Govt keen on credit bureau initiative

A CREDIT bureau could be established soon as the Ministry of Finance (MOF) has taken on board the initiative as a part of a package of cures to high levels of personal lending, a banker said yesterday.

Danny Quah, chief executive officer of Standard Chartered Bank (SCB), told The Brunei Times he did not know what the time frame was. However, he said he believed that Brunei would have a credit bureau soon, adding that it is a "very very important one".

"If you ask me, the earlier we have (the bureau) the better it is. As long as the credit bureau is up, it gives a very transparent record of how people spend and what facilities they have taken up with each bank," said Quah.

Typically, credit bureaus store information on borrowers, including debt payment history. These are made available to credit card companies, banks and other financial institutions to guide them in assessing a customer's ability to meet financial obligations before being granted a credit card or a personal loan.

Quah said having a credit bureau would cultivate the right kind of regulations to guide the people and right now, the regulations are necessary because a bureau is not in place. Once the bureau is there, everyone will have more information to make decisions in that sense, he said.

"It's necessary. It's a must," he said.

Pierre Imhof, general manager of Baiduri Bank, last week said that a credit card bureau would be extremely efficient as compared to regulating or restricting credit card issuance. "We (Baiduri) fully support the initiative taken by authorities to reduce or control the debts of Bruneians, but a credit bureau will be more efficient. Most countries have a different approach by using a credit bureau which is an institution made by individuals and corporates and is equipped with data available for consultation to banks," he said.

"The credit bureau details are made available to credit card companies, banks and other financial institutions to guide them in assessing a customer's ability to meet financial obligations before they are granted a credit card or personal loan," he said.

Imhof said a credit bureau also ensures details about a credit cardholder are not leaked and all information restricted, which is why it is usually coordinated by the central bank or the government.

"A bureau like that would allow all banks to compete to give the best service and card to customers and our view is that it would be extremely efficient to have an immediate creation of a credit bureau rather than to regulate and restrict the issuing of cards," Imhof added.

Quah said the bank supports the government's efforts to curb consumer lending.

"In terms of general impact, the reality is it takes time to adjust. It's going to be painful in the short run both for consumers and the banks perspective but is beneficial in the long run," he said, adding that from Standard Chartered's perspective, the bank is not worried as Brunei is not the first country that has introduced such reforms.

"On a bigger picture, to a bank like SCB, we are a big player in credit cards and personal loans but our focus going forward is wealth management and small to medium enterprise banking. This is the time we need to speed up on that and that has been in the pipelines for a while. It is not because of the new regulations we are pushing for other products, it has been in the pipelines for a while now," he added.

Shazali Sulaiman, a partner at auditing company KPMG and executive secretary of the Brunei Darussalam International Chamber of Commerce, proposed the set-up of a credit bureau in 2008. "There should be a central credit bureau which compiles financial information about borrowers," he said at the time.

The credit bureau can make use of IC numbers so that banks can check and monitor an individual's financial track record, he said.

"That could be one way of controlling the debt situation of individuals. If I am not wrong, in Singapore, there is a central system like that and there is a maximum credit limit based on a person's salary; so if one person wants to have three credit cards from multiple banks, the combined limit of the cards cannot exceed a certain amount," he said.

The Ministry of Finance on January 1 issued 11 new directives to all banks in an effort to reduce credit card debt.

Under the new rules, credit cards should only be issued to customers who have a bank account whose monthly salary is credited into the account or customers who have a fixed deposit account equivalent to the maximum credit card limit required, the minimum monthly payment should not be less than five per cent of the outstanding balance and should increase to eight per cent in June, banks should also bar credit cardholders to use their credit cards to pay their monthly loan obligation to the issuing bank or any of its subsidiaries.The Brunei Times