Request for Expressions of Interest (REoI) for International Consulting Firms (Service Provider) for Asset Quality Review (AQR) in Banks

Published by Ministry of Finance, Bangladesh Bank. Procuring Entity: Financial Sector Support & Strategic Planning Department (FSSSPD). 01. Background Bangladesh Bank (BB), the central bank of Bangladesh, plays a pivotal role in maintaining financial stability, safeguarding depositors’ interests, and strengthening the soundness of the banking sector. As the financial system grows in size and complexity, concerns have emerged regarding credit quality, loan classification, provisioning adequacy, capital adequacy, and overall risk management practices in banks. To address these systemic vulnerabilities and reinforce prudential oversight, BB intends to undertake a comprehensive Asset Quality Review (AQR) of selected banks under the Project Preparation Advance (PPA) of the proposed Financial Sector Support Project-II (FSSP-II), supported by the World Bank. BB seeks to engage an international consulting/audit firm with proven expertise in AQRs, diagnostics of banks, and credit risk assessments to carry out this assignment. 02. Functions and Responsibilities The assessment will comprise two stages: • First Stage: Assessment of asset quality, adequacy of Regulatory and Tier 1 capital against international and local standards and a comprehensive evaluation of banks’ credit risk management procedures, processes, and practices. • Second Stage: Assessment of Regulatory and Tier 1 capital adequacy in a 3-year horizon and according to baseline and adverse macroeconomic scenarios. The assessment will be based on fair, prudent, and realistic assumptions consistently applied to all banks. (i) Compliance and Diagnostic Assessment a) Review compliance with BB’s prudential regulations on asset classification, provisioning, large exposures, related-party identification, foreign currency exposures, and credit underwriting. b) Assess accounting policies, credit risk management practices, internal controls, and underwriting quality. c) Review liquidity management, investment policies, and FX exposure frameworks. (ii) Asset Quality Review (AQR) a) Conduct an asset quality review covering at least 80% of the total assets of the respective bank. b) Perform data integrity verification (DIV) of bank-provided datasets. c) Apply segmentation, sampling, and extrapolation for loan portfolios, securities, fixed assets, and off-balance sheet exposures. d) Conduct collateral valuation reviews, including independent reappraisals where required. e) Identify willful defaulters, related-party transactions, and connected lending as per regulations. (iii) FX Exposure Review a) Assess the adequacy and accuracy of net open positions, valuation of FX exposures, and regulatory reporting. (iv) Capital Adequacy Assessment a) Assess Regulatory Capital and Tier 1 capital adequacy based on adjusted asset classifications and provisioning levels. b) Evaluate capital adequacy under baseline and adverse macroeconomic scenarios. (v) Liquidity Review a) Assess different liquidity ratios like liquidity coverage ratio, net stable funding ratio liquidity mismatches, funding gaps, and reliability of liquidity projections. (vi) Forensic Examination a) Detect fraudulent or illegal loan activities, identify responsible parties, quantify losses, and recommend preventive mechanisms. (vii) Reporting a) Prepare inception report, monthly progress reports, data quality assessments, AQR findings, adjustment summaries, and final diagnostic report signed by the senior-most partner based abroad. Procurement Method: Quality and Cost Based Selection(QCBS). Budget and Source of Funds: Development Budget Loan. Experience and Resources Required: Commencement and Duration The Services are expected to commence in January 2027, and service providers should perform the components in Para 2within 120 calendar days from the date of the contract. Interested international consulting firms must demonstrate the following qualifications: (i) Legal Status and Experience a) The consulting firm must be a legally registered entity with at least fifteen (15) years of verifiable experience, including a minimum of ten (10) years specifically providing professional consulting services in AQR, diagnostic studies, banking supervision, credit risk reviews, IFRS-based assessments, and stress testing with financial sector regulators, central banks, or large commercial banks worldwide. b) In the case of a Joint Venture (JV) or consortium, each participating member must have at least ten (10) years of relevant experience as specified above. c) Consultants are requested to submit, but not limited to, the following supporting documents in support of the above-mentioned criteria: (i) The Firm's Incorporation/Trade/registration documents from the country of the firm (ii) Firm’s brochures; and (iii) description of similar consultancy contracts, including the scope, contract amount, name of Client, period of the contract (date of