Credit information reporting must rise to top of financial agenda, say UAE bankers

Over 20 credit and risk experts from banks, legal firms, credit bureaus and independent consultants from the UAE, Germany and India, provided these insights in an exclusive roundtable summit held in Dubai recently.

Participants said that comprehensive credit information can help better identify and manage their lending risk and boost confidence when offering credit. Especially in the midst of the present financial crisis, the role of a credit bureau has become crucial in addressing some of the lending constraints that banks face, they said. Participants also discussed technical and operational details of the credit information system, including data quality, confidentiality, customer issues and coverage.

Dr. Markus Krall, managing director of risk management consultancy firm, Krall Demmel Baumgarten, said:

"The risks of not using credit bureau services are many. The lack of tested models will mean that banks and regulators will not achieve the transparency necessary to manage individual and systemic risk. Likewise, lack of credit data would give rise to bad risk models, leading to bad decisions and credit portfolio. The UAE cannot afford to be behind global standards."

Ian Spowart, Regional Head of Credit at Lloyds TSB, said: "The more disclosure and transparency we can bring into this market, the better. This is why we need a bureau."

Zaid Kamhawi, Chief Business Officer of UAE's government-backed credit bureau, Emcredit, said: "Credit bureau is an important part of any financial infrastructure. It is like a knowledge bank, in the sense that it facilitates the pooling of credit data so that all members can mutually benefit from collective insights. Given the tight credit conditions, and the upcoming Credit Information Law, now more than ever banks need to fully understand repayment risks of customers and apply risk mitigation strategies."

Legal experts at the summit emphasised the importance of an appropriate legal framework and the quality of data and potential disputes. B.B. Tiwari, a senior consultant with Dun & Bradstreet Information Services (India), spoke about the various complexities of rights and obligations of all stakeholders when it came to pooling or sharing data. He said that a country needs to draft regulations keeping in mind the socioeconomic fabric of the society for which the infrastructure is being created.

Kamhawi added that Emcredit has been working closely with the concerned authorities in providing technical expertise for drafting of the Credit Information Law, which upon promulgation will boost the data-sharing environment in the country.

The Credit Roundtable Summit is part of Moneyworks Summits, and was held recently in Dubai. Attendees of the Summit included senior executives from Emirates NBD, Mashreq, Citibank, Barclays Bank, Lloyds TSB, Royal Bank of Scotland, Dubai Bank, Noor Islamic Bank, Dubai First, Krall Demmel Baumgarten, Dun & Bradstreet, Ernst and Young, Al Tamini, and Afridi and Angell.