5 banks set up credit bureau to keep track of good, bad borrowers

MANILA, Philippines—The country’s five largest credit card players have set up the Philippines’ first international private credit bureau, aiming to ease credit flow by reducing risk for lenders and lowering the cost of money for the “good” borrowers.

Banco de Oro Unibank, Bank of the Philippine Islands, Citibank Philippines, HSBC and Metrobank teamed up with Chicago-based credit information management TransUnion to centralize credit information system as well as the collection and sharing of both “positive” and “negative” data.

This means that banks – which erstwhile shared only their “negative” list of delinquent accounts – would be able to better distinguish good from bad borrowers and allow them to adopt a tiering system on interest rates where credit cost would be commensurate to credit-worthiness.

BPI president Aurelio Montinola III, who is also president of the Bankers Association of the Philippines, said in a press briefing Tuesday that the partnership would boost the financial system by allowing banks to build better customer portfolios and tap under-served market niches. With the sharing of the positive and negative lists, he said banks can better assess credit risk and “avoid lending to borrowers who are already overextended financially.”

There are about six million outstanding credit cards in the Philippines held by about four million borrowers, Montinola estimated.

The five banks – representing the country’s biggest local and foreign players – are in the final stages of incorporating a local company called TransUnion Philippines. Its system went live in July and data will be ready to be accessed within the next few weeks.

“Definitely, with the greater availability of credit to consumers and banks able to look at credit history from a holistic perspective, banks can adopt a risk-based pricing in the consumer lending,” said Lawrence Tsong, president of TransUnion East Asia.

Driving down credit cost has been a natural consequence anywhere in the world where such credit information systems were introduced, Tsong added.