The Bangko Sentral ng Pilipinas (BSP) welcomed the recently-signed Credit Information System Act (CISA) which it said could not have come at a better time and would be critical in boosting the credit market in this time of uncertainty and confidence crisis.

 

The Philippines’ central bank  was initially the lead agency that would own majority of the Central Credit Information Corp (CCIC) which was created by the new law, but as approved, the new corporation would be led by the Securities and Exchange Commission (SEC) instead.

 

BSP governor Amando Tetangco said however the change in the ownership structure would not spell a difference on CCIC’s effectiveness.

 

CCIC would be set up with 60 percent owned by the government and would be chaired by the chairman of the SEC.

 

“While ownership structure is not as originally crafted, it is believed that the compulsion for data submission would still significantly address the current lack of comprehensiveness and credibility of credit-related information,” said Tetangco.

 

Tetangco said that the information sharing procedures were expected to cover hence open up to more credit-granting institutions that would not be limited to just big loan amounts.

 

CCIC now has the mandate to receive and consolidate basic credit data and to act as central registry of credit information. The new corporation would provide access to reliable standardized information on the credit history and financial condition of borrowers.

 

The remaining 40 percent of CCIC is to be owned and held by qualified investors including industry associations of banks, quasi-banks and other credit-related associations.

 

P75 million from the budget has been committed by the national government representing its equity share while P50 million would be subscribed and to be paid up by the qualified investors.

 

The CISA was finally enacted by Congress after almost four years of sorting through legal impediments and initial resistance by banks. 

 

It amends secrecy laws in order to compel banks to centralize credit information. Banks have been assured that there would be little risk that the information sharing would give their competitors access to their data on their clients. 

 

The ultimate effect aimed by the new law is to lower borrowing costs since good borrowers would no longer have to subsidize the bad behavior of irresponsible 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 aims to lower the risk of default by ensuring that borrowers were property rated based on their credit history.