Why does credit information sharing matter?” Doing Business asks.
And this is the answer:
“When banks share information, loan officers can assess borrowers’ creditworthiness using objective criteria. For regulators, credit information systems provide a powerful tool for supervising and monitoring credit risk in the economy. Access to credit information also benefits deserving borrowers by increasing their chances to get credit. Credit bureaus also offer fraud detection, debt collection, marketing services and credit scoring, while credit registries offer ratings to financial institutions and other services to financial supervisors.… By sharing credit information, they help to reduce information asymmetries, increase access to credit for small firms, lower interest rates, improve borrower discipline, and support bank supervision and credit risk monitoring.”
Technically speaking, what is needed is a database that reports on borrowers and their credit history. Since we are talk about sharing, we can also identify a second technical requirement: gathering and disseminating the information about borrowers.
The application supporting such scenarios comes from the banking world and is available in standard SAP software. It comprises functions to manage all credit-relevant master data about individual borrowers. The software includes:
- Data on current credit limit, externally determined rating values, risk class, and more
- Change history – about the time of the change, the user, and the old versus the new value
- A notepad function to enter additional information about each borrower
- Document storage to save press articles, correspondence, and bank information
- The ability to define collateral for a borrower in the calculation of the credit exposure, which improves monitoring risk
Not everything that is technically doable is desirable from a political point of view. But rest assured: the full depth of the credit info your country would
like to store can be covered by such an IT tool – but it doesn’t force you to store all the data possible.