Case Study Dexia Internal Audit

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Case Study Dexia Internal Audit
Leslie Foster, Group Head of Audit Wealth
Management, Human Resources and Communication
27 February 2008, Barcelona
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Dexia Internal Audit

• Agenda

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Dexia Internal Audit

• Agenda

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About Dexia
Dexia A Growth Story
Dexia was created in 1996 through a merger of
equals between Crédit local de France, a
specialized financial institution, and Crédit
Communal de Belgique, a universal bank, each a
leader on its home market for financial services
to local authorities (Public Finance). Dexia
ranks among the 20 largest banks in
Euroland. Key figures - Total assets EUR
577 billion - Net Income EUR 2.75
billion - Tier 1 ratio 9.9 - More than
35,000 employees in 37 countries
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Building the Future on Two Pillars

• Strategic Focus / Business Lines

Dexia will continue building its long term
future on two pillars
Universal banking on a European scale
Public / Project Finance Credit Enhancement
on a global scale
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About Dexia
Geographic Scope
At June 30, 2007
Global
EUR 281 Bn
LT banking commitments o/s
Public / Project Finance and Credit Enhancement
Global
USD 399 Bn
Net par o/s FSA
Personal Financial Services
Belux Turkey
EUR 137 Bn
Customer assets o/s
Belux Turkey
EUR 36 Bn
Customer loans o/s
Number of clients
Belux Turkey
6.5 M
Europe
EUR 111 Bn
Assets under management
Asset Management, and Investor Services
Global
USD 2,633 Bn
Assets under administration
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Dexia Internal Audit Organisation

• 2006 Organisation

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Segment 1
IAMC
Internal Audit Management Committee
Pôle 1
Segment 2
Pôle 2
AG
AG
AG
AGG
Segment 3
Pôle 3
Planning, Tools Reporting
Comité exécutif groupe
Segment 4
Pôle 4
Segment 5
Internal Audit Executive Committee
Pôle 5
DEXIA SA
Correspondant
Correspondant
Correspondant
AGG
Auditeurs
Correspondant
Correspondant
Correspondant
Correspondant
AG
PTR
DBB
Auditeurs
Correspondant
Correspondant
AG
PTR
DCL
Auditeurs
Correspondant
AG
PTR
DBL
Auditeurs
Autres filiales Dexia SA Centres de compétences
spécifiques
CREDITOP
FSA
DIB
DTS
DAM
NY Branch
RBCD
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Dexia Internal Audit Organisation
2008
184 auditors within Dexia Group 52 auditors
within Deniz Financial Services Group Audit
plan for 2008 40 transversal audit
assignments individual (local) audit
plan Audit mission is articulated around
Group Head of Audit Audit Manager
Auditors
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Dexia Internal Audit Organisation

• Group Head of Audit

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Dexia Internal Audit Organisation

• Internal Audit Processes Mission Type

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First Achievements of the New Internal Audit
Organisation

• The Right Track

• 2007 The year of change for Dexia Internal
  Audit function
• Reminder Objectives of the new organization
• Unique audit plan
• Group Heads of Audit convincing interfaces for
  Dexia top management
• Motivation of auditors teams
• New role of General Auditors
• Implementation of Planning, Tools Reporting
  function
• Impressive results after first year
• 45 transversal audits (several implying more
  than 5 entities)
• Coverage rate of the unique audit plan at year
  end more than 80
• 20 senior auditors acting as transversal audit
  managers (coming from 5 different entities)
• Positive opinions of our internal clients

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First Achievements of the New Internal Audit
Organisation

• More Transversal View of the Risks

• Dexia complex and decentralized group
• activities are not equally distributed between
  entities
• major activities located in subsidiaries or
  branches
• Way of working that fits Top Management structure
  and needs/requests of operationals
• Better way to cover all interactions within the
  group
• Avoids time lags and inconsistencies in scope
  coverage for main risks of the Group

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First Achievements of the New Internal Audit
Organisation

• More Transversal View of the Risks - Benchmarking

• When there is a finding in one entity, now we are
  able to check if it is not the case in all other
  Dexia entities potentially impacted
• Improvement of coherence or deepness of audits in
  all entities covered
• Ability to make more strategic recommendations
  based on some entities best practices

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First Achievements of the New Internal Audit
Organisation

• New Opportunities for Auditors

• Better communication all over
• Reinforcement of Dexia feeling
• Culture mix

• Enlargement of management role
• Possibility to have a transversal role given to a
  wider range of people
• Internal Audit ground for talents

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First Achievements of the New Internal Audit
Organisation

• GHAs Achievements

• Privileged interfaces with Board Members
• Better feedback
• Point of reference
• Better global understanding of Dexia activities,
  knowledge of risks.
• Better coordination between audit assignments in
  the same segment to avoid gaps/overlaps
• Support to entities avoid to restart everything
  from scratch

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First Achievements of the New Internal Audit
Organisation
More Flexible Response to Audit Management
Priorities

• Before

• Today

• Less integrated management steering
• Local plans topped with group missions
• Local priorities hamper arbitrage
• Local resources/expertise constraints
• Local/entity action radius of the Auditor
• Local variations on a common methodological theme
  

• Joint management steering
• Integrated planning
• Groupwide arbitrage on priorities
• Leverage on groupwide resources and
  expertise
• Transversal action radius of the Auditor
• Improved alignment of audit methodology

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Dexia Internal Audit

• Agenda

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About Denizbank
Denizbank A Growth Story
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About Denizbank
Denizbank A Growth Story
Top 10 Banks Share 88 in Assets, 93 in
Deposits, 86 in Loans
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About Denizbank
Top Banks by Total Assets
1997 - TRY M
June 2006 - TRY M
Growth
1. Ziraat Bankasi
3,158
1. IsBank
77,392
x 57
2. Halk Bank
1,536
2. Ziraat Bankasi
67,568
x 21
3. IsBank
1,351
3. AkBank
58,696
x 50
4. Yapi Kredi / Koç
1,243
4. Garanti
53,323
x 45
5. Garanti
1,195
52. DenizBank
0,02
9. DenizBank
14,007
x 700
(among private n 6)
Consolidated figures not available
Sources Banks Association of Turkey, CB of
Turkey, Bank only figures
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DenizBanks' Rapid Growth has been Reflected in
its Financial Performance Since its Foundation
in 1997
Loans (TRY M)
Net Income (TRY M)
CAGR 60
CAGR 76
Branches (incl. Intl subsidiaries)
CAGR 40
Source DenizBank
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DenizBank Serves its Customers Through a
Country-wide Branch Network
2007 June Figures
Branch Network
Branches 291 Foreign subsidiaries
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Branch Breakdown
Retail and SME 209 Full service
46 Corporate 5 Commercial center
13 Others (mobile/free zone/offices/foreign
sub.) 30
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Denizbank Integration

• October 2006

Creation of a Coordination Synergy Team
In charge of global steering of the
assignments, ensuring coherence between different
analyses Organizing monthly periodic reviews and
resolve/de-bottleneck issues on an as-needed basis
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Denizbank Integration

• Immediate Post Acquisition

• Definition of Expatriate Positions
• 4 for support functions Risk management,
  Finance, Audit Compliance, OpsIT
• 5 for Business development Retail, CorpComm,
  Private, Mortgages, TFM
• 2 resident Board members out of 4
• Board of Directors composed in total by 5 Dexia,
  5 Denizbank membres and chaired by D. Bruneel.
• Definition of 30 workshops and timelines for
  support functions and business lines.
• Project mode, with a project sponsor (Dexia),
  project owner and a project leader , Mixed teams
• Clear Objectives and deadlines defined for each
  workgroup with approval of Dexia functional line

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Denizbank Integration

• Immediate Post Acquisition

• OBJECTIVES
• Maintain the growth engine of Denizbank, its
  dynamic, the entrepreneurial spirit and improve
  its position in the Turkish market
• Adapt to the extend needed the organisation and
  processes of DenizBank to the Dexia requirements
  in terms of reporting, risk, audit,
• Identify, confirm, assess and capture potential
  synergies for business lines.
• Managing the risk, while keeping in touch with
  the fast growing business and local environment
  of a fast growing market.
• Benchmark

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Denizbank Internal Audit Organisation

• Internal Audit Integration

• Evaluation of as-is situation and gap analysis
  for alignment with Group requirements
• Analysis of the Internal control functions
  organization
• Inventory of no-comfort-zones that were partly
  subject of Joint audits in the last quarter
• Increase understanding of information and process
  flows in order to assess quality of the received
  information and impact of organizational changes.

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Denizbank Internal Audit Organisation

• One team, with auditors specialized only for IT
  audits
• IA is in charge of
• Branch audits, (70 of the time)
• Head office and subsidiaries audits,
• Investigations,
• IT audits and fraud investigations,
• Operational risk data collection

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Denizbank Internal Audit Organisation

• 2007 Re-Organisation

• Dexia Internal Audit Charter has been approved
  by Denizbanks Audit Committee and Board of
  Directors
• Review of control function organisation and set
  up of a project to establish Levels 1,2 3 of
  controls in the organisation
• Refocus Internal Control department on permanent
  controls
• Refocus Internal Audit department on periodic
  risk and process based audits
• Implementation of Dexia methodology for
• Head office and subsidiaries audits
• Risk assessement and audit plan definition.
• Denizbank will be integrated in the global audit
  plan of Dexia

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Dexia Internal Audit

• Agenda

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Dexia Internal Audit Organisation

• Communication

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Dexia Internal Audit Organisation

• Communication