The credit data register is a strategic project of the utmost importance that the Bank of Israel took upon itself to lead about a year ago. Since then, a significant part of my time and that of many others at the Bank of Israel has been dedicated to this project.
The credit data register will for the first time allow, given the customer’s consent, the sharing of information on a customer’s credit history to the whole range of credit market players, and thus minimize the problem of information asymmetry in this market. Institutional entities as well will be able to take advantage of the analyses produced on the basis of the information in the register, to be more active participants in the credit market, and to contribute their part to enhancing competitiveness and to improving the consumer’s status.
The credit market, by its nature, has information barriers that limit the level of competition in providing credit to households and small businesses. Ninety-two percent of the credit to households—the current balance of which is about NIS 480 billion—is credit from banks and credit card companies. For small businesses as well the main source of credit is the banking system.
In August 2014, the Prime Minister established a committee to improve the credit data sharing system. The Committee’s final report was submitted about a year ago, and its main recommendations were:
· Increase competition in the retail credit sector
· Expand access to credit—sharing information also increases the supply of credit to customers about whom it is difficult to receive credit data and thus today are mostly excluded from bank credit
· Reduce discrimination in granting credit and reduce economic gaps—more data will allow customers to be classified in accordance with their personal risk level, instead of relying on group data that raise concerns of discrimination (such as place of residence)
· A base of nonidentified information that will serve the Bank of Israel in carrying out its functions, will improve the Bank’s ability to follow developments in the credit market.
Immediately with the publication of the Committee’s recommendations, a legislative process with a very short timetable began, and in March 2016 the Credit Data Law was approved in the Knesset. After the approval of the law, we distributed the collection directives and a process of collecting and storing data by the banking corporations began.
In August of this year, we published a tender to choose a supplier that will assist the Bank in establishing and operating the register, with the intention of completing the tender process by the beginning of 2017. In October 2018 the register will began to operate. As set in law, the full responsibility for setting up and operating the register is the Bank of Israel’s.
As a direct result of the implementation of the provisions of the law and in order to establish and operate the register, we plan to establish several central functions at the Bank of Israel:
· The Supervisor of Credit Data Sharing, who will deal with, among other things, the issues of licensing, regulation, oversight, and public enquiries management, and will be the entity responsible for overall oversight of all the players.
· Register Manager—will manage and operate the register on a day to day basis.
· The Privacy Protection Officer—will advise the Register Manger regarding implementation of the Protection of Privacy Law, and also will advise the Supervisor with regard to clarifying public enquiries.
· A public Advisory Committee—which will advise the Supervisor on directives to the Credit Bureaus, credit providers, and paid empowered representatives (entities to whom customers can grant power of attorney to receive a Consolidated Credit Report about them).
There are many benefits for the public expected from the central credit data register:
· Strengthening a household’s abilities to use the data for its own good, improving the financial conduct of a household, and improving the position of the consumer vis-à-vis credit providers.
· An infrastructure for fair competition and innovation in the retail credit sector.
· Strengthen lenders’ ability to manage credit risk.
· Creating a broad and high quality base of information for the fulfilling of the Bank of Israel’s functions, and improved ability of the Bank to analyze credit market developments.
We are preparing to deal with challenges and risks in the project, such as:
· Information security and protecting the register.
· Practicality of the arrangement for credit providers.
· Achieving the objectives of the sharing arrangement.
· Quality and timeliness of incoming and outgoing data.