Following on the success of the Western Hemisphere Payments and Securities Clearance and Settlement Initiative (WHI), the Centro de Estudios Monetarios Latinoamericanos (CEMLA), with the support of The World Bank, is launching the Western Hemisphere Credit & Loan Reporting Initiative (WHCRI) in 2004.
This project was approved by the Governors of the Latin American and Caribbean (LAC) central banks in their May 2004 meeting in Mendoza. The Initiative’s objective is to describe and assess credit and loan reporting systems in LAC countries and develop improvement strategies and action plans using a standard methodology. The WHCRI will also define policies and actions for sub-regional integration of credit and loan reporting systems in the region.
Credit and loan reporting systems have received more attention by policy makers recently due to the recognition that they represent an important institutional element of financial markets. Strong credit and loan reporting systems support the ability of bank supervisors to monitor aggregate credit risk borne by regulated financial institutions and possibly prevent excessive concentrations of risk that result in financial crises. In addition, there is evidence to suggest that the existence of robust credit & loan reporting systems strengthens credit markets, thus bolstering economic growth and development.
Credit and loan reporting systems are generally not well-developed in the LAC countries. Problems have been observed with legal frameworks, the lack of institutional capacity to enforce laws and regulations on credit reporting, the limited availability of positive credit data, in part due to the reluctance or legal impossibility for financial institutions to share this information regarding their clients, and weaknesses in the credit registries themselves. Systems developed for use by banking supervisors are typically not well-suited to support lending activity to firms or individuals.
The regional approach embedded in the WHCRI design recognizes that many of the LAC countries face similar difficulties and that knowledge developed in one country can be readily shared and applied in others. It will also lay the groundwork for future regional cooperation, which will be key to make the process sustainable in the long run and in extending it to all of the LAC countries.
An International Consultative Committee (ICC) consisting of a selected group of national and international institutions highly experienced in the field of credit and loan reporting will be formed. The ICC will benefit the Initiative by bringing in expertise, a diversity of experiences and perspectives, provide advice and guidance, and will help in identifying appropriate technical resources.
Detailed information on the WHCRI’s objectives and organizational arrangements can be found in the document:
Western Hemisphere Credit & Loan Reporting Initiative
By Massimo Cirasino, World Bank, José Antonio García, CEMLA, Mario Guadamillas, World Bank, and Margaret Miller, World Bank.