MANILA, Philippines – President Arroyo signed into law yesterday the Credit Information Systems Act which aims to help the poor gain greater access to credit as well as protect the country from bad corporate practices that could lead to financial crises similar to what bedeviled the US and other developed economies.
Mrs. Arroyo signed Republic Act 9510 at the Rizal Hall in Malacañang. Principal authors Senators Edgardo Angara, Juan Ponce Enrile, Juan Miguel Zubiri and Aurora Rep. Juan Edgardo Angara, Manila Rep. Jaime Lopez, Camarines Sur Rep. Luis Villafuerte and Manila Rep. Zenaida Angping witnessed the signing. Sen. Loren Legarda, who is also one of the authors, was not present.
Also present were leaders of the financial and banking industry.
The law created the Credit Information Corp. (CIC) that would be headed by the chair of the Securities and Exchange Commission (SEC).
“Congress has given our people an early Christmas gift through this Credit Information System Law. We look forward to Congress adding even more gifts to better protect our people,” the President said.
“A credible and comprehensive credit information system run by the CIC will cut credit processing time and therefore lower transaction costs,” she said.
She said the law will lessen the risk of defaults with better credit information as well as reduce the credit premium charged by lenders. This, in effect, will increase lending volumes.
The authors said the law would address the fundamental problem of the Philippine credit market, which is the lack of comprehensive credit-related information.
“In the long term, the law aims to protect the country from bad credit practices such as those that contributed to the financial crisis in the US,” a prepared brief from the Presidential Legislative Liaison Office said.
The CIC is mandated to receive and consolidate basic credit data and to act as central registry of credit information, which will provide access to reliable standardized information on the credit history and financial condition of borrowers.
The law allocates 60 percent of total common shares of the CIC to the National Government and the remaining 40 percent to be owned and held by qualified investors such as industry associations of banks, quasi-banks and other credit-related associations.
The National Government will provide P75 million from the budget representing its equity share and P50 million will be subscribed and paid up by qualified investors.
The SEC chairperson will chair the 15-man board of directors of the corporation. The President will appoint directors representing government shares.
Strict confidentiality of credit information will be maintained by the CIC and the “submitting entities, the accessing entities, the outsource entities, the special accessing entities, and duly-authorized non-accessing entities,” the PLLO said.