The Hong Kong Monetary Authority (HKMA) has today (9 March) issued a letter to set out its views on the participation by authorized institutions (AIs) in Hong Kong in Credit Reference Agencies (CRAs).
This follows the release by the Privacy Commissioner for Personal Data of a Code of Practice on Consumer Credit Data.
"The HKMA considers that the Code of Practice provides a sound framework within which institutions may disclose consumer credit data to CRAs," said Mr. David Carse, Acting Chief Executive of the HKMA.
"The HKMA recommends all AIs to share credit information of personal customers within the limits laid down by the Code of Practice," he added.
A study conducted by the HKMA in late 1996 proposed that Hong Kong should have a fully-fledged CRA in view of the growing trend in the banking industry to diversify the consumer-lending portfolio from asset-backed loans to unsecured loans, such as credit cards and personal loans. The recent financial market turmoil and the possible increase in credit risks have reinforced the view.
The Hong Kong Association of Banks and the Deposit-taking Companies Association have endorsed the proposal.
"There are already CRAs operating in Hong Kong, but a lack of full participation by authorized institutions reduces their usefulness," said Mr. Carse.
A fully-fledged CRA in Hong Kong would have the following two major benefits:
- it would benefit all institutions - large and small - and the banking industry as a whole in terms of better informed and more accurate assessment of customers' credit standing. This would lead to lower bad debts, better management of credit risk, and increased opportunities to expand the market in consumer credit; and
- it would further improve the financial infrastructure in Hong Kong, thus further enhancing Hong Kong's status as an international financial centre.
The Code of Practice issued by the Privacy Commissioner permits the disclosure, inter alia, of credit data of both existing and new customers in respect of account defaults data, credit application data within the last 90 days, and credit card loss data arising from unauthorized credit card transactions.
The HKMA would prefer that all relevant institutions should be prepared to share these types of information. For those institutions which remain concerned about loss of market information to their competitors, the HKMA is prepared to accept that such institutions should participate initially only in respect of credit card data.
Hong Kong Monetary Authority
9 March 1998
