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Forum experts took part in the press-conference highlighting the main problems and prospects of credit bureaus' functioning in Ukraine.

Press-conference 25.05.2012 24 May, 2012

Kyiv, May 24

 

Stakeholders are discussing problems and ways of improvement the framework for credit bureaus’ operations in Ukraine.

During the press-conference held on May 24th in Kiev, German Advisory Group presented their report based on the analysis of credit bureaus’ functioning in Ukraine that caused active discussion among the stakeholders.

Credit bureaus pool and facilitate the exchange of information about borrowers. By contributing and requesting information from credit bureaus, banks can improve their risk management and lending decisions. In such a way, the cost of borrowing can be reduced and the access to finance of previously underserved borrowers such as SMEs increased; a fact that is supported by wide empirical evidence. As Robert Kirchner from the consultancy firm “Berlin Economics” points out in a recently released report:  “Credit bureaus are not just important for banks, but also for the real economy and the society”.

Ukraine has several credit bureaus, but the sector as a whole is not working properly yet. One major problem relates to the regulation and supervision of credit bureaus, which lies in the responsibility of the National Commission for Regulation of Financial Services Market. Unfortunately, the commission lacks the necessary institutional capacities for this task. Ricardo Giucci from Berlin Economics argues:  “The regulation and supervision of credit bureaus should be shifted to the NBU, since this institution has a wide and deep knowledge about the banking sector”. 


"On its part the government should create conditions for reducing risks of lending activity, i.e. ensure that credit bureaus have access to information about borrowers in a real-time mode. This information is stored in state registers and relates to validation of identification data, income, starting enforcement proceedings, etc." - Antonina Palamarchuk, Chairman of the First Credit Bureau of Ukraine said.

A further key problem relates to the sources of data for credit bureaus. In many cases, banks either do not report credit information at all, or they restrict their reporting to “black” information. Furthermore, the access of credit bureaus to public registries is far from optimal. Last, data at the level of individual credit bureaus is highly fragmented, in part due to a lack of cooperation between credit bureaus. In principle, there are two ways for the banking regulator to try to improve the situation: mandatory schemes or regulatory incentives. Robert Kirchner maintains: “Based on international experience, we recommend to base policy on incentives rather than on mandatory schemes”.

Development of the credit bureau functioning system in Ukraine is impossible without amending the existing legislation. Thus, implementing the provisions of the Draft Law No. 10292 "On Amending Certain Legislative Acts of Ukraine regarding Improvement of Credit Bureau Activity" in the legislation will establish legal conditions for settlement of existing issues with information exchange among credit bureaus, financial institutions and government authorities. "This Draft Law will amend the Laws of Ukraine "On Organizing Establishment and Circulation of Credit Histories" and "On the State Tax Service in Ukraine" on the legislative level: the State Tax Service of Ukraine will have a function to provide credit bureaus with information from the State Register of Taxpayers - Natural Persons; ensure establishing the State Register of Credit Histories and determine authority of the National Commission for State Regulation of Financial Services Markets on its maintenance; determine the status of persons who acquire the right of claim under loan agreements as credit bureau users who provide or have the right to receive information constituting the credit history; specify information contained in credit histories." the People's Deputy of Ukraine Vasyl Horbal commented.

According to Andrii Ihnatov, Deputy Director of Risk Department at Platinum Bank, a wrong assessment of customers' solvency provides the basis for the majority of cases of default in payment. "Banks just do not have enough information for revalidation of the data which can and should be validated by credit bureaus. In order to improve cooperation between banks and bureaus, a Working Group has been established under the Forum for Leading International Financial Institutions. Today the Working Group has to its credit: surveys and consolidation of proposals from banks as consumers of bureaus' services as well as assessment of those proposals by credit bureaus.  Next thing on the agenda is to develop common decisions. The Working Group, the same as management of Platinum Bank, advocates financial literacy of population in this regard and understanding of all advantages and downsides of responsible attitude towards repayment of loans. We are convinced that a disciplined attitude towards repayment of loans should be encouraged by loyalty programs and more attractive conditions of the next loans" - the banker said.

Improving the framework for credit bureaus will contribute to a more stable banking sector, but it will also improve the access to finance of SMEs and individuals, thus contributing to the growth of the banking sector. Consequently, implementing the recommended measures will lead to more stability while ensuring sustainable growth, two aspects which often are not easy to combine. Ricardo Giucci concludes: “Progress in this important field is exactly what the banking sector in Ukraine needs after the massive shock during the international financial crisis in 2008/2009”.


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24 May, 2012 - Forum experts took part in the press-conference highlighting the main problems and prospects of credit bureaus' functioning in Ukraine.  - 1
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24 May, 2012 - Forum experts took part in the press-conference highlighting the main problems and prospects of credit bureaus' functioning in Ukraine.  - 2
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24 May, 2012
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24 May, 2012 - Forum experts took part in the press-conference highlighting the main problems and prospects of credit bureaus' functioning in Ukraine.  - 3
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24 May, 2012
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24 May, 2012 - Forum experts took part in the press-conference highlighting the main problems and prospects of credit bureaus' functioning in Ukraine.  - 4
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24 May, 2012 - Forum experts took part in the press-conference highlighting the main problems and prospects of credit bureaus' functioning in Ukraine.  - 5
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24 May, 2012
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24 May, 2012 - Forum experts took part in the press-conference highlighting the main problems and prospects of credit bureaus' functioning in Ukraine.  - 6
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24 May, 2012





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