annex ii - terms of reference

7/31/2019 Annex II - Terms of Reference

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ANNEXE II

TERMS OF REFERENCE

FISC FINANCIAL Component 2 Assistance for theRestructuring of the National Bank of Egypt

1. BACKGROUND INFORMATION........................................................................................1

1.1. Beneficiary country................................................................................................1

1.2. Contracting Authority............................................................................................1

1.3. Relevant country background................................................................................1

1.4. Current state of affairs in the relevant sector.........................................................1

1.5. Related programmes and other donor activities:...................................................2

2. CONTRACT OBJECTIVES & EXPECTED RESULTS........................................................3

2.1. Overall objectives..................................................................................................3

2.2. Specific objectives.................................................................................................3

3. ASSUMPTIONS & RISKS..................................................................................................4

3.1. Assumptions underlying the project intervention...................................................4

3.2. Risks......................................................................................................................5

4. SCOPE OF THE WORK....................................................................................................5

4.1. General..................................................................................................................5

4.2. Specific activities...................................................................................................7

A Revised HR Function including policies, procedures, and systems.......................11

Detailed Scope of Work.............................................................................................12

DETAILED SCOPE OF WORK & DELIVERABLES.............................................................15

4.3. Project management...........................................................................................20

5. LOGISTICS AND TIMING................................................................................................20

5.1. Location...............................................................................................................20

5.2. Commencement date & Period of execution........................................................20

6. REQUIREMENTS............................................................................................................21

6.1. Personnel............................................................................................................21

6.2. Office accommodation.........................................................................................24

6.3. Facilities to be provided by the Consultant (within the fee rates).........................24

6.4. Equipment...........................................................................................................25

6.5. Incidental expenditure.........................................................................................25


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FISC Financial - Terms of reference

7. REPORTS.......................................................................................................................25

7.1. Reporting requirements.......................................................................................25

7.2. Submission & approval of progress reports.........................................................27

8. MONITORING AND EVALUATION..................................................................................27

8.1. Definition of indicators.........................................................................................278.2. Special requirements...........................................................................................27

Acronyms

CASE Cairo & Alexandria Stock Exchange

CBE Central Bank of Egypt

CMA Capital Market Authority

EC European Commission

FATF Financial Action Task Force

IMP Egypt Industrial Modernization Program

GoE Government of Egypt

GDP Gross Domestic Product

IFCInternational Finance Corporation (World BankGroup)

IMF International Monetary Fund

JSC Joint Steering Committee (for Components 1+2).MENA Middle East and North Africa

NIP National Indicative Programme

PCM Project Cycle Management

PSB Public Sector Banks

SMEs Small- and Medium-sized Enterprises

ToR 1 Terms of Reference

UNDP United Nations Development Program

USAID United States Agency for InternationalDevelopment

1 Also known as Request For Proposals - RFP


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1. BACKGROUND INFORMATION

1.1. Beneficiary country

Arab Republic of Egypt

1.2. Contracting Authority

The European Commission represented by the Delegation of the EuropeanCommission in Egypt, on behalf of the Beneficiary Country.

1.3. Relevant country background

Egypt has a diversified economy; the trade, finance and insurance sectorscombined amount to 22% of GDP. Egypts banking and financial sector is intransition and needs to be upgraded in order to sustain economic reforms, topromote Cairo as a regional financial hub and to stimulate inward investment. The

contribution of the sector to Egyptian GDP and to private sector growth remainssubstantially below potential. The new reform-minded Egyptian government,appointed in the summer of 2004, has reconfirmed the priority status of financialsector modernisation.

The EU-Egypt Association Agreement, now in force, foresees the gradualliberalisation of capital flows, which in turn requires reinforcement of the Egyptianfinancial sector and capital markets. In order to contribute to the modernisation ofthe Egyptian financial sector, the Government of Egypt and the EuropeanCommission signed the Euro 15 million FISC Financial Financing Agreement inSeptember 2004. FISC Financial will primarily provide technical assistance under

three Components. Component 2 is dedicated to supporting the restructuring ofpublic banks; this contract is to provide assistance for the restructuring of theNational Bank of Egypt.

1.4. Current state of affairs in the relevant sector

The Egyptian financial sector is in transition. Key legislation to encourage financialsector reform has been approved or is in the pipeline. New products are starting toappear and international calibre managers are increasingly present at the top ofthe larger institutions. An important step forward was achieved in early 2004 with

the removal of Egypt from the Financial Action Task Force (FATF) list of un-cooperative countries. Nevertheless, progress on the ground remains slow. Manycategories of potential customers are not being adequately served, includingSMEs2. As a result, the financial sector contribution to Egyptian GDP and to privatesector growth remains substantially below potential.

There are currently 55 licensed banks in Egypt. Despite growth in non-bankfinancial intermediaries over the past decade, the sector remains dominated by the

2 Small and medium-sized enterprises

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Big 4 public commercial banks3 and three specialized public finance institutions.Indicators show that the 4 largest public banks still control 5055% of bankingassets, although their combined market share has declined by around 10% overthe past decade as foreign players purchased stakes in Egyptian joint-venturebanks. Despite the recent rejuvenation of senior management, the Big 4 publicbanks are to varying degrees - still burdened with excess staff, lack of

management skills in middle/lower levels, weak profitability, obsolete technology,outdated systems and/or underdeveloped product ranges. Furthermore, it isrecognized that the balance sheets of these banks contain a high percentage ofnon-performing loans (in some cases exceeding 25%), a legacy of the directedlending policies of an earlier era4. The need for the State, as shareholder, toprovide regular re-capitalisations continues to represent an important drain on thenational accounts.

Consolidation within the banking sector is underway for example, the acquisitionof Misr Exterior Bank by Bank MISR in 2004. Further consolidation amongst thejoint-venture banks and the closure/merger of weaker banks is planned.

As regards banking supervision, the late 1990s witnessed an evolution of the roleof the Central Bank of Egypt (CBE), which issued a number of new prudentialregulations. In 2003 a new Banking Law was promulgated, requiring all banks toincrease their capital to LE 500 million. The Governor and Board members of theCentral Bank of Egypt were changed at the end of 2003, at which time a secondDeputy Governor was appointed with responsibility for restructuring the bankingsector. Continued improvements in banking supervision are necessary in order toprovide an optimum environment for public bank restructuring.

1.5. Related programmes and other donor activities:

A number of programmes currently being implemented in Egypt have relevance forFISC FINANCIAL. Significant initiatives include:

Industrial Modernisation Programme (IMP)The EC-funded Industrial Modernisation Programme for Egypt contains abudgetary support component, to be delivered in 2 tranches. One chapter isdedicated to Financial Sector Soundness and Restructuring (eg new bankinglegislation, anti-money laundering measures, steps towards gradual privatisationof State-owned banks). The Industrial Modernisation Program also provides direct

technical assistance to the Egyptian SME sector, which inter alia will increaseawareness amongst companies of banking products and services relevant to theirneeds.

In addition, the EC has prepared two sister projects, FISC Rural and FISC Social,which promote financial intermediation in agricultural and socially deprived

3 National Bank of Egypt, Bank MISR, Banque du Caire, Bank of Alexandria

4 Provisioning for NPLs is another problem area. According to an IMF report published in April2004, NPL provisioning in the Egyptian banking sector is less than 62% of recorded NPL as atSeptember 2003.

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contexts (i.e. different beneficiaries to FISC Financial, which addressesmainstream banking and finance issues).

North Africa Enterprise Development (NAED)Managed by the International Finance Corporation (IFC part of the World BankGroup), this regional initiative provides advisory services and training modules to

local banks in order to promote effective SME lending. The programme alsosupplies direct technical assistance to SMEs, and promotes non-bank financialproducts such as venture capital, leasing and factoring. The initial funding poolincluded France, Switzerland, Belgium, Italy as well as the IFC.

USAID funded programmesAs a major donor in Egypt, USAID has been active in the financial sector, includingsupporting the development of capital markets and the activation of the mortgagemarket. The Small and Micro Enterprises Development Programme has developeda pilot scheme in association with Banque du Caire, providing lending training tobank personnel as well as support for a loan monitoring system.

Other DonorsThe International Monetary Fund is assisting Egypt with strategic advice onmonetary policy, risk assessment, and financial sector regulation. The World Bankhelped to draft a new law on Real Estate Financing. The UNDP is providingsupport for training on SME lending. Italy is providing on-going advice to theCentral Bank of Egypt, and the United Kingdom and the USA have providedtraining to support anti-money laundering measures.

2. CONTRACT OBJECTIVES & EXPECTED RESULTS

2.1. Overall objectives

The overall objectives of the FISC Financial project, of which this contract will be apart, are as follows:

Modernisation of the Egyptian financial sector (Banks and Regulators) inorder to meet the challenges of globalisation and to support private sectorgrowth in the Egyptian economy.

Introduction - or reinforcement - of international standards and best

practices as regards the governance, regulation and operation of theEgyptian financial sector.

2.2. Specific objectives

The objectives of this Contract are as follows:

a. To organise activities and supply services under Component 2 of FISCFinancial, in order to achieve the overall objectives listed above.

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b. To promote the development and imbedding of effective Risk ManagementStrategy and Policy methodology within NBE, including appropriate hierarchy,reporting systems and procedures.

c. To ensure that Risk Exposure Levels are accurately identified and quantifiedacross all major business lines (corporate, SMEs, correspondent banking,

retail, treasury, investment) and that standardised daily and monthly reportingto line managers and General Management is implemented.

d. To ensure that NBE management develops a comprehensive strategy fordealing with bad and doubtful debts, so as to reduce the percentage of non-performing loans in the consolidated balance sheet by 70% over 3 years.

e. To provide confidential, operational advice and guidance to NBE seniormanagement in the field of Human Resources, notably as regardsorganisational structure and job descriptions in all business areas, so that

weaknesses and gaps are addressed, and bottlenecks overcome.

f. To provide confidential, operational advice and guidance to NBE seniormanagement in the field of Management Information System and InformationTechnology, notably as regards credit control and management accounting.

g. To ensure effective internal communication with NBE management and otherstakeholders, so that internal support for restructuring activities is maximised.

h. To provide accurate and timely reports to the supervisory authorities, as

required.

3. ASSUMPTIONS & RISKS

3.1. Assumptions underlying the project intervention

A stable macro economic environment in Egypt and sustained political willwithin the Government of Egypt to modernise the financial sector and tosupport concrete initiatives for reform.

Progress in parallel to project activities towards wider legislative andregulatory reforms in order to create a stable environment in which localand foreign companies, financial institutions and investors may operate.

A structural solution to the problem of non-performing loans contracted byEgyptian state-owned enterprises during the life of the FISC Financialprogramme.

A strong and stable senior management team at the NBE, working in closeco-operation with the project Experts and the Egyptian authorities.

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Availability of substantive Human and Management resources within theNBE to support restructuring and reform, to include an effectivecommunications policy directed at external and internal stakeholders.

Continued improvement in banking supervision in Egypt.

3.2. Risks

Changes in government economic policy, particularly as regards reform ofthe financial sector, could cause the project to lose focus and momentum.

Failure to provide a structural solution to the problem of non-performingloans contracted by Egyptian state-owned enterprises will delay a return tosustainable profitability.

Internal resistance to restructuring and change within NBE.

An absence of accompanying legislative and regulatory reforms will reducethe impact of the project.

4. SCOPE OF THE WORK

4.1. General

4.1.1. Project description

Effective financial intermediation is a key requirement for sustained economicgrowth. FISC Financial will complement initiatives financed by the EC and by otherdonors to improve the operating environment for Egyptian business and industry.The programme consists of three (3) Components:

Component 1: Support to the Central Bank of Egypt(i) Financial Sector Supervision(ii) RTGS System

Component 2: Restructuring of selected Public sector Banks:(i) National Bank of Egypt (NBE)

(ii) Bank Misr

Component 3: Support to the Capital Market Authority(with a Focus on Corporate Governance)

This Contract forms part of Component 2 of FISC Financial and willfocus on the restructuring of National Bank of Egypt

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COMPONENT 2: Restructuring of selected Public sector banks.

The Egyptian Authorities have designated two large public sector banks including National Bank of Egypt (NBE) - as beneficiaries of operationalrestructuring support under this Component. Sustained on-site expertise andadvice will be provided to assist banks in the operational phases of restructuring.Coaching will be provided to bank senior management to ensure that appropriate

strategies exist and are being implemented in key areas (including riskmanagement), that restructuring goals remain coherent and that implementationoccurs in a logical sequence.

4.1.2. Geographical area to be covered

Activities provided under this contract will take place in Egypt, primarily in theGreater Cairo area. The headquarters of National Bank of Egypt is currentlylocated at 1187 Corniche El Nil, Cairo, Egypt.

4.1.3. Target groups

The operational beneficiary under this Contract is National Bank of Egypt, anEgyptian bank with headquarters in Cairo and a branch network throughout Egypt.NBE is the largest of the Big 4 Egyptian public banks in terms of assets andplays an important role in the national economy.

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"Big 4" Egyptian Banks: Total Assets30 June 2002 and 2003

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

National Bank of Egypt Bank MISR Banque du Caire Bank of Alexandria

LE

Billions

30/06/2002 30/06/2003

Fisc Financial Component 2


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Sources: Annual Reports

4.2. Specific activities

Component 2 of FISC Financial will make available resources for the support totwo large public sector banks that have already embarked upon a modernisationand or/restructuring plan without prejudice to the Governments commitment toprivatise selected public sector banks under other EU supported programmes.Should one of the two banks (NBE or Bank Misr) be privatised during the course ofimplementation of Component 2 of FISC Financial, any unused budget resourcesmay be re-allocated to the other beneficiary public bank.

Activities under this Contract will require the following approach and

techniques :

Providing on-site expertise, advice, coaching and training to assist NationalBank of Egypt management and staff in the operational phases ofrestructuring, covering key aspects of banking operations according toevolving priorities and needs. The expertise required by NBE will alsoinvolve the drafting of strategies, recommendations and implementationplans by the Consultant for the operational areas concerned.

Assisting NBE senior management in verifying - on a regular basis - thatagreed restructuring strategies are being implemented in all areas (ie no

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"Big 4" Egyptian Banks - Assets as a % of Total - 30/6/2003

43%

30%

15%

12%

National Bank of Egypt

Bank MISR

Banque du CaireBank of Alexandria

N.B.E.

Bank MISR

Banquedu Caire

Bk Alex


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major areas have been overlooked). Furthermore, assisting NBE seniormanagement in ensuring that restructuring goals remain coherent and thatimplementation occurs in a logical sequence. To this end, the consultant willprepare time charts and tables for each key operational area, so thatrestructuring can be regularly monitored in a standard format.

The Consultant will be required to review existing management information

data and to advise NBE on ways to improve the quality and quantity ofrelevant indicators (eg return on equity, return on assets, earnings peremployee, expenses per employee, liquidity, foreign exchangeexposure).

The Consultant will produce sensitivity analyses as required, including asregards financial market risks and scenarios (eg foreign exchange risk,interest rate risk, equity-price risk.).

Specific expertise will be provided in the following three areas (A, B and C). Duringthe inception phase the Beneficiary will provide specific input on the expected

deliverables for each of the three areas

A. Risk Management

Phase 1 : Diagnosis, Gap analysis, and Recommendations

This phase will entail a scoping exercise and design of a capacity buildingprogramme as well as a confidential review and assessment of Risk Management(Credit, Market and Operational risks) within the National Bank of Egypt from anumber of perspectives and across key business lines in order to provide NBEwith a detailed assessment of the restructuring, capacity building and trainingneeds in the core business lines as indicated in the below matrix:

Perspectives

Business Lines(risk categories):

(A)

Risk Strategy,Policy,

Procedures &Controls

(Credit, Market &Operational risks)

(B)

RiskExposure

levels

(C)

Risk ManagersHierarchy and

Jobdescriptions

(D)

Systems &InformationTechnolog

y

CorporateBanking

1 2 3 4

SMEs 5 6 7 8

Retail Banking 9 10 11 12

Treasury / ALM 13 14 15 16

Trading 17 18 19 20

Investments 21 22 23 24

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The review and assessment will cover all of the above 24 areas. Key strengthsand weaknesses in risk management will be identified. Where relevant, referencewill be made to readiness for the Basle II capital adequacy regimes.

Analysis of product pricing risk/reward - should also be included, the review willconclude with concrete, written recommendations for action to NBE to improveRisk Management at all levels (structures, methodologies & procedures).

A full diagnosis of the existing risk management functional unit/organization versusbest practice should also take place. Detailed findings and recommendations forthe respective areas along with qualitative assessment - with a clear measurementand illustration of existing versus best practice should be produced.

In this context, the tasks of the Consultant will include:

Identifying, analyzing and summarizing - using astandardised methodology - the risk levels across the main products, andbusiness lines of the 100 largest risk exposures - groups - (excludingfinancial institutions / inter bank credit lines / public enterprises) andappropriate classification to be recommended and compared to existingprovision and consequently identifying exact provision gap.

Identifying, analyzing and summarizing - using astandardised methodology inspired from the above matrix - the (A) RiskStrategy , Policy, Procedures and Controls B) Risk exposure level of NBEwith respect to (1)Corporate banking (2)SMEs (3)Retail banking

(4)Treasury/ALM (5)Inter-bank and correspondent banking and (6)Investments (hereafter known as the 6 key Business Lines).

Identifying gaps in risk strategy and policy thatmay weaken the approach to risk management currently adopted by NBEand/or impedes preparations for the Basle II regime and to makerecommendations for change.

Identifying and analyzing - using a standardisedmethodology inspired from the above matrix - the (C) Risk Managers -Hierarchy and Job descriptions within each of the 6 key Business lines.

Identifying gaps in the organizational structureand/or insufficiencies in individual job descriptions and to makerecommendations for change.

Identifying sources of (potential) human error,omissions, work overload or bottlenecks as regards the processing of riskmanagement information, and to make recommendations for change.

Identifying and analyzing - using a standardisedmethodology inspired from the above matrix - (D) Systems and InformationTechnology with respect to the 6 key Business lines.

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A detailed study of credit control should beundertaken, and the relevant management accounting (non-accrual) loandocumentation and tools examined.

Sample visits to NBE branches will be required,in order to gauge the effectiveness of procedures, and communicationsbetween the lending officers and credit control departments.

Treasury and funding operations should also beinvestigated.

The Consultant should express a written opinionon the quality of the key risk management reporting documents, and verify ifback-up or independent reporting systems exist.

Specific issues to be fully examined under oneor more of the 4 Perspectives indicated in the matrix (A,B,C,D) shall includebut not be limited to:

Credit applications, approval, lending and monitoring processes;

Existence/effectiveness of internal credit rating systems;Monitoring of trading limits;Portfolio concentration / analysis;Early warning systems and stress testing;Collateral evaluation process;Use of industry studies / sector analyses;Delegated lending authorities / limits;Methodology for dealing with non-performing loans;

(x) Workouts department (focusing onorganization, qualification, & responsibilities) and procedures;

Investment portfolio review; and investment process and guidelines.

Review of Asset & Liability Management functions and its effectiveness;Exceptional identification system (e.g. credit lines expired or exceeded);Pricing methodology / formula;

(xv) Review and recommend risk managementorganization structure & HR requirements to implement bestpractice.(xvi) Review and recommend credit administrationorganization structure & HR requirements to implement bestpractice.(xvii) Review the adequacy of Market andoperational risk functions and related issues in terms of

processes & procedures in order to control, monitor, & measureinherited risk.(xviii) Adequacy of reporting system & MIS withregards to risk management and control.

The consultant will summarize in writing towards the end of this Phase - the mainstrengths and weaknesses of NBE in the field of Risk Management. They will berequired to think laterally, and will have the freedom to focus in depth on problemareas, whilst providing a cursory review of areas that appear to be operatingsatisfactorily (NBE will provide some guidance in this respect).

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Moreover, the necessary actions, processes, and procedures will berecommended for implementation in an action plan format.

Phase 2 : Implementation of a recommended Capacity Building Programme

On the basis of this assessment, the Consultant will conduct meetings withNBEs senior management to present the output of the review andassessment together with a recommended action plan to address identifiedweaknesses in Risk Management - with reference to anticipated Basle IIrequirements - in order to ensure a common understanding and to reachagreement on the outline of the Capacity Building Programme.

The recommended Programme should include (but not limited to):

(i) On-the-job training to NBEs managementand staff at branch, regional office and/or head office level.

(ii) Seminar training to NBEs - management andstaff at branch, regional office and/or head office level; seminartraining may be intra-institutional; and should be interactive,thus requiring the preparation and follow-up of case-studies; allseminar training should be well documented with coursematerial relevant to the Egyptian context.(iii) Restructuring of risk function within NBEsorganization to reflect an upgraded focus and management ofthis function.(iv) Streamlining/reengineering of policies andprocedures manuals relevant within the Egyptian context

(v) Development of a credit rating system(vi) Development of a retail scoring system(vii) Recommend software packages for managing the whole risk function (RFPs of said softwarepackages should be prepared).

Implementation of the recommended capacity building programme asmutually agreed with NBEs senior management.

B. Human Resources

This components aims at contracting consulting services to upgrade the currentHuman Resources Infrastructure and practices with the bank and deliver thefollowing:

A revised organization plan for NBE Management with managerial jobdescriptions and a migration plan from current to proposed structures.

A Revised HR Function including policies, procedures, and systems.

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Detailed Scope of Work

1. Studying the Strategic Plan of the Bank

The Strategic Plan of NBE specifies market objectives as regards the expansion ofcurrent services to more customers, the introduction of new services and financialinstruments, and the extension of the branch network. A key objective of theproposed expansion is for NBE to develop into a regional player in the MiddleEast.

In order to implement this strategy, the bank is planning - or has initiated - severalprojects. As these projects and studies will impact the current organization, theconsultants will need to familiarise themselves with these initiatives.

The Human Resources function has an important contribution to make to achievethe overall objectives of the Strategic Plan. Inputs to HR under this contract mustrespect the cultural roots of NBE in Egypt. Outputs (deliverables) will be specifiedin the annual work plans for the programme but will include a strategic plan Study

for Human Resources and organisational charts in both English and Arabic.

2. Studying the Current Bank HR Operations

Review of the current practices (policies and procedures) of the HR activities andconduct a diagnostic study of these practises to upgrade them to industrystandards whilst taking into consideration the particularities of Egypt and the NBECorporate culture. The following should be addressed:

Staffing

o Assessment & Budgetingo Recruiting

o Hiring

o Employee On- Boarding

Manpower planningo Performance assessment

o Career Path and Career Management

o Job grading

o Skills Management & Certification Tracking

o Training Administration

Manpower Deploymento Employee Scheduling

o Shift & Vacation Bidding

o Workload Planning

o Compliance and coverage management

o Corporate Governance aspects for directors

Manpower Trackingo Time & Attendance

o Leave Management

o Policy Administration

o Job & Budget Status

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o Employee Record keeping

Employees Welfareo Medical system

o Cafeteria and meals

o Clubs & Entertainment

Employee Rewards & Incentives

o Payroll Processing & Administrationo Payroll Tax Filing

o Benefits Enrolment & Administrationo Compensation Planning

o Employee Awards

Safety and Security Employee and Labour Relation

o Intermediary between the Bank and its labouro Designing discipline and grievance handling system

o Employee indoctrination (political , Cultural )

Human Resources Research and Information Systemo Providing a human resource information base

o Designing and implementing employee communication system

o Developing and reporting employees and employments statistics

3. Recommend a Revised Organization

Using the NBE Strategic Plan and the HR strategic plan Study as springboards,the consultants will be required to develop and submit a revised Bank

Organization Plan consisting of:

Organisational Structure (overall, departmental and branches) Management Posts, Roles and Positions Qualification and Skills definition for management profiles; Implementation plan for the recommended organization structure

For every management position in the organization chart, it is necessary todetermine the work content, the workload expected, the number of posts in theposition and the qualifications, skills/ experience required to perform the job. In

particular;

Job evaluation to determine the value of each position, then suggest thebest ways to staff and remunerate the position.

The required position should be compared with sample incumbents in thecurrent hierarchy.

A career path for senior leadership positions should also be developed.

Implementation of the Plan has to be phased so as to avoid disruption to thecurrent activities of the bank. The restructuring will normally first address existingbank operations, prior to introducing new structures and activities. The Plan will

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determine the necessary pre-requisites, and the order of tasks to beaccomplished. The Plan must take into consideration the culture and the realitiesof the Egyptian environment.

4. Developing Detailed HR Functional Descriptions and Policies

In light of the in-depth assessment of the current HR functions and activities withinthe bank as well as international practices, the consultant will develop, add orrevise a detailed functional description for every HR activity accompanied with theguiding policies regulating the said function.

In this context, detailed HR functions description and policy is a high levelstatement in the bank developing: beliefs, goals and objectives together with thegeneral means for their attainment for a specific area.

Deliverables

The consultant is expected to deliver the following document:

HR Functional Description, including objectives, mission, relationshipswithin the overall organization, key performance indicators, and policiesgoverning each the HR activities at large and each function in particular(whenever applicable).

The document will have to be of public access to all employees. The document will have to be published electronically so as to allow for

updates.

5. Developing an HR Procedures Manual (in Arabic)

Procedures as viewed from the bank spell out the specific steps to implement apolicy or a guideline and describe the tasks that must be completed in a specificorder.

Starting from the existing HR manual (in Arabic), new procedures will have to bedeveloped or aligned in view of the new organization and in the light of the devisedfunctions and approved policies.

Some procedures will be discarded and replaced with state-of-the-art proceduresinvolving automation (eg recruitment procedures via the internet).

6. Implementation Supervision

To ensure implementation of recommendations and functions as prescribed in theabove activities, the consultant will this will include:

Hands-on as well as class-room type training of relevant HR staff onsaid functions, policies, procedures, practices and systems. This willinclude real case studies as well to ensure the HR staff and usersare fully oriented with reengineered practices.

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During this phase the Consultancy firm will identify key strategic issues to beconsidered during the project, it will confirm project objectives, scope and approach.The Consultancy firm will finalize work program and submit a detailed project timeplan including responsibilities, start and completion dates, and deliverables. TheConsultancy firm will confirm project team members, and the two Parties will developand agree on the approval process.

Deliverables: A detailed list of requirements from NBE and timings. A detailed time plan for the project. An agreed upon approval process for different deliverables. A finalized project team members with time commitments.

2. Survey of the Existing IT Platform at the bank:The consulting firm will conduct a survey of the existing hardware and softwareplatform at the bank, especially the set of software packages and functionalitiesperfomed by each of these packages. The Consultant will perform an assessment ofthe overall situation of software packages interactions and interfaces between thesepackages and the existing accounting package at the bank. A special attention will begiven to assess the available accounting package at bank.

Deliverables: A high level architecture of the exisitng NBE IT environment. Thisarchitecture will identify major applications, sources of data, interfaces,hardware infrastructure and network topography.

3. Proposed Future IT Architecture:The consulting firm will use the results of Phase III to develop a proposed ITarchitecture for NBE. This architecture will identify major applications, interfaces,infrastructure tools and software, hardware and network topography required tosupport NBEs current business and projected future business opportunities. Theproposed architecture should take into consideration the investment which NBE hasmade recently in hardware and network platforms and the latest trends in technologyinternationally.

Deliverables: A high level proposed architecture to support NBEs projected businessneeds. This architecture will identify major applications, sources of data,interfaces, hardware infrastructure and network topography.

4. Gap Analysis of the IT Environment at NBE:A study to assess the gap between existing NBE systems, and the IT architecturerequired to support the Banks future business plans.

In doing so, the consulting firm will review the relevant business processes at NBE,Document, confirm and prioritize major strategic, functional and technicalrequirements and obtain approval, and suggest modifications/ ammendments thatmust be discussed by the appropriate NBE authorities.

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The consulting firm will make a detailed review of the current accounting packageavailable at NBE and determine its capability to fulfill the requirements of the Bank.

A counterpart team from NBE will particiapte in this phase to facilitate the consultant'sjob during this phase, and to acquire experience in the performed tasks.

Deliverables: A Gap Analysis Report between proposed IT architecture and currentNBE systems. Proposed contents are specified below;

o A migration plan for moving NBE from the existing systems to the

proposed architecture.o Identification of all major projects including preliminary time and cost

estimates.o Identification of major architectural constraints within the existing

NBEs systems which would constrain NBEs ability to pursue major businessopportunities.o Assessment of the impact of the proposed architecture on the NBEs

IT department in terms of skill sets and resources requiredo The gap analysis report must take into consideration that NBE does

not intend to introduce major changes to its hardware and networking platforms in thenear future.o The gap analysis report must contain enough detailed description of

business processes to make it feasible for international core banking vendors toidentify those gaps and quote accurate financial offers for their project implementationphases. If the consulting firm needs any special requirements to carry out this phasein an effective way, this must be stated clearly in the offer or well in advance of thestart of this phase.o The consulting firm might consider including an Arabic speaking

business consultant in its team to facilitate the survey component of this phase.

5. Preliminary Assessment of External Vendor Solutions against Proposed ITArchitecture.This assessment will take into consideration NBE strategy, the proposed ITarchitecture, the available platform at NBE (especially the hardware and networkingplatforms), the available budget allocated for the modernization projects at NBE,andthe expected time frame for the modernization process.

This phase will comprise a high-level assessment of potential products/vendors which

potentially meet the Banks requirements. This phase will present differentalternatives for the sought solutions and give pros and cons (including one time andongoing costs) for each of them.

These alternatives include recommendations either to modify/upgrade the currentapplications, the purchase of a new Internationally-Proven Banking Package, the useof middleware and the use of other software products including data warehouses.

A counterpart team from NBE will particiapte in this phase to facilitate the consultant'sjob during this phase, and to acquire experience in the performed tasks.

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Deliverables: A report assessing alternative vendor solutions for implementing theproposed IT architecture at NBE. The report will present different alternativesfor the sought solutions and give pros and cons of each of them. A Comparative study among the available products/vendor's whichmight serve the Bank requirements. This report will also include some similar

case studies of Banks of similar sizes that encountered modernization effortsrecently.

Phase II: Development of the RFP and Vendor Selection

Implementation of this Part will depend on the outcome of Part One and the decisionof NBE based on that outcome. It will include the following activities;

1. Development of a Request for Proposal (RFP).

The Consultant will develop an RFP for the required solution resulting from the

findings of the previous phases. A counterpart team from NBE will particiapte in thisphase.

Deliverables: An RFP stating the technical and functional requirements for the soughtsolution for NBE. An Evaluation criteria for the solutions to be submitted. An estimate value for the sought solution. A time plan for the implementation of the solution.

2. Evaluation of vendor responses and selection of the most appropriate vendor.

The Consultant will participate in the evaluation and selection process for theprospect vendor based upon the vendor responses. The selection process will becarried out according to NBE's rules and regulations, therefore, the Consultant mustfamiliarize himself by those rules prior to the commencement of this phase in order toavoid any unexpected rule violations.

It is expected that the main technical input in the selection phase will be contributedby the Consultant, however, counterpart team from NBE will participate in thetechnical evaluation as well.

Deliverables: A technical evaluation report stating the technical standing of thesubmitted offers as a response to the RFP. A techno-financial evaluation report stating the final standing of thesubmitted offers as a response to the RFP, and a recommendation for theprocurement of the selected solution with recommended terms and conditions.

Phase III. Implementation Supervision

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The consultant is responsible for coordinating with the vendor/system integrator tosupervise the implementation of the acquired IT/MIS Solutions as well as qualityassuring the implantation outcomes with the business and technical requirementspredefined in the gapping and user requirements exercises. This supervision willcover:

Detailed implementation planning and overall project monitoring. PILOT planning, execution, testing, reporting, etc. Roll-out plan for Head Office, Branches, etc. Business and Technical staff training on implementation managementwhenever applicable (apart from application and systems-related training).

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6. REQUIREMENTS

6.1. Personnel

6.1.1. Key experts

All experts who have a crucial role in implementing the contract are referred to as

key experts. The profiles of the key experts for this contract are as follows:

Key Expert 1: Team Leader (Long Term) minimum 620 working days

A Team Leader, who will be an International Expert, will be required for the majorduration of this contract. The Team Leader will be an experienced financial sectorprofessional, combining technical expertise in commercial banking with strongmanagement, communication and administrative skills. In addition to his/hermanagement duties, the Team Leader is expected to provide technical guidanceand inputs in the strategic area ofRisk Management.

Qualifications and skills

University Degree in a relevant discipline (economics, management,accountancy, banking and finance, commercial law). A relevantMasters degree or professional qualification would be welcomed butis not obligatory;

Fluent English and experience of writing detailed reports in English;

Excellent communication and interpersonal skills;

General professional experience

A minimum of twenty years of work experience in commercial and

investment banking, including significant experience in OECDcountries (Europe, North America.);

At least seven years of work experience in large internationalbanking organisations having commercial activities in severalcountries;

Project management experience - leading a team of professionals -is obligatory;

Previous work experience with international development donors(EC, World Bank, EU Member States, USAID, ) is desirable.

Specific professional experience

At least ten years experience in risk-management related areas(control of lending, credit analysis, market risk supervision,operational risks management, treasury limits, financial control,internal audit, investment).

Previous work experience in bank restructuring/advisory or bank riskmanagement, either at senior level within a bank or as an externalconsultant;

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Demonstrable familiarity with the design and critical paths of bankrisk reporting systems (but is not required to be an IT/computerexpert).

Previous work experience in the Middle East or North Africa ispreferred but not obligatory.

Key expert 2: Human Resources Expert - minimum 200 working days (of whicha minimum of 100 days to be provided within the first 6 months of this contract).


University Degree plus a Human Resources professionalqualification;

Fluent English and experience of writing detailed reports in English;



A minimum of fifteen years of work experience in human resources.

At least ten years of human resources work experience within thebanking and finance sector (eg in a large commercial or investmentbank);


Demonstrable familiarity with the design and implementation ofHuman Resources policy for a large, commercially-orientatedorganisation, including job descriptions, staff evaluationmethodologies, compensation grids and staff incentive programmes.

Familiarity with the Middle East and/or knowledge of Arabic would bewelcome but is not obligatory.

Key expert 3: Management Information (MIS) / Information Technology (IT)

Expert - minimum 200 working days (of which a minimum of 100 days to be providedwithin the first 6 months of this contract).


University Degree plus a professional qualification relevant to MIS /IT.



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A minimum of fifteen years of MIS / IT work experience, includingsignificant experience in an OECD country (Europe, NorthAmerica);

At least ten years of MIS / IT work experience in a banking andfinance environment (eg within a large commercial or investmentbank);


Demonstrable project experience in needs analysis, design,development and implementation of MIS / IT systems in largefinancial sector organisations;

Experience of integrating MIS/IT solutions within existing systems;

Familiarity with the Middle East and/or knowledge of Arabic would bewelcome but is not obligatory.

Note that civil servants and other staff of the public administration of thebeneficiary country cannotbe recruited as Key Experts.

6.1.2. Other Experts

CVs for experts other than the Key Experts are not examined prior to the signatureof the contract. They should not have been included in tenders.

The Consultant shall select and hire Other Experts as required, in line with thespecific activities described in paragraph 4.2 of these Terms of Reference and asconfirmed by work plans approved by the Steering Committee. On an indicativebasis only, the following profiles are likely to be required:

Short term Experts in risk management; Short term Experts in credit analysis and control of lending; Short term Experts in treasury management; Short term Experts in foreign exchange; Short term Experts in implementing international capital adequacy

benchmarks (Basle I and II); Short term Experts and Advisors in Human Resources and Compensation; Short term Experts in MIS / database management; Short term Experts in Internal Audit

For these short term assignments, at least 60 % (sixty percent) of working daysmust be provided by International Experts, each having a minimum of 15 yearsprofessional experience. Some short term Experts will need to be fluent in Arabic.

For each Expert recruited, the Consultant must indicate whether they are to beregarded as long-term/short-term, international/local and senior/junior so that it isclear which fee rate in the budget breakdown will apply to each profile. For thepurposes of this contract, international experts are considered to be those whose

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permanent residence is outside the beneficiary country while local experts areconsidered to be those whose permanent residence is in the beneficiary country.

The Consultant should pay attention to the need to ensure the active participationof local professional skills where available, and a suitable mix of international andlocal staff in the project teams. All experts must be independent and free from

conflicts of interest in the responsibilities accorded to them.

The selection procedures used by the Consultant to select these other expertsshall be transparent, and shall be based on pre-defined criteria, includingprofessional qualifications, language skills and work experience. The findings ofthe selection panel shall be recorded. The selection of experts shall be subject toapproval by the Contracting Authority.

Note that civil servants and other staff of the public administration of thebeneficiary country cannotbe recruited as Other Experts.

6.1.3. Support staff & backstopping

The Consultant will be required to provide support and backstopping for allactivities, notably in the case of the temporary or unforeseen absence of Experts.In addition, Experts in the field should benefit from technical support from theConsultant when required. The backstopping costs and the costs of support staff(including local administrative and secretarial staff) are considered to be includedin the fee rates. The Consultant must provide a local secretary for the TeamLeader.

6.2. Office accommodation

NBE will provide furnished office accommodation (desks, chairs) in Cairo of areasonable standard for each of the Key Experts listed in paragraph 6.1.1.

Office accommodation of a reasonable standard for Other Experts working on thecontract is - where necessary - to be provided by the Consultant. The cost persquare metre must be in line with the prevailing local market rate for officeaccommodation of a reasonable standard.

NBE will also make available meeting rooms in Cairo to all Experts on an ad hocbasis, as required.

6.3. Facilities to be provided by the Consultant (within the fee rates)

The Consultant shall ensure that Experts are adequately supported and equipped,including as regards portable computers and mobile telephones. In particular theConsultant shall ensure that there is sufficient administrative, secretarial andinterpreting provision to enable experts to concentrate on their primaryresponsibilities. It must also transfer funds as necessary to support its activitiesunder the contract and to ensure that its employees are paid regularly and in atimely fashion.

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If the Consultant is a consortium, the arrangements should allow for the maximumflexibility in project implementation. Arrangements offering each consortiumpartner a fixed percentage of the work to be undertaken under the contract shouldbe avoided.

6.4. Equipment

No equipment is to be purchased on behalf of the Contracting Authority /Beneficiary Country as part of this service contract or transferred to theContracting Authority / beneficiary country at the end of this contract. Anyequipment related to this contract which is to be acquired by the BeneficiaryCountry must be purchased by means of a separate supply tender procedure

6.5. Incidental expenditure

The Provision for incidental expenditure covers the eligible incidental expenditure

incurred under this contract. It cannot be used for costs which should be coveredby the Consultant as part of its fee rates, as defined above. Its use is governed bythe provisions in the General Conditions and the notes in Annex V of the contract.It covers:

Travel costs and subsistence allowances for missions undertaken by Expertswithin Egypt (ie outside of the greater Cairo area) as part of this contract and asforeseen in the Work Plans approved by the Steering Committee;

Contributions towards the direct cost of organising external seminars in Egypt(eg rental of conference rooms), foreseen in the Work Plans approved by the

Steering Committee;

The total Provision for incidental expenditure for this contract is 250.000-This amount must be included without modification in the Budget breakdown.

Any subsistence allowances to be paid for missions undertaken as part of thiscontract from the base of operations in the beneficiary country must not exceed theper diem rates published on the Web sitehttp://europa.eu.int/comm/europeaid/index_en.htm at the start of each suchmission.

7. REPORTS

7.1. Reporting requirements

The Beneficiary and the European Commission attach high importance to thequality and clarity of Work Plans and other technical documents to be produced bythe Consultant. The following documents will respect the Project CycleManagement (PCM) approach and will be produced by the Consultant inaccordance with European Commission guidelines:

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Document Purpose/content Timing of publication

OverallComponent WorkPlan (OCWP)

Strategic Plan over the life of theprogramme.

Start ofProgramme(S)

AnnualComponent WorkPlan (ACWP)

Annual activity plan, updated every 12months. S, S+12months S+24months

ComponentProgress Report(CPR)

A quarterly review of activities of theprevious 6 months, with reference to theOverall and Annual Component WorkPlans.

S+3, S+6,S+9, S+12

Executive Brief Short monthly status report (1 2 pagesonly)

Every month

Final Report Required as part of project evaluationstage.

End ofprogramme

The Team Leader is responsible for preparing an Overall Component Work Plan(OCWP) for activities under this Contract. The OCWP is a strategic documentwhich must be submitted to the Steering Committee for comment and approvalwithin 25 working days from the start of this Contract. The OCWP is intended toensure ownership by stakeholders and also to assist long-range planning. Ifnecessary, the OCWP can be updated from time to time.

At a more operational level, the OCWP will be implemented according to approvedAnnual Component Work Plans (ACWP). The ACWP will be prepared /updatedevery 12 months by the Team Leader and subsequently submitted for approval bythe Steering Committee. The first AWCP must be submitted to the SteeringCommittee for approval within 40 working days from the start of this contract.

A Component Progress Report (CPR) must be submitted every three months bythe Team Leader to the Steering Committee for approval. The CPR will contain acomprehensive summary of activities over the previous three months, withreference to the Overall and Annual Component Work Plans, and should alsooutline main activities for the following 3 months.

Three months before the end of TA operations, the Team Leader will oversee thepreparation of a Final Report, summarizing activities since inception andevaluating in detail the impact of the Programme in view of its objectives andexpected results. The European Commission shall be entitled to request specificreports from the different technical assistance teams and to request modificationsto report formats.

In addition to the above reporting requirements, a monthly Executive Brief (1 or 2pages only) will be transmitted by the Team Leader to the Steering Committee

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and the EC Delegation. It will summarise the main ongoing activities in each area,highlighting any problems and outlining objectives for the coming month.

For the purposes of this Contract, Work Plans and Reports will be written inEnglish. The use of graphics and charts is expected.

Invoicing

Invoicing by the Consultant will be on a six monthly basis (maximum of 2 times ayear), as follows:

Immediately following the submission of a Component Progress Report, theConsultant should submit an invoice for the previous six months. An updatedfinancial statement must be annexed to each Report, containing details of the timeinputs of the experts and of the incidental expenditure.

Following submission of the Final Report for the Component, the Consultant shouldsubmit a final invoice, at the end of the period of execution. An updated financialreport must be submitted with the Final Report, containing details of the time inputsof the experts and of the incidental expenditure. The Consultant must also providean audit certificate (as defined in Article 30 of the General Conditions and inaccordance with the template in Annex VI of the contract, confirming the finalcertified value of the contract).

7.2. Submission & approval of progress reports

Three copies of the progress reports referred to above must be submitted to theProject Manager identified in the contract. The progress reports must be written inEnglish. The Project Manager is responsible for approving the progress reports.

8. MONITORING AND EVALUATION

8.1. Definition of indicators

Suitable quantifiable indicators (qualitative and quantitative) will be agreedbetween the Contracting Authority and the Consultant to measure the validity,usefulness and efficiency of project activities, and the resulting progress towards

expected results. Examples of Indicators that may be required include:

Targeted reductions in the levels of non-performing loans Improved Return on Equity (RoE) Improved Return on Assets (RoA) Establishment of sustainable management information systems

8.2. Special requirements

Not applicable.

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annex ii - terms of reference

Documents