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Credit bureau to contribute greatly [Khaleej Times (United Arab Emirates)](Khaleej Times (United Arab Emirates) Via Acquire Media NewsEdge) Credit bureaus all over the world are proven to support responsible lending, enhance payment behaviour and reduce credit losses. The Al Etihad Credit Bureau, the UAE's sole provider of credit reports, has started issuing credit reports to banks and financial institutions and these reports will no doubt contribute positively to the banking sector, playing an important role in the assessment and management of credit and possible losses resulting from non-performing loans. Individuals will, in turn, be able to have a comprehensive overview of their current financial obligations and debt payment frequency and consistency over the past two years. It is anticipated that the number of retail loans may slightly decrease in the initial period once the bureau starts but it in the long run will have a positive impact on the bank's lending criteria and provisioning. Earlier, banks in the UAE have often been unable to access data on consumers at other financial institutions when making lending decisions. This has allowed borrowers to obtain money from many lenders and run up big debts that sometimes prove impossible to repay. Credit bureaus all over the world are proven to support responsible lending, enhance payment behaviour and reduce credit losses. Experiences in other countries show that bureaus can help to stop individuals with a poor credit history from amassing further debt, while easing the flow of credit to those able to repay loans. On the other hand banks also benefit to better regulate their lending risks and reward those who do not default on debts with better interest rates. More than five million credit facilities of individuals residing in the UAE have been added to the bureau's credit reporting system. This represents 97 per cent of the total credit facilities provided by local and international banks and financial institutions operating within the UAE, including credit card and loans. The Al Etihad Credit Bureau has completed the process of uploading six months of credit data and information collected from banks and financial institutions to its credit reporting system. Banks and financial institutions will have access to their customers' recent and up-to-date credit reports and will be able to evaluate them before making any lending or financial decisions. The issuance of credit reports to banks and financial institutions is an important step in reducing credit losses resulting from non-performing loans and will in turn help individuals and companies to have a deeper understanding of their financial obligations and debt levels, according to Al Etihad Credit Bureau chief executive officer Marwan Ahmad Lutfi. Last June, the bureau signed a memorandum of understanding with the Telecommunications Regulatory Authority to strengthen information security. The security guidance will help the bureau to protect its security systems from risks of conflicts in cyberspace, prevent potential viruses and network intrusions and respond to computer security incidents. The credit reports would encourage customers with a good track record to access the banking industry. However, those with a bad credit history would be questioned before a financial facility, according to a senior banker. The banker added that borrowers would also be more careful in misusing credit cards and must pay their loans timely, and they would manage their financial obligations more prudently otherwise they would not be welcomed by banks and financial institutions. They could end up in paying more interest rates, he added. The bureau The Al Etihad Credit Bureau, a UAE government company, was set up by the Federal Government in February 2012 under the Law No. 6 for 2010. The bureau is a strategic initiative by the UAE government which aims to create a comprehensive, nation-wide credit reporting system and improve the transparency of borrowing. Through collecting consumer and commercial credit information from various financial and utility companies and government sources, the bureau provides detailed-comprehensive reports to financial institutions, businesses and individuals, helping them to manage their financial commitments better. It seeks to limit credit risk at a national level by assisting credit providers in making more accurate credit decisions and by proactively encouraging UAE residents to develop responsible borrowing. Banks A credit bureau plays an essential role in the financial infrastructure of a country. It helps lenders to make faster and more accurate credit decisions. It also allows lenders to evaluate risks more accurately and therefore improve portfolio quality and profitability by preventing bad debt. Additionally, through documenting individual's personal, non-financial information, the credit reporting system allows banks and financial institutions to have a deeper understanding of consumer behavior patterns and circumstances, and therefore helps them to make better credit decisions. A credit bureau also supports the introduction of credit scoring, automated underwriting and lowers lender operational costs. In addition, it allows banks and financial institutions to properly implement risk-based pricing, giving members of a credit bureau a competitive advantage as their delinquency and default rates are lower. — [email protected] (c) 2014 Khaleej Times. All Rights Reserved. Provided by SyndiGate Media Inc. (Syndigate.info). |