A credit reference bureau, which will serve as a central depository of information related to consumer finance in Bahrain, has now become operational.
The establishment of the Bahrain Credit Reference Bureau (BCRB), which was approved by the Bahrain Monetary Agency (BMA) last year, will considerably enhance the assessment of credit risk by lending institutions.
The BCRB is operated by The Benefit Company, which operates the national switch for automated teller machine (ATM) and point-of-sale (PoS) systems.
“The creation of the credit bureau is prudential in nature,” said Dr Khalid Ateeq, Executive Director, Banking Supervision, at the BMA.
“There is a need for an online central database on credit data in order to protect the financial system from credit-related risks.”
The establishment of the BCRB is also an essential tool in enabling lending institutions to comply with new BMA regulations on consumer finance, which came into effect at the beginning of 2005. The regulations tackle, for the first time, the issue of over-indebtedness on the part of individuals. A key component of the new regulations is the limitation placed on an individual’s total consumer finance repayments, which cannot exceed 50% of a person’s gross monthly income.
As a central depository of information, the BCRB provides various information related to an individual’s personal credit, which could span multiple transactions with different lending institutions.
“A credit reference bureau is a vital tool for assessing individual indebtedness by lending institutions as it makes available information about a loan applicant’s credit history and credit habits,” said Dr Ateeq.
All financial institutions providing consumer loans and credit financing are required to participate in the BCRB. It is also mandatory for these institutions to relay information relevant to personal credit to the BCRB. The data held in the BCRB includes such information as the name of the individual, total outstanding credit, duration of each credit agreement, payment frequency and payment status.
“Commercial banks and finance companies have now completed the process of relaying credit data to the BCRB,” said Dr Ateeq.
As part of the process of creating the BCRB, loan applicants are being required to sign a ‘Customer Consent Form’, to authorize the release of information, pertaining to their personal loans, by their bank into the BCRB system. The ‘Customer Consent Form’ is now an integral part of the process of obtaining a personal loan from a lending institution.
The BMA is cognizant of the need to maintain the highest standards of confidentiality and security, said Dr Ateeq.
“The BMA has imposed strict requirements on The Benefit Company to ensure that credit-related information is accurate and that it is gathered, processed, stored and disseminated in a lawful and secure manner,” he said.
The BCRB also provides for consumers to have the right to review, dispute and amend information held on them.
