Credit-Reporting Systems and Financial Information Services
The concept of credit-reporting systems in finance is a new subject and has received increasing attention in recent years in light of its key role in improving information available to financial intermediaries for their decisions and, thereby, facilitating improved access to finance. Credit reports are becoming more and more important throughout the world, fueled by demand for that type of data not only from banks and other financial intermediaries but also from private firms, retailers, employers, and others. Bank supervisors and regulators are also increasing their demand for high-quality credit data to more effectively monitor credit risks in supervised financial institutions. Credit-reporting systems are also seen as playing a key role in improving credit risk measurements as envisaged under the New Basel Capital Accord. Given the previous context, government officials, as well as bank supervisors and regulators, are interested in knowing answers to the following questions. What is a credit-reporting system? What does a credit report looks like? What would be good practices of a robust credit-reporting system in terms of the key elements involved?
The discussion of those issues is organized as follows. Section 10.3.1 provides a brief introduction of credit-reporting systems and their role in financial development and stability. Section 10.3.2 describes the fundamental elements of a credit-reporting system and identifies good practices for credit reporting. Section 10.3.3 presents the potential uses of credit registries for strengthening credit risk measurements and the supervisory review process. Section 10.3.4 briefly summarizes the role of credit rating agencies.