HK to Establish Commercial Credit Reference Agency

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Last updated at: (Beijing Time) Tuesday, June 17, 2003

HK to Establish Commercial Credit Reference Agency

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The Hong Kong Monetary Authority(HKMA), the Hong Kong Association of Banks (HKAB) and the Deposit Taking Companies Association (DTCA) on Monday announced the plan for the establishment of a commercial credit reference agency (CCRA) in Hong Kong.

The CCRA will collect credit data of small and medium-sized enterprises (SMEs) and make the information available to authorized institutions. Generally, organizations will be defined as SMEs if they are unlisted companies with an annual turnover notexceeding 50 million HK dollars (6.41 million US dollars).

Joseph Yam, chief executive of the HKMA, said at a press conference that "the creation of the CCRA will be an important addition to Hong Kong's banking infrastructure. It will bring about significant benefits to the banking industry's credit risk management, thereby enhancing the safety and soundness of the banking system."

The CCRA will cover only the SME customers of authorized institutions. The consent of each SME will be required before the institutions can pass credit data on it to the CCRA.

Raymond Or, chairman of HKAB, also said at the press conferencethat "there has been growing public awareness of the need for SMEsto have greater access to credit. The CCRA will help meet the needs of both lenders and borrowers. It will help creditworthy borrowers gain better access to loans more quickly and at more competitive prices."

Data gathered by the CCRA will cover only credit data, such as the total number of credit facilities an SME has obtained from lenders, the limits on these and information about defaults on loans. Information about the company assets or the personal wealthof the owners will be excluded. Lenders will only use the data in relation to the grant, review or renewal of an SME's credit.

Cliff Forster, chairman of the DTCA, said, "We fully support the establishment of a CCRA. It is one important and indispensablefirst step to base lending to SMEs in Hong Kong more on the borrowing enterprises' performance, with less reliance on collateral."

To ensure that SMEs and the wider public of Hong Kong understand fully the implications of this important step, the industry has begun an educational program on the CCRA.

Some preparatory work, including identification of an appropriate service provider and systems development to cater for the reporting of data, is also needed before the scheme is operated, hopefully in the third quarter of 2004.

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