The BSP has been pressing the banking industry to establish the credit information bureau before yearend, 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.
However, BSP Governor Rafael 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 what is the point of developing credit profiling for corporate and individual borrowers?" Buenaventura pointed out.
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."
This way, Buenaventura said banks need not worry about revealing their clientele to other banks. "The only problem now is protecting the privacy of the borrowers," he said.
To address this concern, Buenaventura said the BSP is evaluating whether it would be possible to ask the borrowers to sign a waiver that would allow their banks 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," he 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.
"If we don’t do this, then the asset quality of the banking system will be affected," Buenaventura explained.
Buenaventura added that the absence of the credit bureau is forcing good borrowers to subsidize bad borrowers because of the absence of a reliable information and credit-checking mechanism in the industry.
"If the banking industry will not put up the credit bureau, then their outstanding loans will be subject to higher risk-weighting," Buenaventura said. "We will also raise the required capital adequacy ratio to make sure they are managing their risks well."
This means that banks would be made to set aside an even portion of their capital in order to provide a cover for the loans in their portfolio. They would also be forced to raise their capital in order to meet the higher minimum CAR.