THE NBS welcomes the new retail credit register.
Such a register is a normal part of banking practice in economically developed countries and it is one of the basic tools for decreasing credit risk.
The Slovak credit register, which will monitor loan portfolios of retail clients at first, will be established by three major Slovak banks: Slovenská sporiteľňa, VÚB, and Tatra banka.
"We understand that it is the duty of the major banks to establish such a register," said Štefan Máj, the vice chairman of the board of directors of Slovenská sporiteľňa, the biggest bank in Slovakia.
The National Bank of Slovakia (NBS) welcomed the initiative. "We are pleased by the credit register, as it is another step in reducing credit risks in the granting of loans. The National Bank has cooperated and communicated with the three banks in a preparatory stage of founding the register," Igor Barát, the National Bank's spokesman, told The Slovak Spectator.
Barát added that the register will be an important advance on the already existing Register of Bank Loans and Guarantees, founded in 1997, which records the loan history of corporate clients and which is operated by the National Bank.
Banks in economically advanced countries use such a register to exchange data about any client that has requested a consumer or mortgage loan. The register verifies the credit record of a client by checking with a list of different banks.
Clients who fulfil their commitments might not need to begin a complicated process to prove their reliability, as information within the register will already show their financial discipline.
The Slovak Banking Credit Bureau (SBCB) is based heavily on the Czech Credit Bureau (CCB) system, currently operating in the Czech Republic, and uses the same technology and information exchange systems. CCB won the tender contract in June 2003 to establish a model in Slovakia; and the first credit register for retail clients should start working in September.
Slovakia is the last country of the Visegrad Four to establish a retail credit register. Discussions concerning the necessity of such a register began in the Slovak banking market two years ago.
"Two years is not that long to wait, considering the complexity of the process of establishing such a system. We also had to wait for the legislation that enabled the establishment of such a register. It was only the new Act on Banks that allowed it," said Mário Drosc, the member of the board of directors of VÚB.
The register's founding banks would also welcome the participation of other Slovak banks over time so that the register covers as much of the Slovak banking market as possible.
"Other banks have been informed about the register. We are only waiting for their final decision but, unofficially, the majority of them are interested in participation," said Jaroslav Packa, the vice president of the credit control division at Tatra banka.
In the future, the register could also contain, apart from the loan history of a retail client, information about corporations and a client's debts to mobile phone operators or leasing companies.
"The technical parameters of the register enable the use of information concerning corporations, but initially the register will only be used for retail clients. It is also possible to hold data from mobile operators and leasing companies, but there are no current plans to explore these avenues," added Drosc.
This year the banks can put all information about clients and loans acquired until the end of 2003 into the register, in accordance with the new Act on Banks. A bank will require a client's approval before recording any data concerning loan transactions from 2004 in the register.
It is in the interest of the client to agree to such a request. A bank is likely to be more willing to provide a loan to a client who manages his debts well than to one who does not.
The register will contain data about a client's credit exposure, loan payments, and forms of loan security. However, the bank is unable to see data on loan type and volume. The register will only show the final number of debts. The data will be saved for five years after the client pays his debts.
The SBCB will also be responsible for data safety and the prevention of information leaks. "The safety of data is of paramount importance here. Information will not be publicly exposed through phone or internet lines. The technical safety measures are based on the experience of the CCB," said Máj.
Banks belonging to the register will be able to acquire data for a certain fee, which will reduce as a bank uses the register more frequently.
"The starting fee has not been determined yet but it is likely to be about €1.5. As the register is used more, the fee is likely to decrease accordingly. The bank with the highest number of inquiries might get a price 10 percent lower than the average price," said Máj.
"By the end of this year we envisage about 150,000 enquiries. Two or three years from now, the number might have doubled or tripled," added Drosc.
Bank clients and others involved in the crediting process will also be entitled to acquire information after paying a fee.
"We hope that the introduction of the retail register will have positive effects, as has been the experience of other countries," summarised Drosc. In economically developed countries, where banks use such a credit register, the share of bad loans has dropped from 10 percent to approximately 3 - 4 percent," he added.
As the bureaucracy and administration surrounding loans is simplified due to advances like the retail register, the number of clients wishing to request a loan is likely to increase.