Pushing for the creation of the centralized credit information bureau, the BSP revealed yesterday that several policies were under consideration to restrict lending to un-profiled borrowers by making it more expensive for banks to lend and for such borrowers to borrow.
The policy would apply to all kinds of loans, including credit card loans, auto loans, housing loans and even corporate loans. Banks could be required to set aside more provisions to cover the loans they extend to unprofiled or unrated borrowers.
The scheme is under consideration as the BSP said it would have to act as a go-between for banks to facilitate the collection and dissemination of credit information about corporate and individual borrowers.
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.
However, BSP Deputy Governor Alberto V. Reyes revealed that based on the legal opinions sought by monetary officials as well as the banking industry, it would take an act of Congress to facilitate the creation of the bureau as envisioned by the BSP.
"In the meantime, the BSP would have to act as a repository of information about borrowers," Reyes said. "The only legal way that this would be possible is for borrowers to sign a waiver that would allow the BSP access to his credit history."
The BSP could then filter the information to the credit bureau, albeit in a much sanitized form that would reveal only the credit history of the borrower, whether individual or corporate.
Reyes said the waiver will be an attached undertaking to the loan application of any borrower. "If the creditor bank is unable to get the borrower to sign the waiver, we’re thinking of imposing additional provisioning for such loans," he said.
This way, Reyes said, banks would be compelled to convince their clients to waive their privacy rights in the interest of culling the information intended to eventually weed out delinquent borrowers with bad credit history.
"If we had done this early on, we wouldn’t have problems with defaults because we would have known from the start who are creditworthy and who are not," Reyes said.
However, he said the emerging mechanism for facilitating the interim credit bureau is not the permanent solution. "Ultimately, we need legislation to give the mandate for a credit information bureau as envisioned," he said.
Reyes said the creation of the bureau was in compliance with the country’s commitment to the provisions of the Basle Convention which requires banks around the world to institute the mechanism that would classify and rate borrowers. This would lower the risk of default by ensuring that borrowers were property rated based on their credit history.
The BSP said the absence of the credit bureau has been forcing good borrowers to subsidize bad borrowers because of the absence of a reliable information and credit-checking mechanism in the industry.