SBP allowed to regulate CIBs

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SBP Diary - SBP News

ISLAMABAD  : The government has allowed the State Bank of Pakistan (SBP) to regulate Credit Information Bureaus (CIBs), or credit institutions, equipping them with formal dispute resolution mechanism through the Banking Ombudsman, official sources told Business Recorder.On April 21, 2010, the Cabinet was informed that in view of the rapidly growing consumers lending portfolios, Credit Information Bureaus (CIBs) are being established throughout the world to collect and collate credit data on borrowers from its member financial institutions. The major purpose of this database is to enable the financial institutions to know the credit history and financial standing of their prospective customers thus enabling them to make more prudent decisions.In Pakistan, the credit information portfolio is also being run by private credit bureaus without any legal framework or regulatory regime, to which the SBP had reservations.SBP is of the view that some of these bureaus, growing rapidly throughout the country, are leaking sensitive information pertaining to banking activities. A CIB collects and collates credit data on borrowers from its member financial institutions. The financial data is then aggregated in the main system and the resulting information is made available, on request, to contributing member financial institutions for the purpose of credit assessment, scoring and risk management.In Pakistan, the scope and activities of credit information are governed under the provisions of Section 25(A) of Banking Companies Ordinance (BCO), 1962. Under this provision, the first CIB was established by the SBP in December, 1992. In addition, a couple of private credit bureaus started functioning, without any legal framework or regulatory regime. Sources said that the SBP expressed concern on this development, as sensitive information pertaining to banking activities was being maintained by these bureaus.Sources further said that to fill the vacuum, the Finance Ministry has proposed a draft Credit Bureau Act, 2010 . In terms of the proposed law, regulatory control of CIBs and powers to use credit information would vest in the SBP, which would adjudicate, if the offence is committed by the credit bureau, or credit institutions. However, in case the offence is committed by any other person, adjudication would rest with the banking courts and high courts. Dispute resolution mechanism by the Banking Ombudsman will also be provided under the proposed Act. Sources said that the Finance Ministry has been directed to seek formal approval for the Act from the Ministry of Law and Justice.

Courtesy : Business Recorder


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