Credit Information System Project by Credit Information Corpor ation

1. Credit Information System ProjectbyCredit Information Corporation Coops 2020: Raising the Bar October 17, 2014

2. Agenda • Overview of R.A. 9510, CreditInformation System Act (CISA) • Target Eco System/ Process Flow • Global Trends • Project Roadmap & Milestones • Question & Answer

3. Credit Information System Act

4. What is CISA? • R.A. 9510 otherwise known as CreditInformation System Act (CISA) is a law passed in 2008 creating the Credit Information Corporation (CIC) • The Securitiesand Exchange Commission (SEC) is the lead government agency to implement the CISA, in coordination with other relevant government agencies in the adoption of the IRR.

5. What is CIC? • CIC is 60% owned by the National Government (NG) and 40% owned by industry associations of banks/quasi-banks and association of consumers – BAP, CTB, RBAP, CCAP and PCC • Authorized capital of CIC is Php 500 million

6. What is the policy behind CISA? • To address the need for a comprehensive, centralized, and reliable credit information system intended to: • Improve the overall availability of credit to MSMEs • Provide credit information at the least cost to eligible participants • Ensure the protection of consumer rights and the existence of fair competition in the industry at all times • Reduce the overall credit risk thereby contributing to a healthier and more stable financial system

7. What are the functions of CIC? • The CIC has three (3) important functions: • To receive and consolidate basic credit data • To act as a central registry or repository of credit information • To provideaccess to reliable, standardized information on credit history and financial condition of borrowers

8. What is Basic Credit Data? Positive and negative credit information about the borrower’s credit facility • Any information on borrower’s creditworthiness • Other factual and objective information about the borrower

9. What is a Submitting Entity? • Refers to any entity that provides credit facilities such as but not limited to: • universal, commercial, and thrift banks, including their trustdepartments, rural banks, and entities with quasi-banking license issued by BSP, including their subsidiaries, and/or affiliates that are engaged in the business of providing credit • Investment houses with quasi-banking license • Credit card companies • Financing companies • Trust entities

10. What is a Submitting Entity? f. Cooperatives engaged in lending activities such as credit cooperatives g. NGOs engaged in microfinancing h. Life insurance companies and mutual benefit associations and other similar entities supervised by insurance commission i. Government lending institutions, both GFIs and GOCCs engaged in lending

11. Who are allowed access to Basic Credit Data? • Entities authorized access to credit information are the following: • Accessing Entities- refers to any submitting or other entity authorized by CIC to access basic credit data. • Special Accessing Entities- any duly accredited private corporation engaged primarily in business of providing credit reports, ratings, and other similar credit information products and services.

12. Who are allowed access to Basic Credit Data? 3. Outsourcing entities- refers to any accredited third-party provider to whom CIC may outsource the processing and consolidation of basic credit data pertaining to a borrower or issuer of debt securities . Outsource entities are absolutely prohibited from releasing data except to CIC 4. Data Subjects- any natural or juridical person, including any LGU, its subsidiaries and affiliates, that applies for and or avails a credit facility

13. What about a Non-Accessing Entity? • Refers to an entity other than a Submitting Entity, Special Accessing Entity, or Borrower that is authorized by the CIC to access credit information from a Special Accessing Entity.

14. What are the Obligations of Accessing Entities? • Shall have access to basic credit data from CIC subject to prior accreditation and compliance with terms, conditions and procedures set forth with CIC • Shall hold under strict confidentiality any credit information received from CIC and use the same only for the declared purpose of establishing creditworthiness of the data subject

15. What are the Obligations of Accessing Entities? • Shall designate a Compliance Officer and establish a security system and internal control procedures to ensure confidentiality and valid use of the credit information obtained from CIC • Shall release basic credit data received from CIC or credit reports and credit ratings derived from basic credit data received from CIC, to non-accessing entities only when written consent or authorization has been obtained from the data subject (Applies to Special Accessing Entity)

16. What are the Basic Rights of the Borrower? • A borrower shall have the following rights: • The right toknow the causes of refusal for the application for credit facilities or services from a financial institution that uses basic credit data as basis or ground for refusal • The right to have ready and immediate access to the credit information pertinent to him subject to payment of a reasonable fee • The right todisputeerroneous, incomplete, or misleading credit information

17. What are the Basic Rights of the Borrower? • The right to be entitled to a simplified dispute resolution process to fast track the settlement or resolution of disputed credit information • The right to be informed of any correction or removal of any erroneous, incomplete, or misleading information within 5 working days from verification or conclusion of an investigation or from deletion of the disputed information • The right to be entitled to indemnity in case of denial, without justification, of the aforementioned rights, and • The right to be informed by a submitting entity of the latter’s obligation to submit and disclose basic credit data to CIC.

18. Target Eco System/ Process Flow

19. Target Information Ecosystems RA 9150 PROVIDES VALUE-ADDED SERVICES RECEIVES CREDIT DATA FROM CONSUMERS SUBMITS BASIC CREDIT DATA TO THE CIC RAW DATA Cooperatives A PROCESSED DATA Credit Cards CONTESTED DATA B Microfinance C Banks/ Financial Institutions C O N S U M E R S

20. Process Flow Enquiries via Web / A2A (SOAP) • - New Application Enquiry • - Monitoring Enquiry • Application Update Enquiry • … Credit Report CIC Database Front office and back office Provider to download data periodically Data Quality office 1 3 Check and loading processes Data Submission on files 2 Secure FTP transfer

21. Global Trends and Benefits

22. Global trends driving expanded data sources Source: Doing Business 2012

23. Benefits • Ability to more accurately evaluate credit risks and improve portfolio quality • Helps reduce bad debts/ loan payment defaults • Helps identify multiple borrowings and mitigate risk of over-indebtedness • Ability to improve cooperative’s internal policies and processes, i.e. credit risk management , member relationship and services • Improves culture of repayment for borrowers/ greater incentive to maintain positive credit history • Improves overall financial system

24. Project Roadmap/ Milestones

25. Project Roadmap

26. Detailed Milestones • 1st Week October 2014- Receive training on Submission Data Format • From October 6, 2014 onwards – Pilots to start preparing tools to output data from their existing database, into the provided format • End of November 2014 - Pilots to send to CIC a test file based on Submission Data Format • Mid December 2014- CIC will send back a file indicating any errors / suggesting improvements • December 2014 / January 2015 – Iterations between CIC and Providers for test contribution refining • End of January 2015 - CRIF to deliver a second training on batch contribution (finalizing documents, addressing questions by Institutes) • Begin of June 2015- Go live, (limited to working group banks) contributing live data and online inquiries • End of June 2015 - Go live for general financial industry

27. Thank You