© 2007 CRIF Group Czech Credit Bureau – A successful path to establishing Credit Bureau Kiev, June 7th, 2007 Petr Kučera Managing Director, Czech Credit Bureau

© 2007 CRIF Group Table of contents CCB / CRIF Introduction Czech Financial System Overview History of the Czech Credit Bureau project Vital statistics today Consumer perception of the bureau Road map to further Credit Bureau development Czech Credit Bureau – Path to establishing a successful bureau

© 2007 CRIF Group CCB - Czech Credit Bureau  Joint-venture established by CRIF, Trans Union, and Aspekt in 2000 – since 5/2005 fully owned by CRIF  CCB manages two main registers in the Czech Republic: - Banking Credit Bureau (banks, building societies) - Non-banking Credit Bureau (leasing, sales-finance, telecoms, utilities)  In January 2006 the Bureaux started sharing data among each other.  Databases contain both positive and negative information on applicants, co-applicants and guarantors (individuals and companies).  Principle of data exchange reciprocity provides fair and transparent access to information and protection against marketing use.  The system allows partial reciprocity (only negative data) from telecommunications and utilities companies.  CCB is a provider of ancillary services to the financial market (scoring & rating methodologies, systems for decisioning support and business processes automation, business information services, etc.)

© 2007 CRIF Group CRIF Group introduction  A European, private - and bank- owned company with headquarters in Bologna (IT)  CRIF is one of the main international groups specialized in the development and management of credit reference agencies and decision support systems for the retail credit markets  Over 600 employees in 7 countries  More than 85% out of a total of branches of banks and financial institutions connected daily on-line to EURISC, the CRIF credit reference agency in Italy; 50 million lines of information in CRIF databases for the retail and small-medium business credit market  Over 500 scoring and decision solutions projects in 10 countries  Services provided to Banks, Financial Houses, Insurance Companies and Utilities

© 2007 CRIF Group CRIF companies worldwide Bologna Bratislava (Slovak Republic) Milan London(UK) Tampa (USA) Mexico City (Mexico) Moscow (Russia) Koper (Slovenia) Prague (Czech Republic) Warsaw Polonia Cagliari

© 2007 CRIF Group Czech Financial System Overview Financial institutions Number of institutions Banks Credit Unions Insurance companies Investment companies and investment funds Pension funds Leasing companies Other Total number of institutions Source: ČNB

© 2007 CRIF Group Banking sector is the key element of the financial system: Czech Financial System Overview Source: ČNB

© 2007 CRIF Group Banking Sector Structure 24 banks 4 large banks (assets over CZK 100 billion) 9 middle sized banks (CZK 20 – 100 billion) 5 small banks (up to CZK 20 billion) 6 building societies Vast majority of institutions controlled by foreign capital, mainly by institutions from EU countries (Austria, Belgium, France, Italy, Germany etc.) - only 3 banks have non-EU shareholders (2 - USA, 1 - Malaysia) - of 7 Czech owned banks, 5 owned by foreign capital indirectly 13 branches of foreign banks foreign bank branches only from EU countries (single licence principle) – one indirectly owned by Japanese bank Sizing & ownership structure today:

© 2007 CRIF Group Banking Sector Structure & Changes Source: ČNB

© 2007 CRIF Group …and is there still capactiy to borrow by consumers ??  Average credit contract value registered in the Banking Bureau is 94,340 CZK (3,310 EUR). This represents 11% y-o-y increase.  Only 1,7% of all contracts show 90+ days of delinquency (slightly decreasing during the last 12 months)  Average debt per consumer is c. 50 ths. CZK (c. 1,750 EUR)  The total value of consumer debt reaches only 50 % of consumer deposits  Consumer loans to GDP ratio is currently at 2,4% in CR, which is low compared to EU average of 10%  Structure of indebtedness relies heavily on long-term assets (73% housing loans)

© 2007 CRIF Group Why Credit Bureau?...a retrospect view to year 2000  CLASSIFICATION: Classified loans reach a staggering level of 28,99 %  CREDIT ACTIVITY: Long-term decline in loans provided by Czech banks - a fall of 3,2% in 2000  BANKRUPTCY: 15 banks have closed doors due to poor finances and failure to comply with the rules for prudent business  STRATEGY: Many banks' current strategy is aimed at existing corporate clients, devoting little or no attention to natural persons  MANAGEMENT: The role of management, which has predominantly focused on its own personal interests, has been revealed as very poor. Control mechanisms have also failed  INFORMATION GAP: The process for evaluating loan applications in terms of risk suffers from a lack of reliable information on clients

© 2007 CRIF Group …and what was the process  1993 – Banks started to share corporate data (CNB)  1998 – Banking Act allows banks to share data without consent  2000 – Tender for banking credit bureau project  2000 – Joint Development Agreement signed by six banks and consortium ASPEKT, TransUnion and CRIF  9/2001 – MFA signed up by six banks, CCB and CBCB  6/2002 – Launch of the Banking Credit Bureau  10/2004 – Launch of the Slovak Banking Credit Bureau  6/2005 – Launch of the Czech Non-banking Credit Bureau

© 2007 CRIF Group Major obstacles in establishing the bureau Understand the basic principles of CB qualities Convincing the top executives of banks representing critical mass Agree on data content and contractual heads of terms Designing the corporate structure; contractual agreements Setting up technical infrastructure Quality - auditing processes; client center functions setup Implementation; testing GO LIVE Over 3 years!! 12 months

© 2007 CRIF Group  21 active members (99% of banking retail market)  10,4 million credit files on approximately 4,5 million clients (c. 3% growth p.m)  Client centre issued 25 ths. consumer credit reports and answered over 30 ths. telephone queries from customers during 2006 (c. 220% y-o-y increase)  1,4 million credit files prepared for data sharing with Non-banking credit bureau  In average over 200,000 inquiries a month (14% increase in online inquiries from 2005)  Hit-rate (probability of retrieving information) around 82%  c. 450,000 default clients (of which 90 ths. in 90+D)  During the period 1-10/2006 the Bureau recorded c. 1,2 mln. new loans provided to consumers in the total volume of 169,5 bln. CZK  ….and over 180 ths. loan applications in the total volume of 21 bln. CZK have been rejected, primarily thanks to the bureau data Bureau vital statistics today: Banking Credit Bureau

© 2007 CRIF Group  Start in June 2005; at present 19 members (c. 90% of leasing market and 50% in consumer finance); 10 new members in pre- contractual phase.  LLCB database contains 1,5 mil. credit files on 950,000 consumers and companies  Hit-rate reaches 55 % (increase of 30% within one year)  Plans for inclusion of factoring companies, telecom operators and utilities (negative-only data sharing for individuals, positive & negative on companies).  Through data sharing with CBCB, the annual growth of shared credit files database is estimated at over 3 mil. Non-banking Credit Bureau

© 2007 CRIF Group  Launch of Data sharing between CBCB and LLCB (January 2006)  Authentication and Fraud Management tools (1Q 2007) Launch of Fraud Analyser – authentication, ID verification and fraud detection for POS activities (Alternative Distributional Channels, agents)  Credit Bureau Score – PERFORM implementation (June 2007)  Extension of Non-banking Credit Bureau to Telecoms and Utilities (2007)  SME data integration into CBCB; data sharing with LLCB (2007) Integration of iRatings methodology  Portfolio monitoring activities – batch inquiring (2007) Portfolio Lab, portfolio alerts, batch processes for rank-ordering (Basel II)  Launch of Business Information provision (2007) Major achievements in 2006 & Plans for 2007

© 2007 CRIF Group Czech Credit Bureau – leader in CEE IFC annual study „Doing Business“ repeatedly confirms the Czech bureau as the most successful one in Central and Eastern Europe… Source: IFC

© 2007 CRIF Group Q) What are the advantages of the credit loan register according to you? scale from 1 to means „very important“, 5 means „not important at all“. The respondents believe that the main advantages of a credit register include the client’s opportunity to build up a credit loan history, a higher possibility to take a credit loan, and more objective information about the credit loan applicants AVERAGE MARK (St. error: max. 3.3%) Market Research – Perception of credit bureau by consumers

© 2007 CRIF Group Respondents who know what credit register is, are more often not bothered by keeping information in credit register. Q) How do you consider the fact that financial institutions are collecting information about clients in a credit register ? (St. error: max. 3.3%) Market Research – Perception of credit bureau by consumers

© 2007 CRIF Group Value and Usage of Credit Bureau data  Credit bureau information is the single most predictive source of data throughout the credit life cycle PORTFOLIO MANAGEMENT AcquisitionPortfolio Marketing Risk Management Collections The amount of internal, customer-specific data available to model

© 2007 CRIF Group Credit Bureau Data Appli catio n Scori ng Frau d Prev enti on Syst em Stra tegy Mng m Soft war e CRM DW H and Geo dem ogr. soft war e Rati ng Suit e Application processing system Credit Bureau scoring Behavioural scoring Wor kflo w Mng m Soft war e Credit Bureau Services - Ongoing Development CRIF Road Map:

© 2007 CRIF Group From the delivery of Credit Reports … Output APPLICATION FORM Branch Credit Bureau Applicant Id and Matching Codes, Number of Contracts, Global Exposure, Credit Behaviour, No. of Banks and Financial Institutions, … Input

© 2007 CRIF Group … to the management of Decision Processes & Outsourcing PUBLIC DATABASES CREDIT BUREAU DATA & BUREAU SCORE BUSINESS RULES APPLICATION SCORE Database Integration, Policy Rejects, Credit Policies, Business Rules, Scorecards, Decision Matrix, … Credit Bureau Output APPLICATION FORM Branch Input

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