Credit bureau to help instill credit discipline - BSP

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) reiterated that the establishment of a credit information bureau under Republic Act 9510 also known as the Credit Information System Act (CISA) would help instill discipline in managing credit.

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

“The recent passage into law of CISA will definitely help. Unlike the present situation where credit information is privately generated, the ensuing credit bureau will make credit information publicly available. This alone levels the field because similar decisions can now be made using common information,” Tetangco stressed. 

He pointed out that the new law institutionalizes accountabilities because natural and juridical entities could no longer set aside credit events as trivial. 

According to him, regulators and cre-dit executives could now look into past due accounts, unfunded checks, unpaid balances, industry trends, and patterns in a locality. 

“All of these matter and they count towards instilling discipline in managing credit,” he added.

The BSP chief stressed the importance of credit discipline that would provide the framework to help regulators and credit executives exercise sound judgement.

“Indeed, there is no doubt that credit discipline helps. The reality of limited resources tells us that we need to prudently deploy these resources when opportunities present themselves. Credit discipline provides the framework within which we can exercise sound judgement. This applies to both sides of credit. That is, the extension of credit as well as the decision to borrow funds,” Tetangco said.

The BSP chief encouraged members of the Credit Management Association of the Philippines (CMAP) to practice credit discipline as providers as well as users of credit.

“Let me then urge CMAP to take an active role in the market. We need to make sure that we not only talk of the virtues of credit discipline. More importantly, our own actions must reflect that we practice credit discipline as providers as well as users of credit,” he said.

Tetangco reiterated that extended leverage directly contributed to the US mortgage crisis as banks securitized their housing loans into illiquid mortgage backed securities (MBS) that were converted into tradeable securities.

He said the credit discipline could help the economy especially because resources and opportunities are ultimately limited. 

“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,” the BSP chief added.

According to him, the major factor that the Philippines survived the crisis was because banks were able to keep their non-performing loans low while their asset quality continued to improve over the past few years. 

The Securities and Exchange Commission (SEC) has alreay released the implementing rules and regulations of CISA mandating certain entities to provide credit data and updates to the Central Credit Information Corp.

The CCIC to 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 is tasked to receive and consolidate basic credit data.