The Bangko Sentral ng Pilipinas (BSP) disclosed yesterday that the proposed Senate bill has passed through the second reading at the Senate committee on banking and a similar bill was pending at the committee level at the lower House.
BSP Deputy Governor Ernesto Espenilla told reporters that the ADB and IFC have both expressed interest in putting not just technical assistance but equity investment in the proposed credit bureau.
The proposed central credit bureau had initially met opposition from existing local credit rating agencies but Espenilla said fears of creating a possible monopoly were unfounded especially since the bureau was designed not just collect but to share information to credit rating agencies, banks and borrowers alike.
"This is a very basic reform that we have to implement," Espenilla said. "We can not just compel banks to dispose of their bad assets, we have to address the basic questions of why are there bad assets in the first place?"
Under the proposed law, Espenilla said banks and other credit providers would be required to provide credit information on their customers and clients. This information, he said, would be collated and processed by the proposed credit information bureau and would be available to the bank itself, the borrowers and credit rating agencies.
"The finding in other countries, particularly in developed market is that where credit information is strong, access to credit is not just easy but dramatically cheaper,"Espenilla said. "At the outset, borrowers will become more disciplined because they know that if they don’t take care of their credit reputation, it will be hard for them if people don’t pay attention to their credit reputation."
Espenilla said the BSP considered different approaches to the creation of a credit information bureau and ultimately decided that the BSP would have to participate from the beginning since there was strong resistance from the banking industry against giving up information about their clients.
"The BSP will be in the credit bureau to ensure trustworthiness and prevent misuse of information," Espenilla said. "If the BSP can be trusted to hold the country’s dollar reserves and print money, surely it’s a no-brainer that it can be trusted to handle sensitive information."
The equity of the ADB and the IFC into the proposed credit bureau, according to Espenilla, would add another layer of expert governance and help police its operations.
"It’s a very competitive environment and banks naturally do not want to risk their market shares by making information available for data mining,"he said. "But this is explicitly prohibited in the proposed law. Privacy of the borrower is also explicitly protected."