Agreement reached on commercial credit reference agency

A plan to establish a commercial credit reference agency (CCRA) in Hong Kong was unveiled today (June 16) by the Hong Kong Monetary Authority (HKMA), the Hong Kong Association of Banks (HKAB) and the Deposit Taking Companies Association.

The CCRA will collect credit data of small and medium-sized enterprises (SMEs) and make the information available to authorized institutions. Organisations will generally be defined as SMEs if they are unlisted companies with an annual turnover not exceeding HK$50 million.

"The creation of the CCRA will be an important addition to Hong Kong's banking infrastructure," said the Chief Executive of the HKMA, Mr Joseph Yam. "It will bring about significant benefits to the industry's credit risk management, thereby enhancing the safety and soundness of the banking system."

The CCRA will cover only the SME customers of authorized institutions. The consent of each SME will be required before the institutions can pass its credit data to the CCRA.

The Chairman of the HKAB, Mr Raymond Or, said there had been growing public awareness of the need for SMEs to have greater access to credit.

"The CCRA will help meet the needs of both lenders and borrowers," he said. "It will help creditworthy borrowers gain better access to loans more quickly and at more competitive prices."

Data gathered by the CCRA will cover only credit information, such as the number of credit facilities an SME has obtained from lenders, the facilities' limits, and details of loan defaults.

Information about the company assets or the personal wealth of the owners will be excluded. Lenders are to use the data only in relation to the grant, review or renewal of an SME's credit.

Mr Cliff Forster, Chairman of the Deposit Taking Companies Association, said his organisation fully supported the establishment of a CCRA.

"It is one important and indispensable first step to base lending to SMEs in Hong Kong more on the borrowing enterprises' performance, with less reliance on collateral," he said.

Some preparatory work is needed before the scheme can be launched around the third quarter of 2004. This includes identification of an appropriate service provider and systems development to cater to the reporting of data.

To safeguard the confidentiality of the data held by the CCRA, the HKMA will issue a statutory guideline under the Banking Ordinance to set out data protection guidelines in relation to the use of credit data.

End/Monday, June 16, 2003