Subprime Structural View

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THE NEED TO ESTABLISH A REGIONAL CREDIT BUREAU
4th Annual Private Sector Meeting With Ministers
of Trade Ministers of Finance Jamaica
Pegasus, JAMAICA June 13th, 2009
Caribbean Association of Indigenous Banks, Inc
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What is a Regional Credit Bureau? Why is it so
important that we lay the groundwork for its
establishment?
Caribbean Association of Indigenous Banks, Inc
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Regional Credit Bureau

• will act as a repository or clearing house of
  credit and demographic information (both historic
  and current) on individuals SMEs throughout the
  region
• will allow borrowers to establish their credit
  worthiness across different territories
• will allow banks and other lenders to
  accurately assess the risk of regional
  investments and in so doing encourage greater
  regional funding of sound projects.

Caribbean Association of Indigenous Banks, Inc
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Private credit bureaus continue to grow
Source Doing Business reports 2006-2009
Caribbean Association of Indigenous Banks, Inc
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Structure Scope of Credit Bureau

• Database for all kinds of credit grantors
• Based on wide reciprocity sharing
• Provides Positive Negative Data
• Includes all kinds of credit liabilities
• Incorporates an Audit Committee function

Caribbean Association of Indigenous Banks, Inc
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Benefits to Borrowers

• Increases speeds up credit access
• Allows good borrowers to access
• lower interest rates
• wider range of products
• Provides mechanism through which (and incentive)
  to monitor credit avoid over-indebtedness

Caribbean Association of Indigenous Banks, Inc
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Benefits to Creditors

• Streamlines credit decision process
• Better facilitates risk-based pricing
• Lowers exposure to risky loans
• Allows creditors to see any deterioration in the
  positions of its borrowers / investments
• Strengthens fraud-prevention efforts

Caribbean Association of Indigenous Banks, Inc
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Additional services offered by bureaus
Caribbean Association of Indigenous Banks, Inc
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Benefits to the Economy

• Higher international financial rating
• Lower cost of credit on a national level
• Increases credit access on a national level
• Encourages investment
• Precipitates infrastructure improvements
• Technological
• Informational

Caribbean Association of Indigenous Banks, Inc
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Governments Financial Institutions must work
concertedly to formulate the legislative
parameters that will guide and manage a Regional
Credit Bureau.
Caribbean Association of Indigenous Banks, Inc
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Credit Bureau legislative parameters must focus
on

• Integrity of the records held
• Proper use of the information
• Protection of consumers rights
• Thrust of public education
• Clear legislative framework
• Comprehensive information sharing (positive
  negative information)

Caribbean Association of Indigenous Banks, Inc
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Credit Bureau Legislation

• Individual oriented
• Individual right to access file information
• Individual right to challenge incorrect
  information
• Bureau/Registry obligation to investigate
  challenge
• Obligation of data furnishers to confirm
  information accuracy correct wrong information

Caribbean Association of Indigenous Banks, Inc
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Where do we stand?

• 3 relatively fully functioning credit - Trinidad
  and Tobago, Bermuda, and the Dominican Republic
• Limited-functioning bureau Barbados
• Jamaica, Guyana and the Cayman Islands are well
  underway in their development of a credit bureau

Caribbean Association of Indigenous Banks, Inc
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Work to be done

• have to address the legislative issues
• Protection of consumer rights
• Accuracy of data
• Maintenance and use of collected data
• Have to address credit sharing issues
• Between institutions
• Between countries

Caribbean Association of Indigenous Banks, Inc
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Credit Bureaus increase the standing of the
nations
Ratings of countries financial system soundness
increases with a more controlled
credit risk situation
Source Doing Business in 2005, IMF Global
Stability Report 2004, Moodys rating of
financial system soundness
Caribbean Association of Indigenous Banks, Inc
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Full information sharing reduces constraints
for SME
Small Firm Finance Constraints
Small Firm Probability of Obtaining a Bank Loan
Caribbean Association of Indigenous Banks, Inc
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A well-regulated, well-managed credit bureau
fully supported by - and protecting the interests
of - all stakeholders would be of immense value
to our growing economy.
Caribbean Association of Indigenous Banks, Inc
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Thank you
Caribbean Association of Indigenous Banks, Inc