errors and inconsistencies


01-Nov-2008 31-Oct-2008 22-Dec-2014 31-Dec-2017

System implementation verified by a 3rd party consultant

Text Contract implementation for supply and installation of IT systems subject to 3rd party verification before any system is accepted

System implementation verified by 3rd party consultant

System implementation verified by 3rd party consultant.

All system installation processes were validated and verified by 3rd party consultants


01-Nov-2008 31-Oct-2008 22-Dec-2014 31-Dec-2017

Automated and operational procedures in place

Text Dispersed and semi-automated systems led to inefficiency and weak risk control

System design endorsed by International Panelists.

Automated and operational procedures in place to detect inconsistencies or errors in information provision and transmission

The new systems in operation (3 in SBV, 1 in CIC and 1 in DIV) contained automated mechanisms to detect errors and inconsistencies

This target was


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achieved

01-Nov-2008 31-Oct-2008 22-Dec-2014 31-Dec-2017




Management and staff trained in new practices, processes and products

Text Management and staff unfamiliar with international practices of data management and related IT

Management and staff trained in new regulations, operational policies, application tools and IT skills related to new information management system

All related professional and IT training activities completed.

--SBV conducted 143 training courses with 3733 attendants

--CIC conducted 15 training courses with 366 attendants

--DIV conducted 214 training courses with 4488 attendants

--Generally feedback from attendants was positive


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01-Nov-2008 31-Oct-2008 22-Dec-2014 31-Dec-2017



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B. KEY OUTPUTS BY COMPONENT

Objective/Outcome 1: Improved delivery of SBV’s main functions

Outcome Indicators

1. Statistics accuracy and consistency improved; Monthly Monetary Survey submitted to IMF; and results of two research programs regularly published 2. Compliance with BCP Principles on offsite surveillance improved, in particular regarding regular offsite supervision reporting of banks’ risk profiles 3. Presentation, consolidation and timeliness of SBV’s financial statements in line with both Vietnamese Accounting Standards (VAS) and SBV management requirements on the one hand, and international practices and standards applicable to central banks on the other, in terms of presentation of consolidated financial statements in accordance with statutory requirements of Vietnam. 4. SBV chart of accounts is regulated in Circular no.19/2015/TT-NHNN which is compliant with the best practices and has provided for regulations of VAS and SBV’s specific characteristics; SBV chart of accounts is designed in a way that it could be easily expanded to capture new business processes in the future as well as adapt changes on accounting standards and regulations. 5. SBV budgeting and budget management are automated to minimize manual operations.

Intermediate Results Indicators

1. New/revised regulations and operational policies and procedures implemented. 2. Research program on two topics implemented: (i) inflation forecasting and (ii) assessment of interbank risk contagion. 3. Medium-term training program implemented.


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4. Automated and operational procedures in place to detect inconsistencies or errors in information provision and transmission. 5. System implementation verified by 3rd party consultants. 6. All related professional and IT training activities completed.

Key Outputs by Component (linked to the achievement of the Objective/Outcome 1)

1. Key outputs linked to Outcome Indicator 1:

• Conceptual framework and a road map leading to the new CI reporting regime

• Inflation forecasting model/process and inflation targeting strategy, Liquidity forecasting methodology and modeling, OMO procedures, Output templates on in-out capital flows, and Interbank contagion risks model

• Design of the two research programs


• Conceptual design and inputs to six main business processes, and an offsite operational manual

• Conceptual design and inputs to administrative procedures and arrangement to ensure information sharing between onsite and offsite supervision


• Centralized recording model • Design of the new Chart of Accounts • Recommendations on recording and measuring transactions in

accordance with IFRS


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4. Key outputs linked to all 3 Outcome Indicators (other than the IT systems):

• Stocktaking and gap analyses of main functions • Gap analysis of key personnel’s skills, the mid-term training

program, and Professional and IT training materials • Conceptual design of the integrated and centralized ICT platform • 3rd party verification reports • main consulting contracts that supported functional strengthening

and system implementation (including that for the CIC component), quality assurance, change management and 3rd party verification

5. IT system outputs - Five main goods packages designed (bidding documents), procured and implemented, resulted in the following IT systems:

• Integrated and centralized ICT infrastructure including a state-of-art data center

• A core data warehouse that captures all reported data from CIs and that from markets and SBV operations

• Database query tools and outward reporting system that support the delivery of the SBV’s core businesses

• A core banking system for SBV’s financial accounting and reporting and an ERP system

• A HR management system and a document management system


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Objective/Outcome 2: Improved delivery of CIC’s main functions

Outcome Indicators

1. Credit information provided by CIC is comprehensive, covering repayment history, unpaid debts or credit outstanding by borrower and by contract


1. New/revised regulations and operational policies and procedures implemented 2. Automated and operational procedures in place to detect inconsistencies or errors in information provision and transmission 3. System implementation verified by 3rd party consultants 4. All related professional and IT training activities completed


1. Key outputs linked to Outcome Indicator (excluding systems):

• Inputs to SBV circulars and decisions related to credit information collection and CIC’s functions, duties and organizational structure

• Conceptual design of the new credit information system • Professional and IT training materials

2. One goods package designed (bidding documents), procured and implemented, resulted in the new credit information system that:

• Collects all important aspects of credit information and related information outside banking industry

• Timely detects logic and data errors and promptly provides feedback to Cis


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• Ensures accuracy and consistency of outward reports

Objective/Outcome 3: Improved delivery of DIV’s main functions

Outcome Indicators

1. Coverage of risk assessment improved in line with recommendations of the International Working Group on Deposit Insurance under the Financial Stability Forum 2. Risk assessment reports cover all material aspects of DIV exposures


1. New/revised regulations and operational policies and procedures implemented 2. Automated and operational procedures in place to detect inconsistencies or errors in information provision and transmission 3. System implementation verified by 3rd party consultants 4. All related professional and IT training activities completed


1. Key outputs linked to Outcome Indicator 5 and 6 (other than the IT systems):

• Inputs to 8 new main business processes, divided into 87 small business processes

• Conceptual design of the new credit information system • The 3rd-party verification report • Professional and IT training materials • 3 consulting contracts that supported conceptual design,

procurement and installation of the new system, change management and 3rd-party verification


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2. IT system outputs - One goods package designed (bidding documents), procured and implemented, resulted in the new DIV operational system that includes: • An integrated IT platform consistent with international standards • A resolution module for premium collection, special examination,

payout and liquidation • A risk monitoring module for risk analysis, DI ratings, risk-based

premiums calculation and onsite examination • A finance module for financial planning, fund management and

coverage limit management • An information management module for data collection and

warehousing • Three back-office modules for HR management, ERP and

document management


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ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION

A. TASK TEAM MEMBERS

Name Role

Preparation

Supervision/ICR

Ulle Lohmus Task Team Leader(s)

Ba Liu Nguyen Procurement Specialist(s)

Ha Thuy Tran Financial Management Specialist

Alwaleed Fareed Alatabani Team Member

Anna L Wielogorska Team Member

Harish Natarajan Team Member

Nga Thi Phuong Bui Team Member

Xiaofeng Hua ICR Author / Team Member

Jiyoing Song ICR Support

Mariella Yadao ICR Support

Son Van Nguyen Environmental Safeguards Specialist

Nghi Quy Nguyen Social Safeguards Specialist

Huong Thi Mai Nong Counsel

Warren Paul Mayes Social Safeguards Specialist


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B. STAFF TIME AND COST

Stage of Project Cycle Staff Time and Cost

No. of staff weeks US$ (including travel and consultant costs)

Preparation FY05 2.675 70,937.80

FY06 44.307 258,775.41

FY07 33.241 162,433.92

FY08 22.910 177,272.92

FY09 7.850 28,493.90

Total 110.98 697,913.95

Supervision/ICR

FY09 5.447 25,590.56

FY10 10.650 62,286.03

FY11 17.537 109,509.66

FY12 14.930 106,057.12

FY13 22.652 135,234.65

FY14 22.465 137,203.13

FY15 22.950 141,183.21

FY16 14.357 115,829.08

FY17 7.792 95,509.34

FY18 7.705 104,966.48

Total 146.49 1,033,369.26


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ANNEX 3. PROJECT COST BY COMPONENT

Components Amount at Approval (US$M)

Actual at Project Closing (US$M)

Percentage of Approval (US$M)

SBV Component 1 - Functional Strengthening and Business Re-engineering

4.31 3.44 74.46%

SBV Component 2 - ICT Platform Development 37.97 30.21 92.50%

SBV Component 3 - Project Implementation Management

0.88 1.20 51.06%

CIC Component 1 - Business Process Re-engineering .46 .38 100%

CIC Component 2 - ICT Platform Development 10.56 6.46 99.23%

DIV Component 1 - Business Process Re-engineering 0.645 0.80 97.56%

DIV Component 2 - ICT Platform Development 16.97 10.67 84.75%

DIV Component 3 - Project Implementation Management

0.035 0.45

60.81%

Total 71.83 53.61 88.38%


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ANNEX 4. EFFICIENCY ANALYSIS

Economic benefits: The improved delivery of SBV’s policy and banking supervision functions are expected to contribute directly to macroeconomic and financial stability. The improved delivery of CIC’s credit information reporting function is expected to strengthen credit risk management of credit institutions, and hence contribution to financial stability. The improved delivery of DIV’s risk assessment and management function is expected to enhance Vietnam’s financial safety net, and hence contribution to financial stability. This is because these institutions play crucial roles in maintaining macroeconomic and financial stability. It is also because their main operations are standardized and supported by more timely, reliable and complete data, and therefore closer to international good practices. Operational cost savings: All beneficiaries have reported efficiency gains in terms of timeliness and reduced duplication of activities. This is because the integrated operational policy environment and the centralized ICT architecture have significantly reduced time for data collection, processing, validation and error detection and supported important task deliveries with automated business intelligence tools. For example, in the past before the project’s main activities were completed, data cleaning took days or weeks by each department that collected data from credit institutions, SBV branches or the central banking operations. Now data cleaning is automatically conducted and cleaned data is available within the day. At present functional staff can exploit data and produced customized reports on their own while in the past functional departments of the SBV and DIV had to rely on their IT department colleagues to generate reports to management. Regarding to reduced duplications of operational activities, a good example is SBV’s accounting function. In the past each branch and functional headquarter department had to keep a relatively large group of accountants to record and verify accounts, and conduct regular accounts closing. Now many of those duplicated activities are being eliminated and the accounting function can focus more on financial management. The reduced duplication of activities is expected to lead to cost savings for the three institutions. Under the CIC part the efficiency gains are also evidenced in the significantly increased operational revenue. This has enabled the CIC as a public sector institution to reduce the fee by 60 percent on credit rating product and 30percent on average for other products. Investment cost savings: before the Project, the SBV, the CIC and DIV acquired IT systems or developed them in-house per separate operational requests without the strategy/plan for the overall ICT architecture. Over the years patchworks were made to these stand-alone systems in attempts to meet changing operation requirements and newer technologies, but the systems were still out of line with the international standards. International experience shows that this is a costlier approach towards IT acquisition and upgrading. As a comparison, the Project adopted a holistic approach that anchored the procurement and implementation of the international standards IT systems on solid conceptual designs and secured multi-year warranties and maintenance services upfront. The new systems are up to the international standards (e.g. the data warehouse technology and the TIER III standard SBV data center) and are expected to run without major upgrading for the next five-years. This is expected to save the investment expenses for the three beneficiary institutions. Project implementation efficiency: All annual audit reports of the Project’s financial statements are unqualified. Although the Project was heavy with large IT packages and complex consultancy packages to procurement, there were no fraud and corruption complaints to the Bank’s INT (integrity vice presidency). As project financial management and procurement were conducted in compliance with the relevant Vietnamese laws and regulations and the World Bank guidelines, and because the Project’s Action Plan for Improved Governance and Transparency in Procurement was implemented throughout the project life, there were no project delays that was caused by financial irregularities or procurement frauds. All the large consultancy and goods packages were procured through international competitive biddings. As a result, significant cost savings occurred (US$11.7 million included counterpart fund), and the Project


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used the funding to acquire and implement a state-of-art SBV data center and the related technical advisory services. DIV used the saved fund to engage a consultant for the change management and the 3rd-party verification services. The changes that the Project has brought about in SBC/CIC/DIV’s operational environment are extensive and foundational. Some change is notoriously difficult and expensive, such as replacing the existing and somewhat outdated operational systems with centralized, integrated core banking systems. According to a 2015 IEEE (Institute of Electrical and Electronics Engineers) report, worldwide the success rate of business IT projects is only 64 percent.13 This is true even for developed countries. The UK government’s national electronic health record system was cancelled in 2012 after spending more than 11 billion British pounds. The U.S. Air Force’s project of defense enterprise accounting management system saw project cost doubled and implementation delayed for three years (from 2014 to 2017). An earlier paper also found that “a typical business systems project overruns its budget by about 100%”, and “only a quarter of such projects are delivered within 25% of their original target”. [McConnell14] In this context, the FSMIMS Project stands out for having no budget overruns and having largely achieved the original expected outcomes. As a matter of fact, due to SDR-USD exchange rate losses during project implementation, the Project was able to only utilize US$ 54.95 million to achieve the expected outcomes as compared to the originally estimated cost of US$60 million. This is another sign of the efficiency of the Project. The Project had long delays from the perspective of the original project closing date. Factors that affected project implementation are discussed in Section III. For the efficiency analysis, it is important to note that the original project closing date underestimated the challenges of the large-scale banking systems projects. According to a McKinsey report, on average core banking projects in the late 1990s and up to 2010 were implemented in 10 years.15 According to the responses to the ICR team’s questionnaire, the PMU considers that the appropriate project implementation period should be around eight years. Given these findings, the ICR assessment consider the long implementation period of the Project as a secondary factor affecting the rating of project efficiency. Quantitative Economic and financial analyses: As indicated in the PAD, conventional financial analysis was not conducted at project appraisal because of these two reasons: Project was not expected to directly generate revenue for the SBV, the CIC and DIV; and these public-sector institutions did not apply cost accounting methodology to capture all and each step of operational costs. At the ICR time, qualitative data on operational and investment cost savings are not available partly because the centralized business environment and automated processes are yet to lead to further institutional changes such as staff reassignments and organizational readjustments. In addition, the two reasons for not applying the conventional financial analysis remain true for the SBV and DIV. For the CIC, revenue figures have become available at project closure, but the institution has not yet applied cost accounting. For the same reasons quantitative economic analysis was not done at appraisal. At the ICR time, it is still difficult to measure in monetary times the benefits of the Project to Vietnam’s economy. Disbursement rate: Due to the depreciations of the SDR against the US dollars in the latter part of the project implementation period, the available IDA funding to the Project was only US$54.95 million equivalent, instead of US$60 million. At the original IDA credit account disbursement deadline (April 30, 2018), US$ 47.57 million was disbursed which was 86.57 percent of the total available IDA funding. Pending government procedure prohibited DIV to withdraw from the IDA funding after 2016 when DIV’s legal status was changed from a special-purpose public entity to a state enterprise. DIV used its own funds to pay the contractors for the job done.

13 “The enormous cost of IT project failure,” Beverley Head & David Walker, November 2016. 14 “The enormous cost of IT project failure,” Beverley Head & David Walker, November 2016. 15 “Overhauling Banks’ IT Systems,” Marcus Heidmann, March 2010, McKinsey & Company

https://www.intheblack.com/articles/2016/11/01/enormous-cost-it-project-failure

https://www.intheblack.com/articles/2016/11/01/enormous-cost-it-project-failure

https://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/overhauling-banks-it-systems


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ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS

After the FSMIMS project was closed, the SBV and DIV conducted their own evaluation of the Project with the support of the implementation support consultants. Below are the excerpts and summaries of the SBV report, which also includes DIV’s evaluation report.16 GENERAL ASSESMENT (excerpts with some edits)

FSMIMS project is the first project that SBV implemented simultaneously in various key areas of SBV such as monetary policy, banking supervision, forecasting and statistics, accounting and finance, document management and regulation, human resource management, credit information and deposit insurance. After nearly 9 years of implementation, thanks to close steering of SBV Management, dedicated support of WB Task Team and continuous effort of all staff at FSMIMS PMU, SBV departments at the headquarters and 63 provincial Credit Information Center of Vietnam, Deposit Insurance of Vietnam, FSMIMS project has been completed with the following main results: • Number of documents newly issued/amended within scope of project or relating to project scope is 75. This also

means improvement of 34 key business processes at SBV, CIC and DIV. This is the main outcome of the “Functional strengthening” stage – the first stage of the project, implemented in the period from January 2011 to August 2013. With the improvement of business processes demonstrated in the issuance and execution of the new/amended processes/regulations, SBV, CIC and DIV have applied international practices in management and regulation of monetary policy, forex management, supervision, accounting, credit information and deposit insurance in Vietnam.

• Number of new IT systems operated within project scope is 7 systems (of all 3 components). This is outcome of the second stage of the project “ICT Platform design and development”. IT systems have been designed and developed in compliance with ICT Blueprint of SBV approved under Decision No. 2049/QD-NHNN dated 9th October 2012 by SBV Governor. To the reporting time, about 90% of SBV’s ICT platform has been organized in the centralized model instead of disaggregate model before the project.

• number of training within project is 10.653 turns of attendees. Training attendees include departmental and divisional managers and staff of SBV, DIV and credit institutions. Many participants attend various courses.

To the reporting time, the project has achieved all project development objectives and completed all indicators of the project result framework.

ACTIVITIES RESULTS OF SBV AND CIC COMPONENTS (excerpts with some edits)

Functional strengthening activities

Before FSMIMS project, many practices relating to monetary policy regulation, forex, banking supervision, accounting and finance, document management, human resource management, credit information, etc. are still limited, affecting the execution of SBV and CIC core functions.

Within scope of FSMIMS project, with the support of Ernst & Young consultant (EY), SBV departments and CIC reviewed and reevaluated a huge amount of their business processes. Based on result of this activity SBV Governor has issued many new or amended regulations and procedures relating to monetary policy, forecasting and statistics, banking regulation, accounting and finance, document management and credit information. Basically, after project

16 The SBV post-implementation evaluation report is 82 pages long in a structure similar to that of the Bank ICR.


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intervention, these processes have been revised to adapt to international practices.

ICT Platform design and development activities

Before FSMIMS project, SBV had IT systems to serve for business operations with 23 software in which 20 application software were deployed throughout the system and 03 software were deployed at SBV branches such as central banking processing system, transaction accounting, interbank market payment, electronic clearing, vault management, asset management, reporting-HR-document management systems. Most of them are self-developed software over the years to serve business operations and user needs. Software were developed to handle individual business process and are not in line with international practices. In order to deploy software, each SBV unit is equipped with separate IT infrastructure (servers, network, and security) with scattered database. Biggest flaw of SBV’s IT system was the disaggregation, lack of synchronization and connectivity among various business processes. Within FSMIMS Project, SBV has designed an IT blueprint, important document to direct IT applications of SBV in the period of 2016-2020 with vision to 2030. With this design, SBV’s IT systems are developed in a centralized model at central bank instead of scattering in branches before the project. This IT blueprint is optimal solution for SBV to: (i) save cost for investment, maintenance and governance of IT system; (ii) provide information quickly, precisely to serve for centralized surveillance and governance; (iii) easily manage, implement, integrate with outside units. Main results of ICT Platform design and development working group include: • Regarding technical infrastructure: SBV has built the datacenter (DC) following TIER 3 – TIA 942 standards with

modern and synchronized equipment, ensuring availability of 99,982% (equivalent to breakout time of 1.6h/year). Beside DC, SBV equipped system of servers, disk racks, and network equipment using virtualization techniques helping to use resources flexibly and efficiently in resource sharing.

• Regarding products and services: to meet demand of business processes of a modern central bank such as: (i) core banking - T24 Temenos (one of 10 leading banking products internationally); (ii) ledger - EGL and ERP - resource management of Oracle; (iii) Human resource management (SAP); (iv) Oracle Data Warehouse; (v) Enterprise service bus ESB – Tibco; (vi) Sharepoint and Active Drectory solutions of Microsoft. These are advanced technique solutions in the world as well as in the banking sector in Vietnam.

Training and study tours:

A medium-term training program was developed and adopted in the SBV. Since end of 2013 to end 2015, SBV’s HR department implemented and combined the medium term training plan with SBV’s annual training plan for SBV staff and completed the whole medium term training plan. By end of 2015, HR department organized 270 short training courses for 8657 turns of attendees, occupying 128% of planned medium-term training plan. Training quality was up to urgent training demand and met medium and long-term training directions of SBV.

All training activities required in various services and system contracts have been completed. With regard to functional strengthening subjects, 30 training courses were conducted with a trainee turnover of 335. In the IT area, 120 training courses were provided for business and IT staff with a total trainee turnover of 5,127. There were also workshops and training courses for change management and the PMU staff.


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EVALUATION OF PROJECT IMPACT UNDER SBV AND CIC COMPONENT

Functional strengthening of monetary policy and foreign exchange bloc (summary)

• Improved credit institutions (CIs) reporting regime – Centralized report preparation and submission at CIs head offices and with one reporting line to the SBV

• Better capturing of market information – Timely CI market information is available regularly in the centralized data warehouse, as well as from SBV’s Dealer Tracker system

• Improved business processes of inflation forecasting and targeting – Adopted an 8-step forecasting procedure which supports the SBV’s new role as the focal point for setting up the annual inflation rate in the government’s socio-economic plan.

• Improved interbank market operations – The entire process is significantly improved, from members’ data collection and reporting to the SBV to SBV data verification.

• Improved open market operations – Timely information is available in the data warehouse regarding offered and actual interest rates for transactions between CIs and liquidity forecasting is conducted regularly which support OMO planning and daily transactions with CIs.

• Improved capital flow management – Input data is more comprehensive and updated quickly which has enabled more timely reporting on borrowing, repayment, loan types, etc. to management

• Improved research capability – An interbank loan/deposit matrix is used and simulated scenario tests for contagion risks conducted; An inflation forecasting model is used and regular reports produced on trends of inflation, money supply, credit growth and budget implications

Functional strengthening of banking supervision function

FSMIMS project supported BSA in development of the framework and provided documents to support BSA in developing risk assessment process, early warning to complete banking surveillance process. Project outputs thus overcome many shortcomings and helped BSA to comply with BCPs 16-20.

• BCP No. 16 – New supervision procedure and process are adopted that clearly define the role, purpose and scope of offsite supervision and relationship between offsite and onsite supervision, with guidance on CI risk profiling

• BCP No. 17 – CIs are contacted to clarify reported data and discuss issues and remedies, discussion with CI management on safety issues at least once a year or whenever it is necessary

• BCP No. 18 – IT functionality for supervision defined and five processes developed (macro, micro, CAMEL, early-warning and inspection and supervision), to be installed under another project

• BCP No. 19 – Analyses of CIs independent audit reports required, authorized BSA to directly request CI validation of information

• BCP No. 20 – Consolidated supervision clearly defined to include inspection, supervision and regulation of the leading Vietnamese CIs and their branches, subsidiaries and representative offices, as well as foreign banks/holding companies’ branches and representative offices and domestic non-bank banking holding companies

• Functional strengthening of accounting and financial reporting function (summary) • Improved recording model – In terms of integration of accounting processes, information quality control,

transaction reconciliation and management reporting • Improved recording methodology – In terms of knowledge and skills of VAS recording and measurement

requirements and other prevailing regulations


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• New chart of accounts – Designed in line with best practices, taking into account of the Vietnamese accounting standards and SBV needs

• Improved budget management – In terms of timely budget planning and consolidation, expenditure allocation and addition and monitoring and reporting of SBV’s income and expenses.

Other functional strengthening (summary) • Improved internal audit – Nine new processes developed and steps taken to transition to risk-based audits,

audits conducted on foreign reserve operation, money issuance operation and IT investments • Improved HR management – In terms of organizational structure management, job records and job placement • Fundamentally changed document management – In terms of digitalization, sharing and storage/archiving of

documents, and a new tool to management to monitor work processes and provide guidance in a timely way throughout the SBV

ICT infrastructure development (summary): The centralized ICT infrastructure developed under the FSMIMS Project has enabled the above-mentioned functional strengthening via the following ICT investments of new applications: • Reporting system – One-source data collection from CIs, unified reporting format and same IT infrastructure,

connection with other systems (e.g. interbank, treasury, core banking), automatic data quality check, highly flexible and open system, a centralized data warehouse with OBIEE tool

• Core-banking and ERP system – Multiple modules that support all SBV operations, daily consolidated balance sheet in late morning or early afternoon of the following day, shortened time for monthly consolidation and end-year accounts settlement, automated budgeting processes and timely monitoring of budget execution

Strengthening of the CIC (excerpts with some edits) During and after the implementation of FSMIMS, CIC's organization and operations have been significantly improved: core processes are standardized; information from CIs is required to be supplemented with the addition of external; the information system is invested in with adequate personnel training to improve operational efficiency, increase accuracy, reliability and improve service quality. Details as follows: • Comprehensiveness of assessment: Collected all important aspects of credit information and those from sources

outside the industry • Accuracy and reliability: Rules for quality control are integrated with the capability to early detect logic errors,

data errors and early feedback to CIs to review and confirm; Output reports was generated with data from the DataMart ensure accuracy and consistency;

• Conforming to PCR practices of OECD countries: CIC reports and information on credit institutions are in line with OECD countries' PCRs, specifically: Reports and assessments on credit are accurate and sufficient, Allow to update the registered information, Collect both positive and negative information, Provide information about credit score and rating, Ensure the privacy and confidentiality of information

• Better services: Highly interactive capability systems to share data quickly with stakeholders such as MPI, VCCI, tax authorities, Significant improvement on system performance: reduced steps, reduced processing time, Provide new products including: (i) Sector Analysis Report, (ii) Debt Analysis Report, (iii) Provision of Personal Credit Information Collection Service including credit card registration, etc.

• Business expansion: The total number of borrowers in the national credit information database is over 34 million. Particularly in 2017, CIC has updated over 9.3 million customer records and raised the total number of customer records in the store to over 69.3 million (of which more than 1.6 million corporate customer records, over 62.6


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million personal customer records and over 5 million credit card customer records); The total number of reports provided to CIs in 2017 is more than 9.1 million reports (collaterals, credit card, credit scoring, other reports); With the module for registering and providing credit report of borrowers, CIC started to implement online loan application from October, 2017. After 1 month of implementation, the system has successfully registered online accounts for more than 600 individual borrowers, bringing the total number of online accounts to 2,549.

Enhancing DIV (excerpts with some edits) After the completion of the FSMIMS project, DIV has achieved the following outputs, including “Strengthening the risk management capacity as evidenced by improved coverage of assessment reports on risk exposure and their implications in line with the recommendations of the International Working Group on Deposit Insurance under the Financial Stability Forum”. The results are achieved through improved business processes that meet the functional requirements of DIV and in line with the Core Principles for Developing Effective Deposit Insurance Systems of IADI, as below: Strengthening the risk management capacity as evidenced by improved coverage of assessment reports on risk exposure: • The project has supported DIV to develop a risk monitoring system covering core business processes: (i)

Certificate granting and revoking; (ii) Risk analysis; (iii) Deposit Insurer rating; (iv) On-site examination; (v) Premium rate calculation; (vi) Helpdesk; (vii) Additional monitoring information collection

• This system assists DIV to conduct both compliance monitoring and risk-based monitoring. DIV staff have based on the collected data and information and used the Risk Analysis and Rating processes to assess the performance and status of insured institutions, analyses risk scenarios and off-site detect CIs’ frauds and errors and then provide early warning to CIs, report to SBV and related agencies, therefore enhancing the stabilize development and preventing any failures may corrupt the system. The risk monitoring system enables DIV to conduct analyzing, assessing, risk rating for CIs with reliable and accurate monitoring reports.

• In addition, with the OBIEE reporting system, DIV's monitoring reports are updated timely with high coverage and accuracy to meet the requirements of DIV's Supervision.

Accuracy and completeness of information for Risk assessment: Under FSMIMS project, with the supervision of SBV, (i) DIV have permission to access data from SBV via the SG#4 system. These data have been verified by SBV. The DIV system (DG#1) has been designed to connect with SG#4 to receive and process data for risk analysis business; (ii) DIV have issued regulation stipulated that the Insured Institutions have to provide information of insured deposit. Change in business process of risk assessment: Currently, the risk assessment business has been performed by the Information system shared by SBV which is guarantee the accuracy and completeness of information. In addition, under FSMIMS project, risk analysis process have been improved in both process and information: (i) supplement macroeconomic information, quality information of each organization or system; (ii) supplement information from other business process (result from Deposit insurance examination, Deposit insurance premium collection, Deposit insurance certificate granting and revoking, etc.) into the risk assessment process; (iii) supplement historical data of organization and sample failure to estimate the probability of failures. Solutions on the project’s technique meeting with DIV’s risk assessment: With changes on the above-mentioned processes and information, solution on technique has been carried out to comply with the users’ requirements: i)


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Solution on collection and proceeding of information taken from SG#4; ii) Solution on storage, searching, exploitation of macro-economic information and qualitative information; iii) Solution on integration of information under a variety of components (deposit insurance examination result, deposit insurance premium collection status, deposit insurance certificate granting...) into the assessment of risk; iv) Solution on exploitation of historical data achieved at DIV in the period of 2007-2016; v) Solution on integration of statistical analysis tools, econometrics into the risk analysis; vi) Solution on collection, storage and exploitation of insured deposit data collected by DIV from Insured Institutions. With the three above-mentioned factors, DIV can assess the level of risk (probability of default) of each organization, then, with the information of insured deposits, DIV can estimate the level of risk for business reserve fund. Compatibility with recommendations of the Core principles for Effective Deposit Insurance system: Specifically, the new systems have supported DIV practices to be in line with the following principles: Group of Principles on Governance, Roles, Mandate and Powers, Group of Principles on Relationships with other safety-net participants and Cross-border issues, Group of Principles on Insured Institutions and Coverage, Group of Principles on sources and use of funds, Principle of public awareness, Principle of early detect and timely intervention, payout for depositors and recoveries.


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ANNEX 6. SUPPORTING DOCUMENTS

Project Structure, Outputs and Outcomes

Source: Ernst Young: Project Final Assessment Report, December 2017

implementation completion and results report...

Documents