Bankers welcome new credit law

CEBU, Philippines - The recently passed credit law Republic Act 9510, also known as the Credit Information System Act, which establishes a national credit information bureau, is a welcome development for banks in the country.

According to Prudencio Gesta, senior vice president and deputy group head for retail banking in Visayas and Mindanao of Rizal Commercial Bank Corp. (RCBC), the law is good for banks as a whole as it provides for intensive coverage of black-listed people all over the country.

“If before, we would not know if a specific borrower who has good credit standing in the province has fraudulent loans in Luzon or in other parts of the country, now we will know through the CISA,” he told The Freeman.

RA 9510 establishes the Central Credit Information Corp. (CCIC), which has the primary purpose of receiving and consolidating basic credit data, and acting as a central registry or central repository of credit information, and providing access to reliable, standardized information and credit history and financial condition of borrowers.

Banks were initially resistant to the passage of the bill because it requires banks to give up their secrecy agreement with their clients.

“But we believe this is for the greater good,” Gesta said.

Meanwhile, Credit Information Bureau Inc. (CIBI) manager Ed Limtingco said CISA will not compete with credit bureaus such as CIBI, saying the sector is in fact a user of CISA.

“Cisa is a credit depository only. We will be one of its stakeholders. We will be accessing their data for our credit reports. If before, we go directly to the source, like for instance, the court, to get our data, now we will not have to do that. We will now become more efficient. We are not competitors but we complement,” he said.

The Bangko Sentral ng Pilipinas said in a national report that the establishment of the credit information bureau would help instill discipline in managing credit.

BSP Governor Amando Tetangco Jr. said the recent passage of CISA would help regulators and credit executives get the discipline needed to improve the economy and instill further resilience against risks.

He said the bureau levels the playing field because credit information can now be accessed by the public, unlike before, where the information is provided by private companies.

Tetangco urged members of the Credit Management Association of the Philippines (CMAP) to practice discipline as providers as well as users of credit.

He said lax extension of credits directly contributed to the US mortgage crisis as banks securitized their housing loans into illiquid mortgage backed securities that were converted into tradable securities.

“The bar has been raised because we are witness to the devastation that deteriorating credits can bring about. For us, we like to remind all that the Philippines did not suffer from the mortgage-led crisis,” he said.

The CCIC will be 60-percent controlled by the National Government and 40-percent owned by qualified investors such as industry associations of banks, quasi-banks, other credit related associations and associations of consumers.