The Tribune

By NEIL HARTNELL Tribune Business Editor A BAHAMIAN credit bureau should be established by "the latter part of this year or early 2013", the Central Bank's governor has told Tribune Business, with its activation designed to prevent the almost-20 per cent loan arrears the commercial banking sector is now suffering from. Wendy Craigg said the goal was to release draft credit bureau legislation to the Bahamian public for wider discussion in early 2012, adding that its creation would bring "more transparency" to the whole credit application process in this country. "Last year, we established several working groups to deal with various aspects of a credit bureau's implementation, legal, technical and operational working groups, for example," Mrs Craigg said. "They do not just consist of Central bank staff, but staff from the commercial banks and other potential participants in the credit bureau. "Those groups have been very active in examining how a credit bureau can be implemented, and we hope to have draft credit bureau legislation, first for consideration among the internal groups, and then that can go out to public discussion early this year." A credit bureau would, in theory, allow Bahamian commercial banks and all other lenders to access data on every individual and corporate borrower in this nation. It would enable them to assess the creditworthiness of all loan applicants prior to taking any decision on whether to approve credit, examining the level of their existing obligations and track record with other lending institutions. Currently, Bahamas-based lenders have no way of tracking, let alone catching, individuals who bounce from one lending institution to another, leaving a trail of unpaid debts behind. And, privately, several Bahamian commercial bankers have admitted to Tribune Business that so-called 'sub-prime' lending is "alive and well" inn this nation, with numerous individuals receiving credit who should not do so. A contributory factor to this is exchange controls, which restrict Bahamas-based lenders to this nation when it comes to seeking returns on their excess liquidity. Apart from increasing transparency and efficiency in the credit process, the Central Bank governor told Tribune Business that a credit bureau could potentially enable creditworthy borrowers to receive a lower interest rate on their loans. "The whole idea is that we'd have more transparency in the process from the person seeking credit," Mrs Craigg explained. "Banks would know the creditworthiness of the borrower, and in turn would know who the creditworthy borrowers are. "They could then perhaps offer them reduced rates, and hopefully that will help us to address this situation in which we find ourselves now, with the high number of loan arrears." According to the Central Bank of the Bahamas, total private sector loan arrears - the full value of past-due credit owed by Bahamian households and businesses to the commercial banks - rose by $22.9 million, or another 1.9 per cent, to $1.243 billion at end-November 2011. As a result, the ratio of arrears to the commercial banking sector's total loan portfolio hit 19.9 per cent. This now means that almost $1 out of every $5 lent by Bahamian commercial banks is now delinquent. "The Government has already looked at the proposal for implementation of the credit bureau, and given us approval to go ahead with it," Mrs Craigg told Tribune Business. "An important part of this process will be the selection of the [credit bureau] service provider, and that means going out with an RFP (Request for Proposal) to find someone appropriate for our environment." Asked when their target date for credit bureau implementation was, Mrs Craigg replied: "The latter part of this year to early next year. It's the shortest timeframe possible, with due consideration to all the implementation aspects the service provider has to cover. It's a new infrastructure for the Bahamas. "A key deliverable in this process is the legislation, and once we have a draft we're able to discuss with key stakeholders and the public at large." Meanwhile, Mrs Craigg said the Central Bank was looking to implement the "final framework" for its Market Risk Capital Charge regulation by the end of February 2012, having received feedback - via a survey of its bank and trust company licensees - on the proposal. The Caribbean Regional Technical Assistance Centre (CARTAC) provided assistance on this project, and in a paper obtained by Tribune Business said this was designed to require a Bahamas-based bank or trust company to hold extra capital against any extra risk it was running. CARTAC said: "The intended results will be that the banking supervisor can identify areas of high market risks in a particular bank, and require that that bank hold extra capital to compensate for the market risk. "As capital is more effectively measured in relation to risks, the more safe and sound is the bank. This same project has already achieved results in Belize, the Eastern Caribbean Central Bank, and Guyana." Mrs Craigg added that the Central Bank would begin its outreach efforts over the project to bring all Bahamian credit unions under its regulatory ambit by February 2012. "We will certainly move to have those public information sessions," she told Tribune Business, "and after meeting with the Credit Union League, and Boards and management of the various credit unions, we plan to start as early as February the outreach to inform them of the project, address any concerns, and here and benefit from any comments they may wish to offer."