In May 2009 an international task force coordinated by The World Bank with support from the Bank for International Settlement was created with the ultimate goal of producing international standards for credit reporting. The task force comprised representatives from central banks and other financial and data privacy regulators, multilateral organizations and service providers represented by their associations. The task force’s first product/output was the General Principles for Credit Reporting which were published in September 2011.
Subsequently, the task force has been transformed into a more permanent structure, that is, the International Committee on Credit Reporting (ICCR). Since then, the Committee has produced various publications on credit reporting and promoting access to credit. Currently, the Committee is working in promoting and facilitating observance and implementation of the standards by providing additional information and guidance.
The ICCR is the only recognized international standard setter in credit reporting. The Committee is a responsible to (i) further develop the international agreed framework, (ii) identify areas of further consideration and (iii) devote resources to the elaboration of papers, reports, guidelines and other relevant materials that will effectively support the adequate implementation of the General Principles. The ICCR supports a forward looking and broad approach to specific issues while achieving consensus in policy aspects that affect public interest. To this end, the ICCR has developed the General Principles for Credit Reporting (2011), the report Facilitating SME Financing through Enhanced Credit Reporting (2014), The Role of Credit Reporting in supporting Financial Regulation and Supervision (2016) and the Policy Brief on Credit Reporting Contribution to Financial Inclusion (2017). All these documents are part of the Standards and comprise the framework for credit reporting systems.
The committee has issued six publications which have been adopted as standards and best practice. The figure below shows a timeline of the publications by the Committee
The GPCR published in 2011, addresses the fundamental problem of information asymmetry between lenders and borrowers, which may lead to adverse selection, credit rationing and moral hazard. The principles define the minimum elements underlying a sound, efficient and effective credit reporting system which can support credit portfolio management and financial supervision. The GPs focus on: i) data accuracy, timeliness and sufficiency; iii) data security and efficiency; iii) service providers governance and risk management; iv) legal and regulatory environment; and v) cross-border data flows.
The GPs are intended for policy makers, regulators, financial supervisors, data providers, credit reporting service providers, individuals and businesses and includes roles for these key players to facilitate implementation. The GPs are deliberately expressed in a general way to ensure that they can be useful in all countries and flexible to cover different country circumstances. The GPs are not intended as a blue print for the design or operation of any specific system.
International Endorsement/ Acceptance: The Committee members including World Bank, Bank for International Settlement, the International Monetary Fund, some regional financial institutions (Arab Monetary Fund, CEMLA, European Bank for Reconstruction and Development, Inter-American Development Bank), several central banks and banking supervisors (Banco Central do Brasil, Banca D'Italia, Bank of Spain, Central Bank of the Republic of Turkey, Deutsche Bundesbank, Federal Reserve Bank of New York, People's Bank of China, Reserve Bank of India), other relevant national authorities, the European Commission, some industry associations; and data/consumer protection agencies participated in the drafting of the principles. In addition, the General Principles were subjected to an open consultation process, in 2011, before final publication.
International Application: The GPs are being used in the context of the Financial Sector Assessment Program (FSAP) and in the Insolvency and Creditor Rights (ICR) standards as a reference (no formal assessment). The GPs are also used in credit reporting diagnostic exercises that the World Bank conducts. In addition, some institutions are using the GPs for self-assessments.
This report presents the methodology for assessing country-level observance of the five general principles and related roles of credit reporting system participants, and of the recommendations for effective oversight of credit reporting systems.
The main purpose of the Assessment Methodology (AM) for credit reporting is to provide guidance to assessors, through a structured framework, on how to conduct assessments of observance of the GPCR. This AM is primarily intended for external assessors, in particular for the international financial institutions.
This report identifies and addresses, information asymmetries as one of the most significant problems that limit the ability of most Small and Medium Enterprises (SMEs) around the world to obtain adequate external financing to underpin their productive activities. Creditors assess the creditworthiness of credit/loan applicants based on two basic criteria: financial capacity or ability to repay a loan, and willingness to repay the loan.
Due to information asymmetries, however, not all necessary information to assess creditworthiness of applicants is available to creditors. In addition, gathering information that is not readily or easily available is extremely costly. These problems are normally exacerbated in the case of SMEs and are often a cause of the denial of loans and other forms of external financing to them.
Enabling and/or improving the flow of credit-related data and other relevant financial information on SMEs can contribute to alleviating their financing constraints. In other words, ensuring creditors have easy access to accurate, meaningful and sufficient information on SMEs in a systematic and timely manner would enhance their ability to assess SME creditworthiness, and hence could improve SME access to financing.
The report thus identifies actions that could be undertaken by authorities and other relevant policy makers to improve the flow of data and other relevant credit information on SMEs to creditors through credit reporting systems. For this purpose, the report first analyses the overall status of credit reporting activities in connection with SMEs. The key topics or areas identified in the World Bank General Principles report delimit the scope of this analysis.
In many countries, credit reporting already plays a significant role in supporting financial sector regulation and supervision, both from a micro-prudential as well as from a macro-prudential perspective. This report identifies the key elements and practices that characterize a credit reporting system that is effective in supporting central banks and other regulators/supervisors in discharging their respective micro- and macro-prudential supervisory and regulatory responsibilities.
The specific focus of this report is on how the various types of CRSPs satisfy the underlying data needs of these authorities, as well as the difficulties that CRSPs often face in this specific context. These key elements, can guide financial sector authorities in their efforts to build or to reform and modernize the various elements of their credit reporting system and maximize its usefulness for supervisory and regulatory purposes.
5. Credit Reporting Systems Contribution to Financial Inclusion – Policy Brief
In 2015, the World Bank Group (WBG) and a number of public and private sector partners committed to help promote financial inclusion and achieve “universal financial access” by the year 2020. UFA 2020 envisioned that 2 billion excluded adults worldwide -- women and men alike -- would be able to have access to a transaction account to store money, send payments and receive deposits as the basic building block to manage their financial lives. In this policy brief, the ICCR elaborates on how Credit Reporting can contribute to Financial Inclusion, focusing specifically on access-to-credit issues for both individuals and MSEs whose credit needs remain unserved or underserved by licensed/regulated financial institutions and/or by other formal creditors that are not financial institutions (e.g. retailers, mobile money operators, Fintech companies and microfinance institutions).
The G20 High Level Principles on Digital Financial Inclusion recognize the role that the use of alternative data for credit reporting can play in promoting access to credit for individuals and MSMEs in the informal sector. The ICCR was tasked by the G20 -GPFI SME Sub-Group to draft policy guidelines for countries to use in considering adoption and use of alternative data to enhance credit reporting. This Policy Guide provides practical policy recommendations on how countries can adopt and leverage the use of alternative data for credit reporting, while mitigating the risk inherent in the use of such data. The guidelines cover four areas: I) Improving availability and access of information, II) Expanding credit information sharing, III) Enabling cross-border data exchanges, IV) Balancing integrity, innovation and competition. Additionally, this guidance adopted the policies related to Data Privacy, Consumer Protection and Cyber security, in so far as they relate to the use of alternative data for credit reporting issues, that were drafted by GPFI Financial Consumer Protection Law (FCPL) Sub-group. The policies in this document were incorporated in the G20 Policy Guide “Digitisation and informality: harnessing digital financial inclusion for individuals and SMEs in the informal economy” under the Argentina presidency 2018, which was endorsed by the G20 Finance Ministers and Central Bank Governors in July 2018.
There are currently 23 members including the private sector service providers, BIS and WBG. Of the total number; 12 members are Central Banks and regulators from G20 countries; and three service providers associations from Europe, Asia and Latin America.
Indonesia Department of Bank Licensing and Information - Otoritas Jasa Keuangan (OJK)
Banco Central do Brasil
Reserve Bank of India
Banque de France
Banco de España
Bank of Turkey
People's Bank of China
South Africa's National Credit Regulator
Deutsche Bundesbank -Germany
Banco de Mexico
Comisión Nacional de Banca y Valores de México
Consumer Data Industry Association USA
Consumer Financial Protection Bureau USA
Arab Monetary Fund
ALACRED - Asociación Latinoamericana de Crédito
ACCIS - Association of Consumer Credit Information Suppliers (Europe)
FEBIS – Federation of Business Information Service (Europe)
BIIA - Business Information Industry Association
Bank for International Settlements (BIS)
Inter-American Development Bank (IDB)