Bangko Sentral to act as credit information bureau

The refusal of banks to share client information will force the Bangko Sentral ng Pilipinas (BSP) to act as a credit information bureau while waiting for Congress to amend the pertinent provisions of the Bank Secrecy Law.

After sorting through the legal questions blocking the creation of an actual bureau, BSP Governor Rafael Buenaventura said the central bank will have to do it until the law has been amended.

The BSP initially hoped its role would be confined to that of a go-between for banks and the proposed credit information bureau to facilitate the collection and dissemination of credit information about corporate and individual borrowers.

However, discussions on how to create the bureau and safeguard its database have forced banks and bank regulators into a deadlock with the BSP pushing for the creation of the bureau and banks refusing to cooperate.

"We will have to do it because banks are willing to disclose client information only to the BSP," Buenaventura said. "The industry cannot agree on any third party to handle that kind of information."

Buenaventura said the BSP cannot legally create the credit information bureau as a subsidiary but it can add its functions to its regular operations.

"Under very restricted conditions and to a limited extent, we can do it," Buenaventura said. "But in the end, we will need legislation that would allow us to create an honest-to-goodness credit bureau."

The BSP has been pressing the banking industry to establish the credit information bureau before the end of 2004, even threatening to raise the minimum capital adequacy requirement of banks and increase the risk-weighting of their loans if the industry fails to comply.

Buenaventura said the industry has been resisting the creation of the bureau because they are hesitant to share information among themselves, especially on borrowers.

"If they are not willing to share that kind of information, then there is no point in developing credit profiles for corporate and individual borrowers," Buenaventura pointed out. "There won’t be any available information to create an intelligent and reliable profile."

To bridge the gap, Buenaventura said the BSP is considering the possibility of acting as a repository of the information that banks would be required to submit.

"Once we have this information, we’re trying to see if we can release them to the credit bureau although in a much sanitized form," Buenaventura explained. "The data would only contain the relevant information about the credit profile of borrowers and in no way indicate which banks they had dealings with."

Since the bureau could not be created without legislation, the BSP would have to collect and facilitate the restricted release of borrowers’ credit history and profile to banks.

But even this would require borrowers to sign a waiver that would allow their bank to report their credit profile to the BSP.

"The last question we have to study is whether the BSP is legally allowed to disclose this kind of information to the credit information bureau, Buenaventura said. "There are layers of legal questions that have to be answered before we can do this. But we have to do it, we have a commitment to the Basle Convention."

Under the Basle Convention, banks are required to institute the mechanism that would classify and rate borrowers. This would lower the risk of default by ensuring that borrowers are property rated based on their credit history.