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© 2007 CRIF Group
Czech Credit Bureau –
A successful path to establishing
Credit Bureau
Kiev, June 7th, 2007
Petr KučeraManaging Director, Czech Credit Bureau
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Table of contents
CCB / CRIF Introduction
Czech Financial System Overview
History of the Czech Credit Bureau project
Vital statistics today
Consumer perception of the bureau
Road map to further Credit Bureau development
• Czech Credit Bureau – Path to establishing a successful bureau
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CCB - Czech Credit Bureau
Joint-venture established by CRIF, Trans Union, and Aspekt in 2000 – since 5/2005 fully owned by CRIF
CCB manages two main registers in the Czech Republic:
- Banking Credit Bureau (banks, building societies)
- Non-banking Credit Bureau (leasing, sales-finance, telecoms, utilities)
In January 2006 the Bureaux started sharing data among each other.
Databases contain both positive and negative information on applicants,
co-applicants and guarantors (individuals and companies).
Principle of data exchange reciprocity provides fair and transparent
access to information and protection against marketing use.
The system allows partial reciprocity (only negative data) from
telecommunications and utilities companies.
CCB is a provider of ancillary services to the financial market (scoring &
rating methodologies, systems for decisioning support and business
processes automation, business information services, etc.)
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CRIF Group introduction
A European, private - and bank- owned company with headquarters in
Bologna (IT)
CRIF is one of the main international groups specialized in the development
and management of credit reference agencies and decision support
systems for the retail credit markets
Over 600 employees in 7 countries
More than 85% out of a total of 29.000 branches of banks and financial
institutions connected daily on-line to EURISC, the CRIF credit reference
agency in Italy; 50 million lines of information in CRIF databases for the
retail and small-medium business credit market
Over 500 scoring and decision solutions projects in 10 countries
Services provided to Banks, Financial Houses, Insurance Companies and
Utilities
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CRIF companies worldwide
Bologna
Bratislava(Slovak Republic)
Milan
London(UK)
Tampa (USA)
Mexico City(Mexico)
Moscow (Russia)
Koper(Slovenia)
Prague (Czech Republic)
WarsawPolonia
Cagliari
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Czech Financial System Overview
Financial institutionsNumber of institutions
2000 2001 2002 2003 2004 2005
1. Banks 40 38 37 35 35 36
2. Credit Unions 134 134 46 42 33 20
3. Insurance companies 41 43 42 42 40 45
4. Investment companies and investment funds 141 194 119 38 24 21
5. Pension funds 19 14 13 12 11 11
6. Leasing companies 225 322 213 233 248 210
7. Other 458 659 500 650 718 705
Total number of institutions 1 058 1 404 970 1 052 1 109 1 048
Source: ČNB
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Share of Assetsend of 2005
73.8%
0.1%
8.0%
3.7%
3.1%
5.5% 5.9%
Banks
Credit Unions
Insurance Companies
Investment Companies andInvestment FundsPension Funds
Leasing Companies
Other
Banking sector is the key element of the financial system:
Czech Financial System Overview
Source: ČNB
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Banking Sector Structure
24 banks 4 large banks (assets over CZK 100 billion) 9 middle sized banks (CZK 20 – 100 billion) 5 small banks (up to CZK 20 billion) 6 building societies
Vast majority of institutions controlled by foreign capital, mainly by institutions from EU countries (Austria, Belgium, France, Italy, Germany etc.)
- only 3 banks have non-EU shareholders (2 - USA, 1 - Malaysia)- of 7 Czech owned banks, 5 owned by foreign capital indirectly
13 branches of foreign banksforeign bank branches only from EU countries (single licence principle) – one indirectly owned by Japanese bank
Sizing & ownership structure today:
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Banking Sector Structure & Changes
Total Assets, Loans and Deposits of the Banking Sector
0
500
1 000
1 500
2 000
2 500
3 000
3 500
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
billions
of
CZK
Total Assets Total Loans Total Deposits
Source: ČNB
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…and is there still capactiy to borrow by consumers ??
Average credit contract value registered in the Banking Bureau is 94,340 CZK (3,310 EUR). This represents 11% y-o-y increase.
Only 1,7% of all contracts show 90+ days of delinquency (slightly decreasing during the last 12 months)
Average debt per consumer is c. 50 ths. CZK (c. 1,750 EUR)
The total value of consumer debt reaches only 50 % of consumer deposits
Consumer loans to GDP ratio is currently at 2,4% in CR, which is low compared to EU average of 10%
Structure of indebtedness relies heavily on long-term assets (73% housing loans)
BRKI contract value (CZK) 508 640 817 351
Mortgage loan 339 077 654 594 66,7%Personal loan 87 532 859 578 17,2%Construction credit loan 31 435 697 429 6,2%Consumer loan 22 886 189 581 4,5%Overdraft facility 9 787 928 100 1,9%Instalment credit card 4 429 654 371 0,9%Current account credit limit 2 540 289 529 0,5%Credit card 310 684 562 0,1%Investment loan 8 799 099 133 1,7%Operational loan 1 840 760 474 0,4%Revolving loan 2 506 667 978 0,5%Export/import loan 8 998 476 0,0%
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Why Credit Bureau?...a retrospect view to year 2000
CLASSIFICATION: Classified loans reach a staggering level of 28,99 %
CREDIT ACTIVITY: Long-term decline in loans provided by Czech banks - a fall of 3,2% in 2000
BANKRUPTCY: 15 banks have closed doors due to poor finances and failure to comply with the rules for prudent business
STRATEGY: Many banks' current strategy is aimed at existing corporate clients, devoting little or no attention to natural persons
MANAGEMENT: The role of management, which has predominantly focused on its own personal interests, has been revealed as very poor. Control mechanisms have also failed
INFORMATION GAP: The process for evaluating loan applications in terms of risk suffers from a lack of reliable information on clients
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…and what was the process
1993 – Banks started to share corporate data (CNB) 1998 – Banking Act allows banks to share data without consent 2000 – Tender for banking credit bureau project 2000 – Joint Development Agreement signed by six banks and
consortium ASPEKT, TransUnion and CRIF 9/2001 – MFA signed up by six banks, CCB and CBCB 6/2002 – Launch of the Banking Credit Bureau 10/2004 – Launch of the Slovak Banking Credit Bureau 6/2005 – Launch of the Czech Non-banking Credit Bureau
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Major obstacles in establishing the bureau
Understand the basic principles of CB qualities
Convincing the top executives of banks representing critical mass
Agree on data content and contractual heads of terms
Designing the corporate structure; contractual agreements
Setting up technical infrastructure
Quality - auditing processes; client center functions setup
Implementation; testing
GO LIVE
Over 3
years!!
12 month
s
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21 active members (99% of banking retail market) 10,4 million credit files on approximately 4,5 million clients (c. 3% growth
p.m) Client centre issued 25 ths. consumer credit reports and answered over
30 ths. telephone queries from customers during 2006 (c. 220% y-o-y increase)
1,4 million credit files prepared for data sharing with Non-banking credit bureau
In average over 200,000 inquiries a month (14% increase in online inquiries from 2005)
Hit-rate (probability of retrieving information) around 82% c. 450,000 default clients (of which 90 ths. in 90+D) During the period 1-10/2006 the Bureau recorded c. 1,2 mln. new loans
provided to consumers in the total volume of 169,5 bln. CZK ….and over 180 ths. loan applications in the total volume of 21 bln. CZK
have been rejected, primarily thanks to the bureau data
Bureau vital statistics today: Banking Credit Bureau
December2003
December 2004
December 2005
October 2006
Hit rate 64,7% 75,6% 78,2% 80,6%
Number of persons in BRKI database 2,1 mil. 3,2 mil. 3,9 mil. 4,3 mil.
Number of contracts in BRKI database 3,2 mil. 5,4 mil. 7,9 mil. 9,4 mil.
Number of inquiries into BRKI 673.592 809.643 1.680.070 1.938.158
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Start in June 2005; at present 19 members (c. 90% of leasing market and 50% in consumer finance); 10 new members in pre-contractual phase.
LLCB database contains 1,5 mil. credit files on 950,000 consumers and companies
Hit-rate reaches 55 % (increase of 30% within one year)
Plans for inclusion of factoring companies, telecom operators and utilities (negative-only data sharing for individuals, positive & negative on companies).
Through data sharing with CBCB, the annual growth of shared credit files database is estimated at over 3 mil.
Non-banking Credit Bureau
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Launch of Data sharing between CBCB and LLCB (January 2006)
Authentication and Fraud Management tools (1Q 2007)Launch of Fraud Analyser – authentication, ID verification and fraud detection for POS activities (Alternative Distributional Channels, agents)
Credit Bureau Score – PERFORM implementation (June 2007)
Extension of Non-banking Credit Bureau to Telecoms and Utilities (2007)
SME data integration into CBCB; data sharing with LLCB (2007)Integration of iRatings methodology
Portfolio monitoring activities – batch inquiring (2007)Portfolio Lab, portfolio alerts, batch processes for rank-ordering (Basel II)
Launch of Business Information provision (2007)
Major achievements in 2006 & Plans for 2007
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Czech Credit Bureau – leader in CEE
IFC annual study „Doing Business“ repeatedly confirms the Czech bureau as the most successful one in Central
and Eastern Europe…
Source: IFC
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Q) What are the advantages of the credit loan register according to you? scale from 1 to 5 - 1 means „very important“, 5 means „not important at all“.
The respondents believe that the main advantages of a credit register include the client’s opportunity to build up a credit loan history, a higher possibility to take a credit loan, and more objective information about the credit loan applicants.
%
18
33
40
38
40
45
47
56
23
19
26
34
34
35
38
32
17
20
14
15
13
13
9
7
8
11
7
4
4
1
1
1
10
10
3
3
7
2
2
2
24
7
10
6
3
5
3
3
0 20 40 60 80 100
Reducing price of credit loan products
None, it is advantageous only for banks
Widening of offer of credit loan products
Faster accomplishment of credit loan
Reduce the access to credit loans by bad payers
Objective info about applicants for financialinstitutions
Higher possibility to take credit loan
Build up of client credit loan history - highercredibility for banks
1 = Very important 2 3 4 5 = Not at all important Don't know
1.6
1.7
1.7
2.0
1.9
2.0
2.4
2.6
AVERAGE MARK
(St. error: max. 3.3%)
Market Research – Perception of credit bureau by consumers
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Respondents who know what credit register is, are more often not bothered by keeping information in credit register.
Q) How do you consider the fact that financial institutions are collecting information about clients in a credit register?
%
2
1
0
14
10
4
37
42
12
34
37
71
14
10
14
0 20 40 60 80 100
They do not knowwhat it is (N=183)
They have heardabout it (N=252)
They know what itis (N=165)
Definitely mind it Rather mind it Neither mind nor notRather do not mind it Definitely do not mind it
(St. error: max. 3.3%)
Market Research – Perception of credit bureau by consumers
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Value and Usage of Credit Bureau data
Credit bureau information is the single most predictive source of data throughout the credit life cycle
PORTFOLIO MANAGEMENT
Acquisition Portfolio Marketing
Risk Management
Collections
The amount of internal, customer-specific data
available to model
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Credit Bureau Data
Application Scoring
Fraud Prevention
System
Strategy Mngm
SoftwareCRM
DWH and Geodemogr.
softwareRating Suite
Application processing
system
Credit Bureauscoring
Behavioural scoring
WorkflowMngm
Software
Credit Bureau Services - Ongoing Development
CRIF Road Map:
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From the delivery of Credit Reports …
OutputOutputRA18 - Copyright Crif ------------------------------------------------------------ ANAGRAFICA 800010790 -------- NUM. 01 DI 01 ---------COD.FIS. BNCRRT60R15G337C PARTITA IVA N.ISCR.CCIAA DICOGNOME E NOMEDENOM./RAG.SOC.SESSO M NATO IL 15 / 10 / 1960 A PROV. PRRESID. VIA CASTIGLIONE,6CAP. 40124 COMUNE BOLOGNA PROV. BO NAZIONE I------ RIEPILOGO EURISC E CREDIT BUREAU SCORING - INDICAZIONI ISTITUTO -----
------------------------ N. POSIZIONI SEGNALATE 9 ------------------------ RC/IS | RF/DE | RN/AF | AC | EA/ES_ RATEALE : 2 | 0 | 0 | 2 | 1_ NON RATEALE : 0 | 0 | 0 | 1 | 0_ CARTE : 1 | 0 | 0 | 2 | 0TOTALE ENTI SEGNALANTI : 8DI CUI SEGNALANO SOFFERENZE : 1 DI CUI SEGNALANO PASSAG. PERDITA: 0_ CREDIT BUREAU ESTERI / ALTRE B. DATI CRIF INTERR.: 1_ IMPEGNI DI PAGAMENTO : 0_ EVENTI RILEVANTI SEGNALATI A CARICO DEL SOGGETTO : 0------------------------------------------------------------------------------
PF: 4=RIT. 7/8=PREC/SUCC 6=SOCI/SOCIETA' S+INVIO=SELEZ.SEZ. INVIO=SCORRIM.SEQ
APPLICATION FORM ----------------------------
BranchBranch
Credit BureauCredit Bureau
Applicant Id and Matching Codes,
Number of Contracts,
Global Exposure, Credit Behaviour,
No. of Banks and Financial Institutions, …
InputInput
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… … to the management of to the management of Decision Processes Decision Processes & Outsourcing& Outsourcing
PUBLIC PUBLIC DATABASES DATABASES
PUBLIC PUBLIC DATABASES DATABASES
CREDIT CREDIT BUREAU DATA BUREAU DATA
& BUREAU & BUREAU SCORESCORE
CREDIT CREDIT BUREAU DATA BUREAU DATA
& BUREAU & BUREAU SCORESCORE BUSINESS BUSINESS
RULESRULES
BUSINESS BUSINESS RULESRULES
APPLICATION APPLICATION SCORESCORE
APPLICATION APPLICATION SCORESCORE
Database Integration,
Policy Rejects, Credit Policies,
Business Rules, Scorecards, Decision Matrix, …
Credit BureauCredit Bureau
OutputOutput
APPLICATION FORM ----------------------------
BranchBranch
InputInput
© 2007 CRIF Group
Czech Credit Bureau – A successful path to establishing
Credit Bureau
THANK YOU
