What is a Private Credit Bureau?
PCB – Private Credit Bureau is a unit that collects information on the solvency of individuals, businesses or organizations from a variety of sources, mainly from Credit Institutions. This information is aggregated, provided to Credit Institutions, and support decisions related to credit granting.
What is the role of a Credit Bureau?
The goal of the Credit Bureau is to support Credit Institutions with relevant information about borrowers’ repayment status and allow Credit Institutions to make better and more objective decisions quickly.
What is a Credit report?
The Credit report includes detailed information about your credit history, including identity information, loan information, and payment history.
Relating data to your loan payments is collated on your credit profile and used by Banks or Financial companies as a part of your loan underwriting process. Therefore, you should check your Credit report regularly to be aware of updates on it.
What information does the Private Credit Bureau provide?
Private Credit Bureau provides a variety of information, but mainly fall into two categories:
- Identification information (demographic information) including name, date of birth, address., etc.
- Financial information about loans, repayment amount, repayment period., etc.
This information is the basis for developing a rating system for value-added services, enabling Banks and Financial companies to automate the credit rating process.
How does the Private Credit Bureau guarantee the accuracy of information?
Each member is responsible for passing accuracy information to the Private Credit Bureau. After receiving information from Credit Institutions, the Private Credit Bureau will use many professional measures to check the accuracy of this information before putting them into their database. On the other hand, the borrower also has the opportunity to access their own information to request for correction if there is an error. This information is strictly protected, not accessible by an unauthorized person or organization.
What benefits does a Private Credit Bureau bring to the table?
a) Expanding credit activities
- From the fact that Credit Institutions are fully aware of borrower information, the credit risks are minimized, which make interest rates fall and promotes credit growth.
- Along with capturing a lot of information and processing applications quickly, Credit Institutions can reduce expenses in the underwriting process of a borrower, help lowering lending rates. Therefore, credit growth of the whole economy will be faster and healthier, making an important contribution to the national GDP growth.
- The effectiveness of the Private Credit Bureau in lending to SMEs and individuals has been verified through a number of studies:
o The percentage of SMEs with limited financial awareness decreased from 49% to 27%, lending increased from 28% to 40% in countries with a Credit Bureau presence (McKinsey Working Papers on Risk, 12/2009).
o After a Credit Bureau started operating in Egypt, consumer credit growth increased to 34%, from 78,332 loans in June 2008 to 105,041 loans in November 2011 (IFC - 4th Credit Reporting and Risk Management Training, November 2012).
b) Reducing risks for credit operations of Credit Institutions
- The information is shared transparently among Credit Institutions, analysts and underwriters will have more information and supporting tools to make more accurate decisions. This helps reduce costs, time, and effort in granting credit.
- Credit Institutions can calculate credit risks in their portfolio better, ensuring safety for the banking - financial system and the entire economy.
- Examples of positive effects of the Private Credit Bureau in developing economies:
o Delinquency rate from banks in Shanghai decreased from 6.67% to 4.52% at the end of 2002, a year after the establishment of the Private Credit Bureau (McKinsey Working Papers on Risk, December 2009).
o Studies carried out in Argentina in 2004 showed that: With the emergence of the Private Credit Bureau, the delinquency rate in large banks decreased by 41% and in small banks by 79% (McKinsey Working Papers on Risk, 12/2009).
o Egypt's subprime debt ratio also dropped significantly, from 3.6% in 2009 to 2.66% in 2011 (IFC - 4th Credit Reporting and Risk Management Training, November 2012).
o In Palestine, the proportion of inactive loans decreased to 66% compared to the time before the private center started operation (IFC - 4th Credit Reporting and Risk Management Training, November 2012).
Why does Vietnamese market need private a Private Credit Bureau?
With a population of nearly 100 million people and almost 400 thousand SMEs operating, currently Vietnam only has about 5% of the popilation and 30% SMEs have transactions with Credit Institutions. This is a very low rate compare to other countries in the region.
The information demand of Credit institution is increasing and the Public Credit Bureau stand alone can not meet all the needs of the market. In fact, there is a large number of SMEs and individuals are being ignored. Therefore, PCB will be a bridge to help individuals and SMEs to easily access to the capital of Credit Institution quickly and effectively.
PCB report reflects a new perspective with lots of detailed information, useful for the underwriting process of Credit Institutions since it is built by the method of information synthesis and advanced data processing, transferred from the world’s leading credit information solution provider.
With the experience from PCB’s strategic partner – CRIF, PCB has developed a roadmap to bring many value-added services to the market, ensuring to meet the needs of credit instituions at each stage during the “life cycle” of a credit account.
Similar to other countries in the world, the Public Credit Bureau is a unit, with the primary target of supporting macro management tasks of the Statebank to control and prevent systemic risk. Meanwhile, PCB was built by Comercial Banks, with the target of providing services to support the operations of Banks and Credit Institutions. Therefore, PCB will focus on building products and services that meet the needs of the market.
Why does PCB collect Borrower’s Credit information?
In some international markets, borrowers actively seek out to the Private Credit Bureauand ask to be provided based on their information. This is the way for them to proactively approach credit activities while at the sametime controlling their own information.
Similar to other Credit Bureau actively in the world, PCB’s Credit report has been created from the previous borrower’s credit informaton. Therefore, PCB must conduct activities to collect, store and process computer stores in order to create valuable products about marketplaces, in order to support the underwriting process for borrower of Credit Institutions.
When does PCB have the right to collect Borrower’s Credit information?
According to the law, PCBs can only collect Credit information of Borrowers if PCBs is approved by the Borrowers. Borrower's approval is shown in the loan application or loan agreement at Credit Institutions.
Why does the “Loan Application Form” usually have a provision that requires Borrowers to allow Credit Institutions to use and provide information to a Third party?
According to the provisions of the law: Credit Institutions are not allowed to provide information related to their borrowers to other organizations and individuals, except with the consent of borrowers. Therefore, the forms used at Credit Institutions are required to have a clause that Borrower agrees to provide information to a third party (PCB). This ensures the interests of Borrowers when accepting and proactively managing their information.
Is the Borrower's Credit information secured at the PCB system?
In order to be granted the Certificate of eligibility to operate by the State Bank of Vietnam, PCB has proven the full implementation of the prescribed conditions, including strict standards for the safety of the Credit information system. Accordingly, information must "be kept safe and secure, prevent possible incidents and disasters, and prevent outside intrusion and illegal access". PCB strictly complies with the information security standards that are being applied in many of the best Credit bureau in the world nowadays to limit all system loopholes when PCB staff are not assigned or someone from outside tries to break into the database system.
Who does PCB provide Credit information services to? Can borrowers purchase Credit information services?
Pursuant to Decree 10/2010 / ND-CP, PCB provides Credit information services to the following subjects:
- Credit Institutions which contribute data to PCB;
- Borrowers who want to check their information at the database of PCB or to make additional documents for applying for credit;
- Other Credit bureau to serve organizations and individuals in accordance with the law;
- Competent State agency in accordance with the law.
Therefore, borrowers can purchase credit information services with the purpose of checking their information at the database of PCB or to make additional documents for applying for credit.
Which agency regulates PCB activities?
On February 25th, 2013, the State Bank of Vietnam issued a certificate of eligibility to operate the Credit bureau after meeting the requirements specified in Decree No. 10/2010/ND-CP and Circular No. 16/2010/TT-NHNN.
PCB operates under the supervision of the State Bank of Vietnam.
Only bad debt information is contributed to PCB?
PCB collects both positive and negative information. All information about the loan such as type, outstanding balance, repayment status, repayment habits… are contributed to the PCB and updated to the database of the PCB.
