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 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 About APCC

3 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? The issues on the eve of credit reporting reform

4 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. Common findings

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 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: o an increase in GDP growth rates of 1%; o an increase in productivity growth of 0.75%; and o an increase in capital stock growth of 0.75%.  An increase in private sector claims by 50% of GDP: o lowers the growth of the Gini coefficient (an inequality measure) by at least 0.25%, and more by some estimates. o lowers the growth of the percentage of the population living under $1 per day by 2%, and more by some estimates. o 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.” Macroeconomic and macrosocial: growth and equality

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

For more information, contact Dr. Michael Turner Asia-Pacific Credit Coalition 100 Europa Drive, Suite 403 Chapel Hill, NC Phone: ext. 802