questionnaire on foreign exchange

7/31/2019 Questionnaire on foreign exchange

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TABLE OF CONTENTS

I. MFI Background Information........................................................................................................... 1

II. Strategy and Business Planning........................................................................................................ 1A. Business and Strategic Planning (CEO / Chairman of Board) ..................................................... 1

B. Competitive Environment............................................................................................................. 4

C. Marketing (Marketing Manager) .................................................................................................. 5III. Social Impact (CEO / Chairman / Board Member) ...................................................................... 6IV. Governance and Internal Controls ................................................................................................ 8

A. Governance Structure, Board & Committees (Chairman / Board Member) ................................ 8

B. Management (CEO).................................................................................................................... 10C. Financial Discipline / Accounting (Comptroller or Head Accountant) ..................................... 12

D. Internal Audit (Internal Audit)) ................................................................................................. 14

E. General Internal Controls (Internal Audit) ................................................................................. 15F. External Audit (CEO / Chairman / Internal Audit) ................................................................... 20

G. Regulatory Environment (CEO / Chairman) ............................................................................. 20

H. External Rating (CEO / Chairman)............................................................................................ 21

V. Credit Risk Management ................................................................................................................ 22A. Underwriting Process (Head Loan Officer)............................................................................... 22

B. Collections Process (Head Loan Officer) .................................................................................. 25

C. Loan Loss Reserves, Charge-Offs and Recovery Policies (Head Loan Officer) ...................... 28D. Restructuring Process (Head Loan Officer) .............................................................................. 29

VI. Capital Structure......................................................................................................................... 30

A. Capital Plans (CFO or CEO) ..................................................................................................... 30B. Debt & Savings (CFO or CEO) ................................................................................................. 31

VII. Market Risk................................................................................................................................ 32

A. Asset-Liability Management (ALM) / Liquidity Risk Management (CFO or CEO)................. 32B. Interest Rate Risk Management (CFO or CEO) ........................................................................ 33

C. Foreign Exchange Risk Management (CFO or CEO) ............................................................... 34

VIII. Productivity and Efficiency (CFO or CEO) ............................................................................... 35

IX. Human Resources (HR Manager).............................................................................................. 35X. Management Information Systems (IT Manager) .......................................................................... 38

XI. Appendix A: Rating Table......................................................................................................... 39

Guidelines for Using Deutsche Banks Due Diligence Questionnaire

Deutsche Banks Global Social Investment Funds (GSIF) due diligence questionnaire was designed to

be used in conjunction with Deutsche Banks GSIF loan application. It is recommended that before

conducting the due diligence visit, you review the loan application and complete as much of the credit

write up as possible using Deutsche Banks GSIF credit format write up.

Please take all notes of site visit in this document and then scan the document after you have

completed the onsite visit. The scanned document should be saved in the MFIs file.


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I. MFI Background Information1. Please update the following information. Date of UpdateNumber of Employees

Number of Branch Offices/Service Outlets

Plans for New Branches (when)

Number of Clients

Size of MFI in Assets

II.Strategy and Business PlanningA.Business and Strategic Planning (CEO / Chairman of Board)

Follow Up Questions from Application

1. How has your business and strategy changed over the past three years?__________________________________________________________________________________________

__________________________________________________________________________________________

2. In what direction to you want to take the MFI in the next 1-3 years?__________________________________________________________________________________________

__________________________________________________________________________________________

3. When was the last time your strategic medium/long-term plan was updated? _________________________4. Do you have your competitive advantages defined? YES _____ NO _____ What are they?

_______________________________________________________________________________

_______________________________________________________________________________


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B.Competitive EnvironmentFollow Up Questions from Application

1. How are you improving your competitive position? (Note:

You should review loan application to

determine what they believe their competitive position is as well as how competitive the market place is.)

_______________________________________________________________________________

_______________________________________________________________________________

_______________________________________________________________________________

2. What types of new activities/products have you seen from key existing competitors or potential newcompetitors (e.g. full service bank platforms)?

_______________________________________________________________________________

_______________________________________________________________________________

3. Are your loan interest rates above, below or about the same as the competition? ___________________4. Have there been any recent competitive developments (e.g. pricing pressures, anticipated market

consolidation)? Who do you view as you primary competitors and why?

_______________________________________________________________________________

_______________________________________________________________________________

5. Are there concerns about clients becoming over-marketed? If so, how are you and industry peers handlingthis potential for over-indebtedness?

_______________________________________________________________________________

_______________________________________________________________________________

1=Excellent; 2=Significantly Above Average; 3=Above Average4=Average; 5=Below Average; 6=Significantly Below Average; 7=Seriously Deficient

Section Rating & Rationale (Include Loan Application Observations)

Rating: ______


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III. Social Impact (CEO / Chairman / Board Member)Follow Up Questions from Application

6. Name of the person(s) being interviewed.__________________________________________________________________________________________

7. How long has s/he been involved with the MFI?__________________________________________________________________________________________

8. What relevant experience does s/he have fulfilling his/her role at the financial institution?__________________________________________________________________________________________

__________________________________________________________________________________________

9. In your view, what is the primary target market of the institution? Is this accurately reflected by yourcurrent client base? If not, how do you expect to get there?

__________________________________________________________________________________________

__________________________________________________________________________________________

10.What type of organization or business will the MFI be in 3-5 years (i.e. microfinance, bank, etc.)__________________________________________________________________________________________

__________________________________________________________________________________________

11.Have you had any problems keeping focused on the primary mission of your institution? Do you have anyplans to modify your mission? Review client breakdown and average loan size in light of response.

__________________________________________________________________________________________

12.Who are your founding members? Are they on the MFIs Board?__________________________________________________________________________________

__________________________________________________________________________________


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C.Financial Discipline / Accounting (Comptroller or Head Accountant)Follow Up Questions from Application




__________________________________________________________________________________________

4. Where do the majority of accounting discrepancies come from? What are you doing about this?__________________________________________________________________________________________

__________________________________________________________________________________________

5. What is the date of the latest unaudited financials? ______________ (Note: We should have the latestaudited financials. Audited financial statements should be completed in a few months after the fiscal year

end. Delays in audited financials can indicate a problem.)

6. Do you accrue interest from loans? If so, what are the criteria for reversing accrued income on loans madeto clients? If not, what are the policies followed by the banking sector?

__________________________________________________________________________________________

__________________________________________________________________________________________

7. Do you have a policy to control & minimize the amount of non-earning assets? YES _____ NO _____(Ask for a copy) In general, how is this policy applied?

8. Does the accounting system have any suspense accounts where accounting differences are noted?YES _____ NO _____


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9. If so, how big is this account? Is there variability around it? If not, how do they handle accountingdiscrepancies?

__________________________________________________________________________________________

10.Does the accounting system have separate results for financial and non-financial services?YES _____ NO _____

11.Does accounting register all guarantees in off-balance sheet accounts? YES _____ NO _____12.Please outline any areas that could be improved in the current accounting system.__________________________________________________________________________________________

__________________________________________________________________________________________

13.What are the current strengths of the accounting system?__________________________________________________________________________________________

__________________________________________________________________________________________

14.Review the General Ledger account and separate out the amount of Other Assets (sometimes calledOREO or Other Real Estate Owned) that are directly related to loan recoveries. This should be measuredas a percentage of the total loan portfolio. If larger than 2%, when reviewing loan files make sure to look at

credit analysis closely to see if undue weight is placed on the Collateral as opposed to the Capacity of the

borrower to repay.__________________________________________________________________________________________

__________________________________________________________________________________________

__________________________________________________________________________________________

__________________________________________________________________________________________



Rating: ______


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10.Do you have segregation of the following key duties:- Key / combination of vault YES _____ NO _____- Credit analysis / disbursement of cash, YES _____ NO _____- Entry to vault / handling of cash YES _____ NO _____- Bank reconciliation / Check signing YES _____ NO _____

11.Does your MFI disburse and collect cash from clients? YES _____ NO _____ Please describeprocess, i.e. who disburses cash, who receives cash (do loan officers do either?), etc. and any changes thathave occurred in the last 12 months.

__________________________________________________________________________________________

__________________________________________________________________________________________

12.Are there procedures for controlling and maintaining a balanced cashier drawer such as?- Internal audit conduct random audits of teller drawers?. YES _____ NO _____- Clear oversight of tellers by management (video camera can also be used)YES _____ NO _____- Daily reconciliation of teller drawers to general ledger YES _____ NO _____- Dual controls of cash and cash management YES _____ NO _____Random audits are generally not an effective control point and can sometimes be an inconvenience toclients.

13.What are the procedures for signing checks and handling the MFIs bank accounts? Is there clear separationof duties, dual signatures, no Bearer checks issued, etc.

__________________________________________________________________________________________

__________________________________________________________________________________________

14.What is the policy for changing the safe combination and location of duplicate keys?__________________________________________________________________________________________

__________________________________________________________________________________________

15.How are checks and receipts handled? Should have someone from accounting walk through process withaccountant and teller to ensure understand process.

__________________________________________________________________________________________

__________________________________________________________________________________________

16.Do you have insurance against fraud for all employees that handle funds (fidelity bonding)?YES _____ NO _____17.How oftern are the MFIs bank accounts reconciled?__________________________________________________________________________________________

18.Does Internal Audit review the bank reconciliation process?__________________________________________________________________________________________


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V.Credit Risk ManagementA.Underwriting Process (Head Loan Officer)





__________________________________________________________________________________________

4. Please walk me through your loan underwriting process. Key to this exercise is to determine what criteriaare used to approve or deny a loan (ability to pay, guarantee, share leverage, credit history, etc.)

__________________________________________________________________________________________

__________________________________________________________________________________________

__________________________________________________________________________________________

__________________________________________________________________________________________

__________________________________________________________________________________________

__________________________________________________________________________________________

__________________________________________________________________________________________

__________________________________________________________________________________________

__________________________________________________________________________________________

__________________________________________________________________________________________

__________________________________________________________________________________________


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12.Do you monitor/track the work that lawyers are doing? What controls do you have in place?__________________________________________________________________________________________

__________________________________________________________________________________________

13.Have you liquidated any assets used to guarantee a loan in the last year? YES _____ NO _____How many? ____

_______________________________________________________________________________________

_______________________________________________________________________________________

14.Are any of the loans to Board or employees delinquent? YES _____ NO _____ Who, Why, How:_______________________________________________________________________________________

_______________________________________________________________________________________



Rating: ______


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Rating: ______

B. Debt & Savings (CFO or CEO)Follow Up Questions from Application

1. How do you ensure qualityThe MFI needs to be able to place this money while maintaining portfolio quality.

growth of the loan portfolio when placing large amounts of funding?

__________________________________________________________________________________________

__________________________________________________________________________________________

2. What percentage of your total loan portfolio would new loan from Deutsche Bank represent? ____%3. Is the current creditor list provided up to date? YES _____ NO _____ (If not, request updated table)4. What additional funding or debt issuance do you have in the pipeline? Get names and dates. How is your

relationship with your current creditors?

__________________________________________________________________________________________

__________________________________________________________________________________________

5. Do you intend to eventually mobilize savings? YES _____ NO _____ If so when? ___________________________________________________________________________________________________

__________________________________________________________________________________________

6. Do you have a policy to protect clients savings value against inflation? _____________________


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7. Given that your institution is mobilizing savings, why are you interested in taking out a loan with DeutscheBank? Why do you need additional funding? Are you looking for subordinated debt to shore up your

capital base? How much sub-debt do they have? Be sure to ask questions with liability structure in mind?

_______________________________________________________________________________________

_______________________________________________________________________________________



Rating: ______

VII. Market RiskA.Asset-Liability Management (ALM) / Liquidity Risk Management (CFO or CEO)


1. Do you have liquidity reserves (short term investments for liquidity)? Please describe.YES _____ NO _____(this would be more important for institutions that mobilize savings)

2. Where are your liquidity reserves held? _____________________________________________________3. Has the MFI ever had any liquidity problems? YES _____ NO _______________________________________________________________________________________________

__________________________________________________________________________________________

4.Review funding sources, duration and repayment and compare that with the term lengths for the various loanproducts that they offer. Ideally, average loan term should be shorter than funding. If not, then discuss with

Management its strategy for matching asset-liability repayment periods.

__________________________________________________________________________________________

__________________________________________________________________________________________


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VIII.Productivity and Efficiency (CFO or CEO)Follow Up Questions from Application



Rating: ______

IX. Human Resources (HR Manager)Follow Up Questions from Application




__________________________________________________________________________________________


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4.If they answered affirmative on job descriptions or criteria defined for the recruitment of new personnel,review materials used for recruitment. Are the materials comprehensive?

_______________________________________________________________________________________

5. Are the salaries for personnel competitive with other banks and financial institutions?YES _____ NO _____ How do you know?

_______________________________________________________________________________________

6. Does your compensation program adjust salaries and incentives by position? YES _____ NO _____7. Do you have a system for evaluation of personnel? YES _____ NO _____8. How stable are personnel? What is the average tenure of senior management? Of loan officers?_______________________________________________________________________________________

_______________________________________________________________________________________

9. Do you conduct exit interviews with outgoing employees? YES _____ NO _____10.What is the most common reason(s) employees leave your MFI?_______________________________________________________________________________________

_______________________________________________________________________________________

11.Is management making the necessary changes to attract and retain staff?_______________________________________________________________________________________

_______________________________________________________________________________________

12.Is there a Board-approved code of ethics that defines organizational values and ethical standards expected forstaff? YES _____ NO _____ If the answer is yes, ask to see the code. (Client Protection Principles

question, Staff Ethical Codes of Conduct)

__________________________________________________________________________________________

__________________________________________________________________________________________

13.Are there staff rules that describe acceptable/unacceptable behavior, reprimands and violations that can resultin employment termination? YES _____ NO _____ If the answer is yes, ask to see a copy of the rules.(Client Protection Principles question, Staff Ethical Codes of Conduct)

__________________________________________________________________________________________

__________________________________________________________________________________________

14.Do all staff sign annual pledges to follow ethical codes? YES _____ NO _____ If the answer is yes, ask tosee a copy of the pledge. (Client Protection Principles question, Staff Ethical Codes of Conduct)


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X.Management Information Systems (IT Manager)Follow Up Questions from Application




4. Do you have an adequate computer system (with technical support, internal controls, system audits,contingency plans, etc.?) YES _____ NO _____ Explain.

_______________________________________________________________________________________

_______________________________________________________________________________________

5. Is there a backup/contingency plan? Please describe it._______________________________________________________________________________________

_______________________________________________________________________________________

6. Are transactions in the loan/savings ledgers of clients tied directly to the general ledger? Note:

YES _____ NO _____

This question

was in the loan application, but is repeated here to confirm with IT. If the MFI has separate systems or ismanual, there is a significant risk of discrepancies between what has been registered on the clients account

and what has been entered into the accounting system.



Rating: ______


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questionnaire on foreign exchange

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