After almost a year of sorting through legal impediments to the creation of a separate credit information bureau, BSP officials said they have resigned to the possibility of assuming the responsibility while Congress has not passed the relevant laws and amended existing laws.
BSP officials told reporters yesterday that based on the legal reviews, it would be legally tenable for bank borrowers to sign an undertaking that would waive bank secrecy.
The bank secrecy law has been the major impediment for the creation of the bureau that was intended to function as a central database of borrower information to allow banks to assess the credit-worthiness of borrowers.
Once established, the credit information bureau would allow banks to determine whether they are dealing with a reliable borrower or a high-risk one.
The BSP official said that under existing rules, delinquent borrowers are able to go from bank to bank since financial institutions do not have access to the full record and borrowing history of individuals protected by the bank secrecy law.
The official said the BSP preferred the creation of a separate agency but existing laws would not allow it unless the bank secrecy law has been amended.
"The BSP is the only institution that banks would trust with this kind of information but we can not in turn gather them unless borrowers waive their rights to bank secrecy," the official said.
Once in place, the official said the BSP would be able to access the relevant information about borrowers and disseminate the processed information to banks.
"What we have to determine now is what form this information would take and how to do it," the official said.
At first, the BSP hoped its role would be confined to that of a go-between for banks and the proposed credit information bureau to facilitate the collection and dissemination of credit information about corporate and individual borrowers.
However, discussions on how to create the bureau and safeguard its database has forced banks and bank regulators into a deadlock with the BSP pushing for the creation of the bureau and banks refusing to cooperate.
"We will have to do it because banks are willing to disclose client information only to the BSP," the official said, adding that " the industry can not agree on any third party to handle that kind of information."
The official said the BSP can not legally create the credit information bureau as a subsidiary but it can add its functions to its regular operations.
"Under very restricted conditions and to a limited extent, we can do it," he said. "But in the end, we will need legislation that would allow us to create an honest to goodness credit bureau."
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 failed to comply.
The BSP said the industry has been resisting the creation of the bureau because they were hesitant to share information among themselves, especially on borrowers.
The creation of the bureau was one of the country’s commitments under the Basle Convention, where banks were required 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.