RP takes step closer to setting up credit bureau
By Doris Dumlao
Philippine Daily Inquirer
First Posted 19:29:00 06/22/2008
THE PHILIPPINES IS MOVING CLOSER TO setting up the much-awaited credit information agency that will make it easier for banks and financial institutions to detect credit risks.
But based on a version recently passed by the Lower House on third reading, the Bangko Sentral ng Pilipinas, a major advocate of the Credit Information Systems Act (Cisa), would not have a stake in the P100-million central credit corporation—a departure from earlier versions that called on the central bank to take a prominent role in the proposed agency.
Congress had earmarked P100 million for the government to take a 60-percent stake in the credit corporation, but the Securities and Exchange Commission was assigned to be the lead agency instead of the BSP.
The CISA seeks to create a central credit information agency that will collect and provide reliable, standardized and updated information on the credit history and financial condition of all borrowers, whether individual, corporate or local government units.
“The operations and services of a credit information system can be expected to greatly improve the overall availability of credit especially to micro-, small- and medium-scale enterprises; provide mechanisms to make credit more cost-effective, and reduce the excessive dependence on collateral to secure credit facilities,” the consolidated bill said.
“An efficient credit information system will also enable financial institutions to reduce their overall credit risk, contributing to a healthier and more stable financial system,” it added.
The Cisa, authored by Reps. Juan Edgardo Angara (lone district of Aurora), Luis Villafuerte (2nd District, Camarines Sur) and Jaime Lopez (2nd district, Manila), will now be elevated to the Congress Bicameral Conference Committee.
Asked about the Lower House version, Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said he would leave it up to Congress to hammer out the framework for this key financial market reform.
The Cisa will require all banks, quasi-banks, their affiliates and subsidiaries, including insurance companies, credit card companies or any entities providing credit, to submit basic credit data and updates to the credit corporation.
Basic credit data refer to “positive” and “negative” information submitted by a borrower when applying for a loan, but excluding confidential information on bank deposits and client funds.
“Negative” credit information refers to data like defaults, adverse court judgments relating to debts and reports on bankruptcy, insolvency, petitions or orders on suspension of payments.
To date, the Bankers Association of the Philippines has a data-sharing facility that is limited to so-called negative information. In general, banks are still hesitant to share information on good borrowers as they fear this will reduce their competitive edge. But banking regulations believe that many banks could have avoided risky loan exposures if they were made more aware of borrowers’ outstanding liabilities to other banks.
Under the bill, the negative information on a borrower will remain in the database of the corporation for a maximum of three years from the date when the negative information was rectified through payment or liquidation of debt or through compromise settlements or court decisions that exonerate the borrower.
But the Cisa shall now require the reporting of “positive” information, such as timely repayments or nondelinquency.
On the equity ownership in the central credit information corporation, the bill mandates that the remaining 40 percent be held by “qualified investors”, which shall be limited to industry associations of banks, quasi-banks and other credit-related associations including associations of consumers. No single interest group, however, will be allowed to own more than 10 percent of total stock.
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