By NATARIO McKENZIE
Tribune Business Reporter
nmckenzie@tribunemedia.net
THE Credit Bureau's creation could ultimately enable banks to release pent-up liquidity and improve their lending confidence, the Bahamas Institute of Chartered Accountants (BICA) president said yesterday.
Gowon Bowe, who hailed the Government's tabling of the enabling legislation on Wednesday as a positive step, acknowledged there would likely be some "pain and discomfort" in the initial stages of credit bureau implementation.
"The mere tabling of the Bill will require considerable debate but, more importantly, there is still a significant amount of work needed to get it implemented," Mr Bowe said. "The banks are well known but you do have credit financing via car sales, furniture sales, and you have number of those kinds of consumer finance businesses essentially not regulated by the Central Bank, although some of them are regulated by the Securities Commission.
"Most Bahamians nowadays are borrowing for personal loans.
"The application form is not telling the lender the level of debt that individual may have with other banks, furniture companies and car companies," Mr Bowe added.
"This will shine the spotlight on the over-leveraging of the average consumer in the Bahamas. We can go from anecdotal knowledge as to how over-leveraged persons are to empirical evidence. What it will do is effectively give the lending environment greater confidence in who they are lending to."
The Credit Reporting Bill 2017 establishes the framework for the Bahamas' first credit bureau, which will collect personal and financial information on persons and companies, then issue this to client lenders via a credit report. This enables the latter to better assess a potential borrower's creditworthiness and associated risk, helping the distribution of capital.
In the Bahamian context, a credit bureau should help borrowers improve their credit and payment behaviour, while lenders will have increased access to accurate and more comprehensive information about borrowers' credit history and payment habits. This, in turn, would reduce their exposure to risky loans. Credit bureau clients typically include banks, mortgage lenders, credit card firms and other financing companies.
Mr Bowe added of the credit bureau: "In reality it should release some of the built-up liquidity, because as persons demonstrate that they are quality borrowers then those persons should be eligible for loans as, right now, in the absence of salary decision authorisation from a reputable company, they are not able to get debt financing.
"We may be surprised because there may be only a handful of persons considered credit-worthy in the beginning.
"This is a positive development towards 21st century activity, but it will have some pain and discomfort in the initial implementation."
Comments
bogart 6 years, 11 months ago
Banks and financial having accountants must not have been doing their jobs to not have advised their clients to have better financial analyses over yhe past decades especially as the Banks snd financial instituhiions tend to hire the same firms evrry year.
Banks loan offocers, auditors and yearly Accounting firms must know the credit worthyness of each customer from the lengthy mathematical analysis, numerous questions and numerous pieces of papers they want you to bring. If their bank procedures fail then they should talk to their hired Accountants or sue them.
Furthermore, Banks amd Financial institutions charge a fee to give you a Bank Reference from their decades old records from all their branches immediately to show to the Embassies for Visas. Who else has better records backed by professional Accounting firms who audit their books.
We need an INDEPENDENT FINANCIAL CONDUCT AUTHORITY TO PROTECT THE CUSTOMERS, AND AUDIT THE BANKS AND FINANCIAL INSTITUTIONS. NOT FOR BANKS AND Their ACCOUNTANTS TO HAVE THE GOVT GET INVOLVED TO PROTECT THE BANKS.,,!!!
Serious investigation into all these Banks are needed.
TheMadHatter 6 years, 11 months ago
Bogart they are trying to "sell" this bill by saying it will allow banks to release some of their overflow of liquidity. That is true, but it will also help the public by detering banks from lending to persons who have low credit ratings....which is good to help persons not drown in debt via the associated 18% interest.
Right now, if you are working and your company will do salary assignment ... then banks will lend to you...WHICH IS WRONG. They are taking advantage of the poor man and have no fear or concern about whether the lender can truly pay back the loan because they know they have big shot lawyers who will put you in court.
What is needed as companion legislation to this bill is a Bankruptcy Act where persons can declare bankruptcy every 7 years like they have in the USA if the person is truly bankrupt and have all their debts wiped clean by the court.
Only then will these banks stop their predatory lending practices.
bogart 6 years, 11 months ago
Agreed, with companion legislation like Bancruptcy and would like a FINANCIAL CONDUCT AUTHORITY LIKE THE UK. Banks have the mathematical ability and under constant advisement by multitude experts headoffoces in foreign countries including international ACCOUNTING FIRMS who do yearly audits for legal required Balamce Sheet for the shareholders ,public. Audits dhould have picked up flaws in the granting of loans for decades. Customers pay a BANK FEE OF AROUND 1% for the bank to compile, analyze and correctly grant a loan that has a chance of success uusing due care and attention, diligence, their rxpertise etc. Banks follow that all ALL OF YOUR LOANS MUST BE 45% OF INCOME AND WITH CARE AND DIGILENCE MUST ENSURE THE REMAINING 55% WILL ALLOW YOU A FAIR CHANCE TO SURVIVE which should be common sense duty of DUTY OF DUE CARE NOT NEGLIGENCE but many a focus before seemed to be just the 45% to give loans to meet loan targets set by foreign head offices for loan officers to get a salary increase. Loan officers were turned into SALESMEN AND LOAN OFFICERS.
Previous TRUCK LAWS Act FORCED EMPLOYERS TO BE RESPONSIBLE AND NOT REDIRECT EMPLOYEES SALARY AND LEAVE THEM WITH LITTLE TO SURVIVE. The law was changed into the Labour law which does not address this issue and many emplloyers have no responsibility if the worker signs away their whole paycheck as many govt employees do.
Clearly we need investigations before sweeping things under the carpet and where bank misrepresenntations occur, fraud, lack of due care and attention, negligence, improper analyses, lack of insurances -customers die and no insurance, faulty mortgage documentation, misuse of indemnity insurances, documents taking too long to be registered, title opinions, over collaterals requirements, hyper inflated bank fees, money laundering, numerous complaints agsonst banks that groups now protest pubictly against banks. It takes two hands to clap, see Dodd Frank US legislation also. Go after the big fish not the small one.
DDK 6 years, 11 months ago
45% is way to high. 25% (or one's week's salary) is far more realistic and should become, once again, the benchmark percentage for bank repayment calculations for total loan output.
DDK 6 years, 11 months ago
too high!
proudloudandfnm 6 years, 11 months ago
If we had a credit beareau on existence the last 3 years 99% of Freeport would have horrible credit thru no fault of their own.
The Bahamas government is incapable of managing a credit beareau.
The Bahamas government is incapable of providing and maintaining a healthy environment where one can sustain good credit.
This is a horrible idea without a complete government overhaul/reform....
OldFort2012 6 years, 11 months ago
Credit bureaux are private companies all over the world. There is absolutely no reason why the government should have anything to do with it. You are quite right in stating that they are incapable of organizing a piss up in a brewery.
bogart 6 years, 11 months ago
The banks customer loan debt service ratios of a max of 45% of salary for all loan payments and 55% for the applicant to live has been used since the last 25 years and audited yearly by accountants paid by the banks DESPITE the cost of living to survive on the remaining 55% has every grocery ,food, light bill, shoes, clothing, corned beef increasing in price over the last 25 years.
DDK 6 years, 11 months ago
Bogart, as you said, " audited yearly by accountants paid by the banks". There you go, the accountant does not live in the shoes of the average man on the street whose salary has not increased proportionately with the cost of his living expenses over the last 25 years. Further, I don't think many, if any, employers increased their employees' salaries to cope with the added burden of VAT, which has increased the costs of goods and services far more than 7.5%, probably more like 35%, give or take.
bogart 6 years, 11 months ago
1.3 billion extracted by the govt in VAT. What was questioned at the time of implementing the additional burden, paperwork, printer ink, time liningup at the bank, accounting etc was an investigation to see whether the employers of businesses was mot raising their prices to incorporate these costs and in actual increase to the consumers was the 7.5% plus the office expenses and perhaps even a small profit increase? For instance how many would not want to not round out the prices for goods and services on an already rounded price to again round it off to avoid using coins inconvenient for all??? Or the few I think like the papers in taking a loss by not charging $1.075 cents.
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