THE BAHAMAS’ CREDIT BUREAU PROJECT [April, 2019] 1 The Bahamas Credit Bureau Project
THE BAHAMAS’ CREDIT BUREAU PROJECT [April, 2019] 2 The Bahamas Credit Bureau Project
PROJECT HISTORY … renewed momentum after joining the IFC Caribbean Credit Bureau Project IFC Project Govt Approval Public Consumer Consent Bahamas beneficiary of Consultation CBOB obtained Gov’t’s no Discussion assistance under IFC’s 5 yr. objection to proceed with credit bureau project for Draft credit preparatory work for CBOB discussed with AGO the Caribbean. reporting Bill and establishing a credit requirements for Assessments undertaken Regs to be issued for bureau. Credit Bureau disclosure of customers of market, legal and public consultation. Committee established. accounts to a credit regulatory and business bureau. and technical frameworks. Sep 17, 2014 1990 1994 2003 2008 2010 2011-2014 BCB Project World Bank Guided by findings, new Study working teams CBA Proposal established; Central Bank, Feasibility study in consultation with the undertaken on To operate a lenders’ IFC, develops draft lenders’ exchange exchange. legislation; extensive as first step; exercise started in discussions with key stakeholders. 2005, report finalized in 2006.
PROJECT HISTORY … renewed momentum after joining the IFC Caribbean Credit Bureau Project Public IFC Project Govt Approval Consultation Bahamas beneficiary of CBOB obtained Gov’t’s no assistance under IFC’s 5 yr. Draft credit objection to proceed with credit bureau project for reporting bill and preparatory work for the Caribbean. regs to be issued for establishing a credit Assessments undertaken public consultation bureau. Credit Bureau of market, legal and Committee established. regulatory and business and technical frameworks Sept, 2014 2003 2008 2011 - 2014 BCB Project Guided by findings, new working teams World Bank Study established; Central Bank, in consultation with the Feasibility study IFC, develops draft undertaken on legislation; extensive lenders’ exchange as discussions with key first step; exercise stakeholders. started in 2005, report finalized in 2006.
Coming into Being ..considerable work involved in the establishment of a credit bureau Credit Bureau Licensed Credit Bureau Public Consultation Identified Licensing process begins FEB ‘19 90-day period, followed by Bureau will take at least 12 to 18 review of comments and Operational framework established. months, before operational. finalization of legislation. January 2019 –CRIF S.P.A Credit Bureau engaged in data gathering, cleansing etc. SEPT - DEC Identified as preferred credit bureau operator 2016 2018 Project Kickoff April ‘18 Feb ‘18 Credit Reporting Act, Credit bureau issuing credit Request for Proposal reports after 2020 2018 From qualified firms to establish and Credit Reporting Regulations operate a credit bureau in The Bahamas. passed by Parliament. 5 The Bahamas Credit Bureau Project
Coming into Being .. Credit Bureau Identified Cash investment to establish operations rather than fees or licensing agreements Local sales and support office incorporated in The Bahamas 6 The Bahamas Credit Bureau Project
Coming into Being … Credit Bureau Identified ITALY EGYPT • • Bologna Cairo • • • KSA • UAE Milan • • Riyadh - in partnership with • SWITZERLAND • Dubai Rome GERMANY • • Bayan • Zurich Hamburg • • UK USA Karlsruhe • • • MADAGASCAR • TAJIKISTAN • London Atlanta • • Antananarivo • Dushanbe Denver INDONESIA • • • VIETNAM Jakarta • • MALAYSIA • RUSSIA • Hanoi AUSTRIA • • Kuala Lumpur • Moscow • Ho Chi Minh City Vienna INDIA • • Dushanbe Mumbai • • • MEXICO • REPUBLIC OF SINGAPORE • CHINA Pune • • Mexico City • Singapore • Beijing TAIWAN Chennai • • • Hong Kong Taipei • • PHILIPPINES • SLOVAK REPUBLIC • Shanghai IRELAND • • Manila • Bratislava • Shenzhen TUNISIA Dublin • • Tunis • • POLAND • SLOVENIA • CZECH REPUBLIC JAMAICA • • Krakow • Koper • Prague TURKEY Kingston • • Istanbul • JORDAN • Amman • 7 The Bahamas Credit Bureau Project
Objectives of the Legislative Framework § Facilitate the effective supervision of the credit reporting sector and the efficient operation of a credit bureau —provides for confidence in the system. § Establish the rights and obligations of the credit bureau, its users, the credit information providers and consumers. Comprehensive information sharing (positive and negative information) - Protection of consumer rights. - Consumers’ right to challenge incorrect information. - Obligations of data providers to confirm information accuracy and correct wrong - information. Promote safe, secure, efficient and reliable mechanisms for information § sharing. § Ensure the equal treatment of all stakeholders. § Provide clear guidelines on the kinds of data that can be collected. § Indicate how long data can be retained—to allow borrowers a “fresh start”. Credit reporting framework should be clear, predictable, non-discriminatory 8 The Bahamas Credit Bureau Project
General Principles on Credit Reporting § Should have accurate, timely and sufficient data, including positive— collected on a systematic basis from all relevant and available sources, and DATA should be maintained for a sufficient amount of time. § Should have rigorous standards of security and reliabilty and be efficient. SECURITY § Arrangements should ensure accountability, transparency and effectiveness in managing risks and fair access to the information by users. GOVERNANCE § Should be clear, predictible, non-discriminatory, proportionate and supportive of data subject and consumer rights. LEGAL & REGULATORY § Should include effective judicial dispute resolution mechanisms. § Transfers should be facilitated, where appropriate, provided that adequate requirements are in place. CROSS-BORDER 9 The Bahamas Credit Bureau Project
Components of a Credit Reporting System (CRS) Legal/ Regulatory Framework Institutions Technology Enable information flows for Databases decisions (Credit related to Bureau) credit and Borrowers Standards loan agreements Rules & Procedures At the core are the databases of information on debtors, and supporting institutional, 10 The Bahamas Credit Bureau Project technological and legal frameworks .
Typical Participants in the Credit Reporting System … involves a broad spectrum of public and private sector players. Credit Reporting Data Providers USERS Service Providers § Banks § Banks § Insurers § Credit unions § Credit unions § Leasing companies § Money lenders § Judiciary Authorities, Data § Leasing companies regulators, § Tax authorities Users Providers supervisors § Credit card issuers § Insurers § Collection agencies § Employers § Retailers § Landlords § Utilities § Consumers § Public registers Data Subjects 11 The Bahamas Credit Bureau Project
What is a Credit Bureau? § Company collects information from lenders and other sources about a consumers’ borrowing and bill-paying history . Credit history is compiled in a credit report. - Credit reports used by prospective lenders and other - users (e.g. employers) to help assess credit worthiness of consumer o How likely the consumer is to repay the loan/make payments when due Can impact the interest rate or other terms of a loan . o § Offers other value added services Credit scoring - Portfolio monitoring - Fraud alert - § Credit Bureau may : charge fees for credit reports (except free annual - report) and other value-added products. no charge for investigating disputes/correcting - disputed information. 12 The Bahamas Credit Bureau Project
13 The Bahamas Credit Bureau Project
Why Do We Need a Credit Bureau? § Presently, lenders are not able to accurately assess the credit worthiness of potential clients, due to a lack of comprehensive information on their outstanding debt obligations. § CHALLENGES POSED: - Can lead to consumers taking on too much debt, given their income and level of assets. - If customers unable to service debts, then repossessions and foreclosures can occur. - Financial institutions will be adversely affected if a significant number of clients are unable to meet their debt obligations. More risky loans impact banking sector stability; high levels of bad debt higher o provisions and write-offs. Greater claims on capital tends to reduce lending activity. - Problems in the banking sector present challenges for overall economic growth and financial stability. 14 The Bahamas Credit Bureau Project
Domestic Credit Quality Conditions B$ Million % 1,600 20.0 …Spike in banks’ arrears coincident 1,400 with sharp decline in GDP and 15.0 hike in joblessness 1,200 10.0 1,000 800 5.0 600 0.0 400 -5.0 200 0 -10.0 2007 2008 2009 2010 2011 2012 2013 Total Arrears Real GDP Growth Unemployment Rate* Commercial Banks’ remediation activities Between 2009 and 2013: § Restructured loans: $778.8 million or 12.6% of total private sector credit at end- Dec 2013 § Write-offs: $462.7 million § Recoveries: $82.3 million § Provisions: $442.7 million 15 The Bahamas Credit Bureau Project
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