By NATARIO McKENZIE
Tribune Business Reporter
The proposed Credit Bureau will be an “eye opener” for many Bahamian consumers when it exposes just how heavily indebted they are, the Central Bank’s governor said yesterday.
John Rolle told Tribune Business that legislation for the Bahamas Credit Bureau’s creation is in its final draft form, with the next government tasked with bringing it to Parliament.
“The Credit Bureau is even more relevant in terms of moving forward and opening up the market to an easier flow of financing,” Mr Rolle said.
“The legislation is in final draft form. It’s only an issue now of having it taken through the parliamentary approval process. For the vested stakeholder groups, you will see the strong interest maintained in seeing the legislation passed.”
Credit Bureaus collect personal and financial information on persons and companies, and then issue this to client lenders via a credit report. This enables the latter to better assess a potential borrower’s creditworthiness and associated risk, helping the distribution of aiding the distribution of capital.
In the Bahamian context, a Credit Bureau should help borrowers improve their credit and payment behaviour, while lenders will have increased access to accurate and more comprehensive information about borrowers’ credit history and payment habits. This, in turn, would reduce their exposure to risky loans.
Credit Bureau clients typically include banks, mortgage lenders, credit card firms and other financing companies.
“What it does is it allows the banks to be more selective on the preferential and not so preferential interest rates they can offer clients,” Mr Rolle said.
“If a person has a very established credit record, in some cases that could be the difference between whether you get secured or unsecured funding, or very pricey funding versus cheap funding.
“For many it may be an eye opener. Some people may very well have to go into a cooling-off period when the truth be told about what their debt levels are. For those left who qualify, there is less pressure on their costs.”
Mr Rolle described the Credit Bureau as having a wide net. “It will definitely require reporting from lending institutions that are not banks. If they have information on what your credit risk could be, they would be required to also report in on the credit behaviour,” he explained.
“You will definitely need to cast a wider net than just monitoring who the banks lend to, because those entities will also be beneficiaries of what the credit bureau puts out.”
Wendy Craigg, Mr Rolle’s predecessor as Central Bank governor, previously said the Credit Bureau would result in “safer lending and lower defaults”, as lenders would have a better knowledge of borrower characteristics, behaviour and repayment history.
She added that it would also “eliminate incentives to over-borrow” and promote a healthier credit culture in the Bahamas, while lenders would be better able to “price for risk” and reward good borrowers with lower interest rates.
Bahamian commercial banks are still sitting on a stubbornly-high delinquent loan pile that remains near $1 billion in worth, although the sale of non-performing loans and restructurings have helped to reduce this from a $1.2 billion peak.
Bahamian commercial banks restructured $758 million worth of loans in the six-and-a-half years to end-June 2015, a figure that represents more than $1 out of every $10 lent to private individuals and businesses.