Manual for off-site analysis of financial institutions in developing countries

Treasury Department"s Office of the Comptroller of the Currency (OCC) found the approach flawed by a lack of attention to the banks between examinations and by the lack of a comparative national data base. To remedy this, OCC established an off-site monitoring system which analyzes the information provided by banks in periodic "call reports". This manual uses the OCC system as a framework for analyzing financial institutions in the Third World. Chapters I and II describe the evolution of off-site analysis and discuss the significant level of financial disclosure which is required in the call reports. Chapters III-VI explain how a determination can be made regarding the four objective criteria of bank analysis: asset quality, capital adequacy, profitability, and liquidity. Qualitative factors (e.g., management) which should be factored in the overall analysis are assessed in Chapter VII. Finally, Chapter VIII discusses criteria to be used for a three-scale rating (low, medium, and high risk) to summarize the analysis. A sample report, a financial information questionnaire for use by PRE"s Loan Portfolio Guarantee Program, and PRE guidelines for assessing Third World institutions are annexed. It is noted that the assessment is not simply a numerical exercise, as individual judgment will always play an important role in off-site analysis.