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Th e R o l e o f t h e S t a t e i n F i n a n c i a l I n f r a s t r u c t u r e
GLOBAL financial DEVELOPMENT REPORT 2013
Box 5.1 Argentina: Using Credit Registry Information for Prudential Supervision Argentina’s central bank, the Banco Central de la República Argentina, has been operating a credit reporting system since 1991. The system is mostly focused on large loans and has been increasingly used for supervisory purposes. In 1995, the system was reformed, and access to data was granted to financial institutions. After Argentina’s financial crisis in 2003, several reforms of Argentina’s credit reporting system were undertaken to facilitate its use for prudential regulation and to support greater stability in the financial sector. Currently, the Argentine credit reporting industry comprises a public credit registry and several private sector credit bureaus. The legal and regulatory framework covering credit reporting activities in Argentina is limited to data protection compliance, which places some limitations on the authorities’ ability to adopt a holistic approach to credit reporting. The Argentine central bank currently acts as an operator of databases. Regulated entities are required to report their credit exposures to the central bank, which makes this information available to private credit reporting agencies.a Several private credit bureaus operate in Argentina, with the largest credit bureau, Veraz, holding data on approximately 90 percent of all credit lines in the market. In the aftermath of the Argentine economic crisis, the central bank focused on a strategy to enhance the availability of credit information for risk management and prudential supervision. This strategy included extending the coverage of the system and the collection of new information. In addition to providing data useful for prudential oversight and regulation, these reforms also aimed to facilitate the restructuring of the banking sector. The aim of these reforms was to make it easier for banks and regulators to (a) iden-
tify and contain a deterioration in the quality of loan portfolios, (b) facilitate provisioning and supervision of provisioning requirements for credit risk, and (c) facilitate the debt refinancing process. Monitoring credit risk and informing banks of these risks remain primary objectives of the Argentine credit registry. I n it ia l ly, A rgent i na’s publ ic cred it reg is try included only information on debts above US$200,000. As a means of broadening the coverage of the system, the minimum threshold was reduced to US$50,000 in 2002. To further improve the quality of recorded credit information, the central bank has taken important steps toward the establishment of a financial statements database and has begun to collect new information on loans already covered by the system (including credit lines, currency denomination, and maturity structure of outstanding liabilities). These improvements in data collection have been particularly helpful in facilitating the implementation of portfolio models of credit risk based on data from the registry. In particular, the expanded data can be used to check that provisions for credit risk properly cover banks’ expected and unexpected losses and serve as the foundation of scenario analyses and stress tests. For example, credit registry data can be used for simulations to test for the effects of new internal ratings–based capital standards as envisaged in the Basel III accords. Taken together, these changes have significantly enhanced the central bank’s ability to leverage Argentina’s existing credit reporting system for the purpose of prudential oversight and regulation. Some opportunities for improving the capabilities of the system nonetheless exist, for example, with regard to tracking the risk profile of securitized loans and monitoring loan portfolios after origination.
a. Initially, this arrangement came into existence because Argentina’s leading banks failed to agree on a mechanism for the voluntary exchange of credit information (see Berger and others 2003). In response, the Argentine authorities required banks to share information and made the data available to private credit reporting agencies on an equal basis. Private credit reporting agencies may access data from the central bank’s databases and offer value-added services.
information. The state can act to overcome such barriers to information sharing in a variety of ways, ranging from the establishment of an appropriate legal framework to direct interventions, mandating the exchange of credit information.
As a first step, the government can help lay the legal foundations for effective information sharing. This includes a sound legal framework that maintains consumer protection but at the same time permits banks and nonbank lenders to share relevant