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Asia-Pacific Credit Coalition

Asia-Pacific Credit Coalition. Lessons for Information Sharing Standards in APEC. By Marlena Hurley, TransUnion CRIF Presentation for The Advisory Group on APEC Financial System Capacity-Building of Asia-Pacific of the APEC Business Advisory Council Moscow 6 May 2008. About APCC.

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Asia-Pacific Credit Coalition

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  1. Asia-Pacific Credit Coalition Lessons for Information Sharing Standards in APEC By Marlena Hurley, TransUnion CRIF Presentation for The Advisory Group on APEC Financial System Capacity-Building of Asia-Pacific of the APEC Business Advisory Council Moscow 6 May 2008

  2. About APCC • The Asia Pacific Credit Coalition is • A coalition committed to promoting credit reporting standards within APEC. • An affiliate organization of the non-profit Political and Economic Research Council (PERC). • Mission • To development and promote the adoption of sound information sharing and credit reporting standards in the APEC region. • To develop and demonstrate standards that are based upon proven principles and solid evidence. • In that APEC is the largest, economic region, the diffusion of standards to member economies key is a step in economic development for hundreds of millions. • In pursuit of goal, APCC • Hosts educational seminars with national regulators and policy makers. • Reaches out to APEC staff • Engages press and media briefings • Develops Country-specific and regional economic impact analyses • Provides Industry executive briefings and outreach

  3. The issues on the eve of credit reporting reform • What information should be reported? • Which sectors should be encouraged to report? • How is the size and distribution of lending affected? • What forms of registry ownership work best?

  4. Common findings Full-file (positive and negative payment) and comprehensive (across many sectors) reporting: • increases lending to the private sector especially among lower social segments more than other reporting regimes; and, • results in better loan performance than segmented and negative-only reporting; • private bureaus with comprehensive data increase lending to the private sector.

  5. Effects of full-file & comprehensive reporting on access to credit Results of simulations using real credit files • 4 economies, and 10,000s to millions of files each study • Produced consistent results (greater credit access to a loan portfolio performance target) • approximately additional 10% gain access • much more in other cases • Consistent with statistical tests that use country level observations

  6. Distributional consequences of full-file vs. negative only Results on demography using real credit files • disadvantaged social segment gain greater access than others • racial-ethnic minorities • young • low-income groups • Colombian simulations • under negative-only, 33% of acceptances women • under full-file, 47% are women

  7. Consequences of full-file vs. negative-only for performance Results on loan portfolio performance • default rates climb as information moves from full-file to negative-only in all cases • good risks are confused for bad ones • bad risks confused for good ones • Data sharing • improves quality of information for risk provisioning, allowed under Basel II • Associated with lower defaults, smaller capital requirements, and lower credit constraints

  8. Macroeconomic and macrosocial: growth and equality Comprehensive reporting promotes economic growth by enabling an increase in lending to the private sector by as much as 45% of GDP. • Statistical tests show that an increase in private sector lending by 30% of GDP can yield: • an increase in GDP growth rates of 1%; • an increase in productivity growth of 0.75%; and • an increase in capital stock growth of 0.75%. • An increase in private sector claims by 50% of GDP: • lowers the growth of the Gini coefficient (an inequality measure) by at least 0.25%, and more by some estimates. • lowers the growth of the percentage of the population living under $1 per day by 2%, and more by some estimates. • increases the growth of the lowest (poorest) quintile’s income share by at least 0.45%, and more by some estimates. Source: Ross Levine, “Financial Development and Economic Growth: Views and Agenda” Journal of Economic Literature, Vol. 25(June 1997), pp. 688–726; Thorsten Beck, Asli Demirguc-Kunt and Ross Levine, “Finance, Inequality and the Poor.” www.econ.brown.edu/fac/Ross_Levine/Publication/Forthcoming/Forth_3RL_Fin%20Inequalily%20Poverty.pdf.

  9. What you can do Much work remains to be done, and help is needed. If you are interested you can: • Assist in the formulation of standards for APEC, by helping APCC to take local concerns into account; • Participate in local and country area outreach efforts, sharing experiences of best practices and methods of engaging press and policymakers; and, • Join APCC coalition to may it wider, broader, and more multi-national.

  10. For more information, contact Dr. Michael Turner Asia-Pacific Credit Coalition 100 Europa Drive, Suite 403 Chapel Hill, NC 27517 www.apeccredit.org Phone: +1 919 338 2798 ext. 802

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