Clarification by the Bank. Questions for pre-bid meeting from Prospective Bidders. SL No

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1 SL No Questions for pre-bid meeting from Prospective Bidders 1 The cut-off score for shortlisting of bidders during the technical evaluation stage is given as two different figures - 75 (Pg 65 Para 35.1) and 60 (Pg 67 Para 35.3). Please clarify. 2 One of the technical evaluation criteria is that the Engagement Manager should have minimum 5 years work experience in a public / private sector bank (Pg 71). Is this restricted to Indian experience only? 3 We would urge the Bank to consider signed copies of contracts / engagement letters entered with a Client as evidences for credentials in addition to confirmation letters on Client s letterheads as those may not be available for all credentials outlined in the evaluation criteria (Pg 71 last line). 4 Can a signed declaration be provided by the authorized signatory as evidence for professional & educational qualifications / accreditations (such as MBA / FRM / PRM, etc) as required to be provided in Annexure E (Pg 122) instead of submission of copies of professional & educational qualifications / accreditations, etc for each nominated personnel (Point 17 on Pg 75)? 5 As per the RFP, the consultant is expected to assist the Bank in ensuring compliance for each host country s regulations where the Bank has banking operations in the form of branches / subsidiaries (excluding representative offices and non-banking subsidiaries / entities). Please confirm this understanding. Clarification by the Bank Cut off score is fixed at 75. Wherever 60 appears on page number 67 under the clause "Commercial Bid Evaluation Criteria should be read as 75. The minimum experience of 5 years in a private/public sector banks can be in domestic or overseas. At least three Risk Management Projects in India, and two similar projects in International banks will also be required. Banks will require documents as mentioned in the RFP document towards evidence of credentials. Declaration by the company may be accepted as substitutes of the certificate/accrediation. The Consultant is expected to implement Basel II advanced approaches framework throughout the Bank including territories/subsidiaries where it will be applicable as per norms. It is expected that the consultant should consider BCBS guidelines as the benchmark for implementation of Advanced Approaches guidelines in domestic/geographical locations. The overseas territories/subsidiaries should be able to implement the host country guidelines of Basel II in respect of Pillar I, Pillar II & Pillar III guidelines of host as well as home country guidelines. 1

2 6 The RFP states that the consultant is expected to review the existing compliance function in the bank perform a gap analysis vis-à-vis regulatory guidelines and industry best practices and suggest modifications, improvements or any other suitable measures. Does this refer to Compliance function as required by RBI through its 2007 circular? If so what are the exact requirements other than a gap analysis? (Para 3b on Page 15) 7 Is the Bank fine with collaboration by the consultant with other parties to deliver on this project? If so the evaluation criteria should equally apply to the other parties to make this a fair assessment 8 What is the expectation of the Bank for Strengthening of Risk Based Internal Audit (RBIA) in line with international best practices, Basel II and RBI guidelines in Credit Risk Phase vii Assist bank in developing reporting policy as per Pillar III of Basel II and Documented report on RBIA (Pg 25)? As per our understanding this aspect is typically covered under Operational Risk management. 9 Typically rating models are re-calibrated / mapped to PD models after obtaining the results of model validation. Hence we would urge the Bank to consider shifting Phase VI Perform validation of models and develop policy for model validation before Phase V Implementation of FIRB and more sophisticated approaches" (Pg 24). 10 The consultant is expected to perform the gap analysis for overseas entities also. How many overseas entities have separate credit risk management policy, separate rating system and IT system? Gap analysis pertains to our existing method, system process, data and monitoring system vis-vis what is expected as per Basel II norms for implementing advanced approaches. Compliance function refers to our existing method as per the norm which the Bank has already implemented. The evaluation of compliance is to be done with respect to the latest guidelines of the regulators in respect of the approaches which have already been implemented by the Bank in respect of Basel II guidelines. Subcontracting is permitted subject to para 32 of section III as page number 63 of the RFP document. The subcontractee will also be bound by the norms of non selection of solutions of the subcontractee by the consultant during the assignment under this RFP. RBIA forms part of operational risk and should be covered under Operational risk. The phase wise implementation given in the RFP document by the Bank is tentative. The consultant will be bound by the project timelines mentioned in Para 37 on page 72. As per the para 37, the selected bidder shall furnish a schedule of implementation, discuss the same and arrive at a mutually agreed implementation schedule. The list of Banks overseas territories and subsidiaries as on is given as per question number 5. We have developed rating models for 2 overseas territories namely UK and UAE, which has been rolled out. These models are part of our BOBRAM rating model which is set up to calculate PD. No other entity (subsidiary or Territory) has policy rating or IT system in place conforming to Basel II guidelines. 2

3 11 Phase 2: Is the credit risk data management of overseas entities and domestic entities housed in single system? Can the Bank provide more details on the underlying IT data architecture? 12 Phase 4: The RFP scope does not mention anything on the development of PD models for the Corporate portfolio. Does the Bank have PD models? Have they been validated? 13 Does the Bank expects the consultant to develop SOP for all businesses (Para 2.1 a Point 6 on Pg 18)? 14 Please clarify the exact expectation from the consultant for A documentation of the testing and verification of the processes and procedures with respect to enterprise wide has to be submitted. (Point 9 on Pg 29). 15 Please clarify the exact expectation from the consultant for Identify Operational risk which form a part of Pillar II. (Last point under Phase ii, Pg 30). 16 Given that the preparation of a RFP, vendor evaluation and selection, implementation and UAT of software solution for various risks would happen in Phase VII as has been outlined in the RFP, would the Bank wish to float a separate RFP exclusively for software vendor selection for ICAAP as has been outlined in Phase v of ICAAP (Pg28)? Based on our experience, it is typically beneficial for a bank in terms of time and cost to do the same in one single RFP along with other risk management aspects. 17 Is the Overseas operation and domestic operations integrated or separate as they will bear an effect on the amount of work involved in the project. 18 Does the bank require prototypes of new model that the consultant is intending to build As replied in question above, the data of 2 overseas territories along with domestic operations rating system is captured and maintained in BOBRAM server located at Data Centre, Baroda Sun Tower in Mumbai. The transactional data of the loan book of the bank is maintained on Finnacle system which is maintained at data center of the Bank in Mumbai. The Bank has purchased a credit rating model from CRISIL limited, where data under 11 rating models is maintained since the year The system has not been validated. The Bank has already Book of Instruction in place which is Standard Operating Procedure (SOP) for all business transactions of the Bank. The consultant is expected to prepare SOP to capture risk related data for enhanced measurement, reporting, monitoring and capital allocation. The consultant is expected to put n place system ad procedures where in the control and monitoring mechanism in the organization with respect to operational risk can be ensured. Any aspect of Operational risk which may merit inclusion under Pillar II is included here. The sequence and schedule for software procurement will form point of Project timelines as per para 37, which will be prepared by the consultant discussed with the Bank and finalized for implementation. Our domestic & overseas operations are integrated in the transaction system. As to risk measurement system, the system should be integrated while keeping the uniqueness of the overseas entity intact. The prospective bidder, upon short listing will be required to make presentation as per para 35.2 of RFP. 3

4 19 The stage of implementation of CRISIL software and KVaR+ and does the UAT testing also involves these software The UAT of these software will not be included but model validation of these software s is included 20 Which software is used for ALM Our in-house Data warehouse project is able to generate bucket wise inflow and outflow of assets and liabilities. Remaining computations are done separately. The Bank has also purchased Oracle Financial Services Application (OFSA), which is in implementation stage. 21 Do the consultants need to upgrade the existing Standard Operating Procedure (SOP s) in addition to creating new ones 22 Does the implementation of advance approaches of credit risk, market risk and operational risk are on a pilot basis or full basis 23 Has the bank started some work on advanced approaches of different risks Updation/New SOPs will be restricted to risk management system & procedures The consultant is expected to prepare the Bank so the Bank can implement on full fledged basis. Yes, the same has been mentioned in section II para 2, page Is quantitative validation of all the models, the responsibility of the consultant 25 Is the bank looking at a new data collection process or up gradation in the current system 26 What is the current risk mitigation framework in the bank and does the bank expect the consultant to upgrade it 27 Does the bank expect the consultant to build any rating models for the specialized lending processes of the bank The consultant is required to put in the place the policy/system validation of Models. He will also be required to perform validation of Models. We expect the consultant to evaluate the current systems and procedures, and suggest remedial measures if it is found deficient. The remedial measures should be workable with the Bank We do not expect consultant to evaluate the risk mitigation framework. We expect them to put in place a framework of measuring risk mitigation as required under Basle II guidelines. However if some areas come to the notice of the consultant where risk mitigation is in better interest of the Bank, the consultant should indicate the Bank for implementation. We do not expect the consultant to develop models for us. Wherever models are required, the consultant is expected to either get it developed in-house or facilitate the Bank in procuring the model. 4

5 28 Has the bank documented and implemented its risk appetite and risk strategy documents 29 Does the bank expect the consultant suggest and implement more stress testing method over and above the macroeconomic method 30 What are the exact software bank is looking to procure in relation to implementation of ICAAP 31 Does the bank expect stress tests in relation to Contingency Funding Plan (CFP) 32 Are the consultants expected to provide solutions in relation to network architecture 33 Page 21, Deliverables 3 rd point states Purchase of software solution to capture the data and process it to compute RWA and all activities pertaining to purchase of software selection. (Issue of RFP to UAT of software) 34 Could you please provide a brief over view of your current risk Management organization and reporting structure - for central and branch risk and credit functions. 35 What is our timeline to meet Basel II compliance and do you have plans to meet Basel III capital and liquidity requirements around the same time frame? Bank has Credit risk Policy in the form of Domestic Loan Policy, Country Risk Policy, Aggregate Settlement Policy, Investment policy etc where risk apatite and risk strategy have been mentioned. The consultant is expected to review it and upgrade the same if required to implement Advanced Approaches of Basel II guidelines. Yes, if it improves Banks risk management practices. Has to be decided in consultation with the consultant. Yes, as a part of Pillar II requirements of Basel II guidelines. The Bank has a IT network on which our transaction system (CBS) works. We envisage that our Risk management related IT system will also work on the same network. However a final decision can be taken only after proper review of the existing architecture and future requirement. The purchase of software will be through a separated RFP process and the cost will be borne by the bank separately. The consultant is expected to take the bank through the entire process of purchase of software. The cost of any hardware/ network system will similarly not form part of the commercial bid of this RFP. The risk management organizational structure of the bank is as under Provided in Annexure II. As to credit function, the bank has designated discretionary lending powers at different levels of authority. The credit proposals are to be disposed of as per the loan policy and book of instructions of the bank. The consultant is expected to implement Basel II advanced approaches in the Bank. Basel III guidelines should not be viewed separately from Basel II in this regard. All enhancements/ revisions popularly known as Basel III will be part of implementation by the consultant. 5

6 36 Are your existing Credit and Market risk models maintained in-house by a dedicated odeling team? 37 What is your current data warehouse and reporting software/system? Do you use specific odeling software like SAS? 38 Will you be open to a consortium to jointly work on the ERM project or prefer a single entity to bid and deliver the entire project? 39 Page 21, Deliverables 3rd point states Purchase of software solution to capture the data and process it to compute RWA and all activities pertaining to purchase of software selection. (Issue of RFP to UAT of software) Page 16, point no 3 Risk Management being an evolving subject further guidance / directions are expected from the Regulators for which the consultant is expected to evaluate and advise the Bank suitably. In the absence of regulatory guidelines, is the consultant only expected to benchmark process according to global best practices? Page 17, point no 2.1. A description of the envisaged scope is enumerated in sub para a to f of this paragraph. However, Bank reserves its right to change the scope of the RFP considering the size and variety of the requirements and the changing business conditions. The commercial estimate is based on the current scope if work. The revision on the project timelines and cost estimate. Page number 18 point number 2.1. Assist Bank in identification of related required software vendor. The consultant will have to rollout full implementation of pilot phase (rollout of software solution) in 70 to 100 domestic and international branches and subsidiaries. The consultant is also expected to develop an implementation strategy base Credit and market risk software s are purchased from CRISIL Ltd and Thomson Reuters respectively. We have a dedicated team to maintain the model. No model has been developed in-house The bank has a data warehouse project which is in different phase of implementation. We do not use any specific modelling software as of now. The arrangement has been explained in Para 32 page 63 of the RFP document The purchase of software will be through a separate RFP process and the cost will be borne by the bank separately. The consultant is expected to take the bank through the entire process of purchase of software. The cost of any hardware/ network system will not form part of the commercial bid of this RFP. The regulatory guidelines to be implemented are RBI and BCBS guidelines on Basel II implementation from time to time. As to practices to implement to the guidelines it should be the global best practices best suited to Bank of Baroda. The clause is inserted to take care of unwarranted circumstances. We do not expect the revision to be significant to extra cost and time The methodology of implementation will be out of mutual discussion 6

7 43 for rolling out the solution. Is consultant required to visit along with solution vendor to all 70to 100 branches personally and implement the solution? Page no 62, point number 26 It is not properly/duly signed. Does the Response to RFP need to be signed to sign on every page? 44 Is the consultant required to comply with home country regulations of the foreign entities of the Bank? 45 It would be useful if the Bank can share a list of the geographies of the Bank s international operations. This would help us in determining the effort required for different geographies and the level of teaming that would need to be done with our local teams in those geographies. 46 Point 36, Technical Evaluation Criteria; page No- 71 under the head People of the Organization. It would be difficult to provide the credentials of all the members of the consultant team for evaluation. 47 In view of festive season (navratri & Diwali) we would like you to consider extending the deadline by atleast 2 weeks. This will help us in preparing the RFP response better. It will not be required to sign the document on all the pages. The bidder is required to sign only the forwarding copy of the document Yes. The consultant is expected to put on place systems and procedures so the home country as well as host country regulations can be complied with. The list of overseas advances of the Bank is given in Annexure I For the purpose of Technical Evaluation the credentials of the core team members will only be evaluated. The core team members will be those members of the team who will work with the bank on dedicated basis to complete the consultancy assignment. The core team will be responsible for qualitative delivery of consultancy assignment. The Consultant may also deploy other members wherever required under the guidance and supervision of the core team. Bank has considered to extend the dead line of bid submission as mentioned under dates as under:- Bid Submission Last Date and Time: , P.M Opening of the Eligibility Bid-date & Time: P.M Technical Bid Opening Date and Time: P.M 7

8 Annexure - I BANK OF BARODA (INTERNATIONAL DIVISION) OVERSEAS SL No OVERSEAS SUBSIDIARIES TERRITORIES/BRANCHES 1 U.K. 1 BOB(Uganda) Ltd 2 FIJI 2 BOB(Kenya) Ltd 3 MAURITIUS 3 BOB(Tanzania) Ltd. 4 UAE 4 BOB(Ghana) Ltd. 5 OMAN 5 BOB(Botswana) Ltd. 6 BRUSSELS 6 BOB(Guyana) Ltd. 7 SEYCHELLES 7 BOB(Trinidad & Tobago) Ltd. 8 USA 8 BOB(New Zealand) Ltd. Sl No 9 NASSAU 10 SOUTH AFRICA 11 CHINA 12 MALAYSIA 13 THIALAND 14 OBU SINGAPORE 15 HONG KONG 16 SYDNEY 17 BAHRAIN 8

9 Annexure - II Organization Chart of Risk Management Board of Directors Sub Committee of the Board on ALM & Risk Management Credit Policy Committee (CPC) Convener GM (Risk Management) Asset Liability Management Committee (ALCO) Convener GM (Risk Management) Operational Risk Management Committee (ORMC) Convener GM (Risk Management) Risk Management Department Portfolio Review Cell ALM Cell Rating Validation Cell Credit Review Cell Corporate Research Cell Basel II Cell Operational Risk Management Cell BOBRAM Support Cell IT Security (Headed by AGM) 9 Treasury Mid Office (Headed by AGM)