2. Mohammad Fheili – fheilim@jtbbank.com
Mohammad Fheili
“Over 30 years of Experience in Banking.
mifheili@gmail.com (961) 3 337175
Risk & Capacity Building Specialist.
Trainer in Risk & Compliance
University Lecturer: Economics, Risk, and Banking
Operations
Currently serves in the capacity of an Executive (AGM) at
JTB Bank in Lebanon.
Served as:
• An Economist at ABL,
• Senior Manager at BankMed
• Senior Manager & Chief Risk Officer at Group
Fransabank
Mohammad received his college education
(undergraduate & graduate) at Louisiana State University
(LSU), and has been teaching Economics and Finance for
over 25 continuous years at reputable universities in the
USA (LSU) and Lebanon (LAU).
Finally, Mohammad published over 25 articles, of those
many are in refereed Journals (e.g., Journal of Money
Laundering & Control; Journal of Operational Risk;
Journal of Law & Economics; etc.) and Bulletins.”
4. Mohammad Fheili – fheilim@jtbbank.com
However,
• Increased Competition
• Advent of Technology
• Proliferation of Channels to service the Customer
have led to:
• Increased Usage of Impersonal Electronic Services: Low Cost Electronic Services;
Widespread and Diffused Customer Base. This, in turn led to:
Lower Customer Intimacy (How much intimacy can one get out of e‐Banking!).
Reduced Switching Costs Between Different Banks (Customers these days are constantly
shopping for the better deal).
Increased Chances of Fraud and Credit Risk (Law 318 on Fraud & BDL Basic Circulars 83 –
Regulator’s Version of Law 318, and BDL Intermediate Circular 371 – Compliance Officer at POS, and BDL
Basic Circular 81 on Credit Risk – Compared to BDL Basic Circular 58)
Increased the Demand for Transparency (BDL Basic Circular 134; and BCCL Circular 281)
• Less Time to Know and Influence Customers.
Research shows that Customer Interest peaks and falls rapidly especially in
response to a Promotional Event.
This makes it absolutely necessary for banks to optimally leverage all available
customer touch points so as to be able to influence the customer (e.g., You find ads and
offers on ATM receipts).
TheTruthAboutRetail Banking
7. Mohammad Fheili – fheilim@jtbbank.com
Information Technology at the forefront of Operational Risk:
But ….!
The Introduction of any form of technology in a given production process or the mere
modification of an existing IT environment necessitates a number of changes which
spillover on Branch Performance: Staff Skills, Workflows, Policies & Procedures, and a
host of other changes.
In today’s technologically intense production
processes, information technology (IT) risks cannot be
considered independently of other types of risks since
it reflects on our ability to serve and satisfy our clients.
Recognizing these challenges and acknowledging that
the Branch has a role to play in managing this risk will
put management one step ahead. Because processes are
Technology dependent, data collection has changed from being mostly qualitative to
overwhelmingly quantitative; Types/Nature of Mistakes committed by Branch
Employees are Different; etc.
Head of Retail Banking
is a Member of the IT
Steering Committee,…
Or Not!
Information Technology
9. Mohammad Fheili – fheilim@jtbbank.com
Changing Customer Expectations and the Power to
Punish:Power has shifted to the customer as they become more connected, more demanding and less
loyal.
Instilling the vision and values needed to rebuild trust.
Harnessing big data analytics, social media
monitoring and other new forms of insight to
anticipate and respond proactively to changing
customer demands. If you don’t Duly respond, some other Banks will;
and the Cost of ‘Switching’ is negligent.
How to gain clearer line of sight to customers, speed up decision making and
overcome institutional resistance to change.
Shift from product‐push to customer solutions.
Accent on product specialization (‘depth’) gives way to broader engagement,
analytical and change management skills (‘Breadth’).
Retail Banking Unit
must Anticipate
and Respond to
Changing
Customer
Demands!
Customer Expectations
10. Mohammad Fheili – fheilim@jtbbank.com
Digital Competitors and the Age of Innovation:As the
pace of innovation accelerates, developments that would have taken years to impact on the market can now
become consumer expectations in a matter of days or months.
New competitors have head start on trust.
Operational barriers to entry are disappearing as tech‐enabled entrants use digital distribution
and advanced customer profiling to break into the market.
How to create a Business Model that is Flexible enough to
reinvent itself when better technologies or potential
partners come along.
How to lead innovation – even fast following could leave your business marginalized.
How to create an adaptable workforce, unbound by hierarchy, organizational
siloes or restrictive practices.
The Culture
& Practice of
Retail
Banking is
the
Backbone of
Workforce
Agility!
Agility in the Digital Age
It is about the ability to make
choices, decide and act swiftly.
11. Mohammad Fheili – fheilim@jtbbank.com
Equipped to Compete:The most successful businesses are going much further by
re‐engineering their organizations towards new ways of meeting customer demands and opening up new market
opportunities. So is your business up to speed?
Is your thinking radical enough? … Your Customer decides; NOT YOU!
Does your mission embrace the values of the post‐crisis
world?
Does your organizational capability reflect your customers’ changing
expectations?
Do your organizational capabilities reflect the new economics
of your business?
Is your organization ready for change?
Since Branches
are the Life‐
Line of the
Bank, Retail
Banking Unit
ought to be
Responsible
for securing
Branch Staff
Readiness!
Staff Readiness
16. Mohammad Fheili – fheilim@jtbbank.com
• Most of the Risks Identified
throughout the Branch Network are
Operational Risks.
• Beware to Look In The Right
Direction . . . .
• Operations/Transactions in the Head
Office are Dramatically Different
from Operations in Branches.
• Therefore, the Types and Nature of
Risks Identified in the Head Office
are Significantly different from those
found in the Branches.
17. Mohammad Fheili – fheilim@jtbbank.com
Retail Banking Division is/has:
The Biggest Employer in a Typical
Banking Organization
The Most Active Processor of
Transactions (i.e., Traffic) in a Typical
Banking Organization
The Highest Utilization Rate of IT
Systems in a Typical Banking
Organization
… there is more
21. Mohammad Fheili – fheilim@jtbbank.com
Flying From “Beirut” To “Paris” Is a ‘Service’; Just Like Opening a Saving/Checking Account.
Descent Below Safe Altitude is an Incident (With Zero Losses this time). …. BUT . . .
Minimum Safe Altitude (MSA)
IncidentAccident
Operational RiskLoss Events
YOU MUST Report ALL Incidents
irrespective of Current Consequences/Impact
23. Mohammad Fheili – fheilim@jtbbank.com
Acquisition/
Credit
Specific
Customer
Service
Collect And
Review
Data
Credit
Review
Assess
Collateral
And Risk
Document
Approval
&
Pricing
Sales: Bank-Client Interface Financial & Risk Analysis: Understanding Risks Processing
Establishing
Contact
Evaluate first
customer info
Customer
Meetings
Debriefing
Request
documents
Obtain data &
information
Completeness/
plausibility
review
Follow up
Review document
Follow up with
Loan Officer /
Account Manager
Standardized
Credit Rating
Document on
other credit
related factors
Inspect
Object
Determine
Loan-to-value
Evaluate
Exposure
Data is
Sufficient
Complete
Loan
Application
Prepare
Credit rate
Handover
Credit File
Follow Up
Data is
Complete
Approval by
Decision
Makers
Check Compliance with
Authority Structure
Prepare Contracts
Get Signatures
Provide Security
Disbursement Review
Disbursement
Monitor &
Report
Resolution
Loan/Asset Life Cycle
Credit Approval Process
Implement
On the
Credit
Decision
Real-Time Management of Loan
Portfolio begins here by building
knowledge about Clients.
Credit Risk
Branch
Branch
24. Mohammad Fheili – fheilim@jtbbank.com
Consequences:
Losses
Causes:
Risk
Event:
Loan
Default
• Loan Workout and Recovery
• Recovery is a Function of the
Quality of the Credit File and the
Legality of Accompanying
Documents
• Losses (Total or Partial) of
Principal and Interests
Dried up Cash Flow Sources: Client’s
business received a bad hit.
Collaboration between the Branch Employee
and the Client in the provision of inflated
figures (Sales, Revenues, Cash Flows, …)
leading to a false‐favorable credit decision.
Over‐worked, and Under‐Staffed Branches
leading to overlooking some critical changes
in business circumstances of the Client.
Incompetent Branch Manager Gave False
Recommendation which led to a False‐
favorable Credit Decision.
Poor/Inadequate Follow‐up at the Branch,
absence of Loan monitoring and Reviews
rendering the process weak in capturing
“Warning Signals”
Etc.
How Implicated is
Branch Management in
Credit Risk?
Now, Do You Think
Branch Management
ought to be
involved?
Credit Risk
25. Mohammad Fheili – fheilim@jtbbank.com
Banking Model & Risk
MAXIMIZE PROFIT subject to:
RISK , REGULATORY, Compliance,
Reporting, Etc. Constraints
RISK . . .
Default
Liquidity
Maturity
Others . . .
REGULATORY . . .
Basel I
Basel II
Basel III
Basel IV (In the making)
Sanctions Rules
USA_FATCA Requirements
AML, Etc. . . .
Uses of Funds Sources of Funds
Reserves
Loans
Securities
Other
Investments
. . .
All Types of
Deposits
Borrowings
Other
Sources
Equity
. . .
Off-Balance Sheet
With every Dollar
in Service a
Typical Bank
Solicits, it MUST
satisfy all these
Regulatory
Constraints first!
VERY COSTLY!
Legal Issues . . .
Who can best help the Bank
recover some of the cost of
Compliance?
Yes, YOU – Branches.
You can Increase Traffic:
• More Clients
• More Transactions
which can be
achieved Through
cross‐selling
Follow up Diligently on
the settlements of Loans
(and ‘Bien Trouvé’,
Updated Financials, Site
Visits, etc….)
Reduce Loss‐Events.
Promote the Bank
through your Social
Networks.
30. Mohammad Fheili – fheilim@jtbbank.com
CALCULATIONof
Bonus for each Branch
ALLOCATIONof Bonus to All
functions in the Branch
PAYMENTof Bonus to
Deserving staff
Key Performance Areas
_Reduction in Cost
of Fund
_Volume in Interest-
based Products
_Traffic: More Clients,
More Transactions
_Work Environment in
the Branch
_Identification od Key
Risk Indicators
_Risk Reporting
_Effective Risk Control
_AML Compliance
Based on each function’s
Contribution to business
Development in the
Branch
_Branch Manager
_Deputy BM
_Head of Commercial Unit
_CSR
_Teller
_Head of Operation
_Clearing
_Office Boy
_Etc.
Based on each staff’s
Performance Appraisal
Review System
_“A” Performers
_“B” Performers
_“C” Performers
_”D” and “E” do not
receive any bonus
irrespective of how the
branch performs
PILLAR 1: Reflects the
Bank’s Strategy, and Key
Performance Areas
PILLAR 2: Reflects the
contribution of every function
to the branch’s Bottom Line
PILLAR 3: Reflects the
performance of every staff in the
Branch
30
Risk‐Based Performance
33. Mohammad Fheili – fheilim@jtbbank.com
Collect
them
all!
Data
Data
Data
Data
Data
Data
Data
Data
Data
A Data warehouse is a good
idea, but a warehouse only
works when Staff bother to
make deliveries into it –
and that’s where Branch
Staff need some sharp Inter‐
Personal communication
skills, to persuade clients to
share their data. Without
the Right/Complete/Timely
Data, Risk Decisions are
Ambiguous, Ignorant, or
Uncertain!
Any Piece of Information
Will Have Implications On
Success.
Importance of Data
All Data is IMPORTANT
37. Mohammad Fheili – fheilim@jtbbank.com
1 2
34
Your Assignment is to Pick
One Animal to take care of,
• for One day,
• Inside a 25m2 room; and
• Alone?
You May Ask Any Question
To Help You Prepare
Adequately For This
Assignment.
Importance of Data