March 17, 2022
March 17, 2022
The introduction of public registers where they do not exist is positive. However, in establishing or expanding those registers, it is important to ensure that their objectives do not overlap with those of private credit reference agencies (or private credit bureaus, PCBs).
On this purpose, ACCIS organized a seminar on complementarity between Public Credit Registers and Private Credit Bureaus on March 17, 2022.
Davide Meo, CRIF International Markets Director, participated as a speaker in session 3 “How can complementarity between PCRs and PCBs be achieved?” describing CRIF global experience on PCRs and PCBs complementarity.
Access to finance is a major challenge, especially in emerging and developing economies. One of the factors accountable for the financial inclusion is the information asymmetry between lenders and borrowers. In order to address this problem, public credit registries (PCR) and private credit bureaus (PCB) have been established around the world to serve as information brokers. The reduction of information asymmetry has positive implications for relaxing credit constraints, increasing competition in the credit market and the efficient allocation of capital.
Davide Meo highlighted the main differences between PCR & PCB, as well as possible cooperation models and related features emerged from CRIF's experience worldwide, in particular in Italy, Slovak Republic, the Philippines and Ireland.
Given CRIF 34-years history, Public Credit Registers can complement rather than replace Credit Bureaus. Of course, this is bilaterally true: Credit Bureaus can help but not do the job and play the role of a Central Bank Register. “What we have learned over time is that the "non-compete" between the two entities should instead evolve into "cooperation", which brings added-value to the financial infrastructure. In fact, we have seen an increasing trend over the last decade” commented Meo.
Recent cases have arisen with the Central Bank of Madagascar (BFM) and the Central Bank of the Bahamas (BOB), demonstrating the need for a joint effort for the improvement of a country credit infrastructure. They imposed the use of the Credit Bureau by law, managed an active role to spread-out the educational programs set-up by the Credit Bureau, and at the same time acted as supervisor of the CB. This said, the Central Banks acted fairly in order to set-up also a co-operational relationship with the Credit Bureau to get statistics and everything was considered worth to monitor the increase of access to credit and to manage systemic risk assessment. Interestingly, these two Credit Bureaus have been fully launched remotely during the pandemic, and this only highlight how important was considered the cooperation rather than the competition.
“The difference of scopes and roles to be played is, in fact, self-evident looking at the worldwide experience: one is acting as supervisor of the banking/financial market, the other is serving the lenders for any need they might have in the consolidation and growth of the credit management activity. The Credit Bureaus need a very specific and constantly dedicated level of competence, investments, and specific tools to be adopted. They need dedicated and competent professional teams, and investing on private sector dedicated teams is not typically the operational perimeter managed by Central Banks. One of the most relevant consequences of the beneficial cooperation between PCBs and PCRs is that the lack of information and innovation will die with the markets sophistication. The value is for all the stakeholders and for the whole country itself” concluded Meo.
