4 Law in transition 2012

01 Credit information reporting systems

FRÉDÉRIQUE DAHAN AND ELIZABETH KIRK

Extension of credit depends on the ability of lenders to access credit information and overcome inherent information asymmetries about their potential borrowers’ ability to pay. This article builds on recent standard-setting developments on credit information reporting systems and proposes an approach to assess the effectiveness of existing systems. It then presents the results of a study carried out by the EBRD on 16 countries where credit reporting information systems are in place, and compares and contrasts such effi ciency. It then draws some conclusions and potentially important policy implications for future developments. 5 General section

General section

An analysis of the continuing fallout from credit histories of prospective clients: obtaining the global economic crisis of 2008-09 has information on a potential client’s past credit highlighted the importance of an institutional performance and taking collateral over the environment in which credit decisions can be client’s property to secure the loan are often made effectively and effi ciently. Extensions of conceptually seen as two faces of the same coin. credit depend on the ability of lenders to access credit information and overcome inherent Since the 1990s, the Legal Transition and information asymmetries about their potential Knowledge Management Team (LTT) has borrowers’ ability to pay, despite the availability maintained a focus on collateral law reform. Far of other supporting credit documentation, less attention had been paid to credit bureaus. such as collateral security or guarantees. One of the reasons for this is historical: the EBRD in its fi rst decade put more emphasis Access to credit has been a cornerstone of on large corporate fi nance, which was vital the Bank’s Legal Transition Programme since for engineering economic growth, rather than its inception. The scope of the legal reform on SME or microfi nance, or indeed consumer work in this area has evolved over the years in fi nance. This has changed over the years and synchronisation with the products offered by the Bank has increasingly focused its policy fi nancial institutions (including the Bank itself) in dialogue on serving the development of micro, transition countries. The development of micro small and medium enterprises fi nance. The and SME fi nance has emphasised the need ability to take collateral has remained very to develop an information system around the important for reducing and mitigating credit 6 Law in transition 2012

risk; however, the ability of lenders to access ■ whether the information provided credit information on borrowers has also is both positive and negative become a key pillar of access to credit. ■ whether both individuals and fi rms are covered Effectiveness of However, the effectiveness of these credit information reporting institutions can be ■ whether the data from retailers, trade credit information limited by the lack of an appropriate legal creditors and utilities are collected in addition reporting institutions framework and proper institutional structure and to the data from fi nancial institutions can be limited by the processes. To complement its work in fi nancial law, the EBRD launched an assessment in ■ whether more than two years of lack of an appropriate 2010 to review and measure the functionality historical data are distributed legal framework and legal effi ciency of some existing credit information reporting systems in the region. ■ whether small loans are included

Assessment and methodology ■ whether borrowers have a legal right to access their data. The assessment drew from a number of existing materials. These materials included the 2006 IFC Although this information is very useful, Credit Bureau Knowledge Guide, the World Bank/ it may also be too summary and does not BIS, General Principles for Credit Reporting, necessarily capture some aspects that are Consultative Report (2011),1 Task Force General important for the further development of the Principles for Credit Reporting and the World systems – in particular the ease of obtaining Bank Doing Business Reports.2 The EBRD’s a credit report, the associated costs, or assessment aims to capture the differences the frequency of corrections made to credit among legal systems, oversight and ownership information. The EBRD Survey thus collected of credit reporting systems, data protection additional information to the Doing Business and consumer protection issues, and practical Reports, and also attempted to take a more considerations of the users of credit information comprehensive approach to the effi ciency in its countries of operations. At present, the most of credit information reporting systems. comprehensive database for credit reporting information systems is provided in the World Methodology Bank Doing Business Reports, updated every year. The Reports provide a very brief snapshot of The assessment has two purposes. First, credit information reporting systems, formalised it provides descriptive information on the as a score from 0 to 6. The score is calculated institutional structure of the credit information as a sum of six binary checks, differentiated by reporting systems in the transition region. whether the system in place is public or private Second, it presents, mirrored against experience (see below for further defi nition of this distinction): in previous assessment exercises,3 a new

Chart 1 Legal efficiency criteria of credit information reporting system, EBRD

Basic legal function Maximising economic benefit

Simplicity

Speed

Cost

Certainty

Fit-to-context 7 General section

Table 1 Glossary of relevant legal terms Credit history A borrower’s past payment history, including credit applications and payment history. Credit reporting Overall term encompassing credit bureaus and credit registries. Refers to the database Legal effi ciency system that contains information on data subjects and the processes for accessing information consists of a set of on subjects to support users in their analysis of creditworthiness. Credit bureau Privately owned entity that processes information on data subjects to support users. Can criteria, grouped be operated by banks (which are then considered non-neutral, since banks are also under two headings: users) or neutral data processing companies. Credit registry Public entity operated by central banks or other agencies collecting information from data basic legal function providers about the indebtedness of data subjects. and the maximisation Credit report Document produced by credit bureaus or registries for users about the credit history of of economic benefi t data subjects. May include a credit score. Credit information Core information on data subjects, which may include borrowers’ identity details, past and present payment history and updated basic credit risk information. Positive credit information is a record of good repayment behaviour, such as on-time payments. Negative credit information describes missed payments, tax arrears, and so on. Data provider An institution which has disclosed information about a data subject and a payment history to the credit reporting system. In most cases, data providers are government agencies and fi nancial institutions with which the data subject has credit relationships. Data subject Individual or legal person (a company, for example) whose data are subject to processing. User Individual/company who asks the credit reporting system for credit reports and other information about data subjects for permissible purposes.

Source: EBRD, Credit information reporting system survey, 2011.

measure of “legal effi ciency” of the credit ■ operators of the credit registry and/or information reporting systems. Legal effi ciency credit bureau(s) in existence in the country; consists of a set of criteria, grouped under who were asked for information on how two headings: the basic legal function and the their institutions are operated and used maximisation of economic benefi t. The basic legal function of a credit reporting system is to ■ regulators of the credit information reporting allow for the sharing of accurate and suffi cient system, who were asked about their role, credit information. This supports credit responsibilities and experience in regulating providers in assessing the creditworthiness of and sometimes disciplining such a system a potential borrower/debtor, while respecting the sensitive and confi dential nature of such ■ data providers and users of the systems – information. Maximising economic benefi ts institutions that provide credit information of the system consists of allowing for all to the system and also retrieve information functions of the system to be fulfi lled simply, on data subjects when permitted. within an appropriate time and cost, while providing the different users with certainty The EBRD also reviewed the laws and other as to how the system and its safeguards are regulations applicable to the subject matter, to operate. There should also be evidence including data protection laws, and any materials that the system fi ts in the context (social, that were publicly available in order to complete economic, and so on) of the particular country, the picture drawn by the responses to the survey. in the present and in the foreseeable future. The research gathered a minimum of The assessment was conducted through information on all of the EBRD’s 29 countries surveys and desk research. Surveys were of operations, and surveyed in depth a sample sent to key stakeholders in the region, of 16 (which were considered to allow for a to seek their views, perceptions and fairly representative overview of the region), information on a number of key questions. namely: Bosnia and Herzegovina, Bulgaria, The stakeholders were divided between: Croatia, FYR Macedonia, Georgia, Hungary, Kazakhstan, Kyrgyz Republic, Latvia, Mongolia, 8 Law in transition 2012

Table 2 Credit information reporting systems in transition countries: basic classifi cation Grading Availability of credit information reporting system Countries No system There is no system of credit information reporting Moldova; Tajikistan; Turkmenistan There is no which allows the assessment of creditworthiness of consensus on potential borrowers. Limited system Credit information reporting system is in place but is Belarus; Croatia; Estonia; whether credit too limited in terms of data, data providers and Montenegro; Slovenia; Uzbekistan information potential users to serve its function. System in place The credit information reporting system is in place, Albania; Armenia; Azerbaij an; reporting systems and although it may in some cases present a Bosnia and Herzegovina; Bulgaria; number of ineffi ciencies in terms of processes, data FYR Macedonia; Georgia; Hungary; should be run by quality and consumer protection, it is deemed Kazakhstan; Kyrgyz Republic; Latvia; public agencies, generally to fulfi l its purpose. Lithuania; Mongolia; Poland; Romania; Russia; Serbia; private companies, Slovak Republic; Turkey; Ukraine or some hybrid of Source: EBRD, Credit information reporting system survey, 2011. these models Poland, Romania, Russia, Serbia (excluding Institutional structure of the credit Kosovo), Slovak Republic and Turkey. reporting service providers There is no consensus on whether credit Regional institutional information reporting systems should be run by and market structure public agencies, private companies, or some hybrid of these models and, to some extent, Existing data from the World Bank Doing the optimal structure will be determined by the Business Report 2011 on credit reporting size of the market. Credit registries and credit systems in the EBRD’s countries of operations, bureaus in the transition region have a wide suggests that the transition region is one diversity of ownership structures which have of the most advanced regions in the world, evolved over time. The oldest credit information especially when compared with other emerging reporting system in the region is in Turkey, markets regions. Table 2 shows that 26 of the where the credit registry operated by the Central EBRD’s 29 countries of operations have an Bank of Turkey opened in 1951. Most other existing credit information reporting system. systems in the region were developed during the Only Moldova, Tajikistan and Turkmenistan are last 10-15 years. Private ownership currently without a credit reporting system. However, in dominates, as illustrated in Table 3 below. six of those jurisdictions (specifi cally, Belarus, Croatia, Estonia, Montenegro, Slovenia and Some of the systems in the region are Uzbekistan), the system in place is unduly undergoing further changes and the current restrictive through limiting data or participating institutional environment may not be static. None institutions. In Croatia, for example, the credit of the 16 countries surveyed has a structure bureau established by the banking association which solely comprises a public registry. In permits only banks and other related fi nancial Mongolia, where the Credit Information Bureau institutions to receive credit information and which has operated out of the Bank of Mongolia excludes other credit providers, such as utilities from the mid-1990s is undergoing privatisation, or leasing companies from using the system. it seems likely that a joint venture company will be formed with the US-based commercial In all the other countries (20 out of 29), a information company Dun & Bradstreet. credit information reporting system is in place, although in some cases it presents a Seven of the surveyed countries – Bosnia and number of ineffi ciencies in terms of processes, Herzegovina, Bulgaria, FYR Macedonia, Latvia, data quality and consumer protection. Romania, the Slovak Republic and Turkey – These are captured by the main survey. have a private credit bureau and a public credit registry. Bulgaria and FYR Macedonia A number of specifi c features of credit both have a private credit bureau and a public reporting systems can be highlighted. credit registry, but the latter dominates the 9 General section

Table 3 Transition countries: main institutional form of credit information reporting systems (early 2011) Central bank Both public Public Both public Single private Multiple public registry and registry and registry and bureau only private registry only private private private bureaus / bureau (but bureau bureau (but registry – Among the countries registry co-existing bureau competitive surveyed there is dominant) dominant) environment Bosnia and Herzegovina ✔ a fairly even split Bulgaria ✔ between countries Croatia ✔ with specifi c laws FYR Macedonia ✔ related to credit Georgia ✔ information reporting Hungary ✔ Kazakhstan ✔ and those which rely Kyrgyz Republic ✔ on general legislation Latvia ✔ ✔ Mongolia* ✔ Poland ✔ Romania ✔ ✔ Russia ✔ Serbia** ✔ Slovak Republic ✔ Turkey ✔

Source: EBRD, Credit information reporting system survey, 2011. * This is a prospective interpretation of the reformed system currently under development. ** Excluding Kosovo.

market at present in each country, although this record in providing credit information services; may change. The public credit registry in FYR the central bank has owned and operated a Macedonia was established in 1998 and the credit registry since 1951, and a private credit private bureau became operational this year. bureau has been operational since 1997. In Latvia the public registry (operated by the Bank of Latvia) is the main credit information The other nine countries rely on private credit reporting system, but some private companies bureaus to provide credit information services, offer reporting services alongside their primary but there are signifi cant differences in the business of debt recovery. In the Slovak Republic number of operating bureaus in a particular the private bureau covers only individuals, country. In Serbia there is one private bureau, while the public registry applies only to fi rms. which was established by the Association of In Bosnia and Herzegovina the private bureau Serbian Banks. In Russia, as of January 2011, was formed in 2000 and the public registry there were 32 registered bureaus throughout in 2006; the coverage of the latter has since the country, many of which were affi liated increased greatly, while that of the private directly with various fi nancial institutions. bureau has dropped signifi cantly. The public registries in Bulgaria and Romania, which were Legal framework formed in 2000 and 1999, respectively, were Among the countries surveyed, there is a fairly joined by private credit bureaus in each country even split between those with specifi c laws from 2004. Despite these similar formation or regulations relating to credit information timelines, it should be noted that in Romania reporting and those which rely on other general the private credit bureau has larger coverage, legislation (typically banking law and data while the fi nancial institutions in Bulgaria that protection law) to control the operations of responded to the survey indicated that they credit bureaus and registries. Nevertheless, only used reports from the public registry. there seems to be a trend towards developing Lastly, Turkey has a signifi cantly longer track specifi c laws on credit reporting, as for example 10 Law in transition 2012

in Croatia, the Kyrgyz Republic and Mongolia. a potential borrower has an existing credit In Croatia HROK credit bureau was founded history. The catalogue database receives by 20 Croatian banks under the auspices of information identifying data subjects from the country’s banking association. There is no all of the existing credit bureaus, so data can Competition within legal framework other than the 2003 Act on be sourced from a single reference point. Personal Data Protection, and participation a credit reporting in the system is determined by the internal Stress resistance and system integrity system can provide regulations of the bureau. Public registries are Defi ning the rights of credit information market pressure all based on laws and/or regulations governing operators over data in cases of cessation banking or fi nancial services. Some private of trading, transfer of a business to a third to provide an credit bureaus have been set up by experienced party or insolvency of a credit registry is an effective, accurate international fi rms (such as Experian) using essential part of ensuring data protection. In existing data protection law to base their Russia the Federal Law on Credit Histories and cost-effective operations. The Kyrgyz Republic is a special dictates that, in the event of a credit bureau’s product for a large case in that the credit bureau was developed insolvency, the credit histories owned by the without any legal framework; a draft law which insolvent bureau should be sold in an auction number of users refl ects the current system is being developed. involving only other state-registered credit bureaus. The CCCH would temporarily store Level of competition among credit databases of liquidated, re-organised or reporting service providers excluded credit bureaus. In Hungary, in the Competition within a credit reporting system event of the Central Credit Information System can provide market pressure to provide becoming insolvent, the data would reportedly an effective, accurate and cost-effective be transferred to the replacement institution product for a large number of users. However, designated by the Supervisory Authority. Other competition may also lead to a fragmented countries do not seem to have procedures and confusing system in which a data in place to respond to such a situation and subject’s complete credit history can only surveyed parties were uncertain as to what be pieced together from multiple sources. the outcome of such a scenario would be.

A number of jurisdictions in the transition region Regulatory oversight and enforcement have competitive markets for credit reporting The privacy concerns inherent in personal credit service providers, whether operating as a private information suggest that effective oversight of bureau providing services alongside a public institutions in the credit reporting system and registry (for example, in Bosnia and Herzegovina), appropriate enforcement authority are essential a public registry coexisting with multiple credit for regulators to protect data subjects and to bureaus (as in Latvia and Romania) or in an promote data accuracy and good business entirely private bureau environment (as in practices. The central bank typically plays a Poland, and Russia, where the sheer size of role in regulating credit reporting systems, but these markets can accommodate a number other fi nancial system or banking authorities of competing organisations). See Table 3. are often involved and many regulatory and supervisory functions are the responsibility of Hungary is unique among countries in data protection agencies. In general, central the region insofar as it permits only one banks regulate public credit registries, while credit bureau at a time to operate. private credit bureaus are subject more generally to laws on personal data protection, In Russia the competitive environment is with supervision and enforcement powers enabled by the Central Catalogue of Credit falling on the data protection authorities. The Histories (CCCH), a database run by the central objective is to have effective regulatory oversight bank containing information about where a of the credit reporting system, ensuring that data subject’s credit history is stored. The the system operates as a public service for all role of the CCCH is to direct a lender (or an borrowers and lenders (debtors and creditors). individual) to all the credit bureaus that keep records of that individual’s (as a potential The degree to which the credit reporting borrower) credit history. This should reduce system is regulated may vary widely. In the the possibility of getting a blank report when least regulated countries, regulation may be 11 General section

limited to the licensing of the credit information of Justice and presently not externally regulated provider or even simply issuing clarifying by the central bank or any governmental entity. statements about the law. In the majority of There is a draft law in discussion that will EBRD jurisdictions, however, regulation is more place supervisory and regulatory functions The main purpose intensive and may include issuing industry on either the National Bank or the Banking regulations or administrative guidelines, auditing and Financial Supervisory Authority. of the study was credit bureaus, collecting and investigating to evaluate the complaints, and imposing penalties. A regulatory The results of the survey relating to regulatory effectiveness of authority whose activities extend beyond oversight and enforcement were somewhat licensing and registration is thought to be a troubling in that many respondents were unable credit information better model because the regulatory activities to identify the regulatory authority for the credit reporting systems may mitigate some of the inherent risks to reporting system. Data subjects do have some privacy present when dealing with collection level of responsibility for ensuring that their right in place in the of and access to personal information. to an accurate credit history is not violated. In EBRD region many jurisdictions, the primary law governing the In most countries in the EBRD region, operation of credit bureaus is the data protection regulators – whether they are central banks or law, which may or may not be enforced by a data other supervisory agencies – have extensive protection authority. In addition to enforcement powers. Both private credit bureaus and public by regulators, data subjects themselves registries are subject to data protection laws should play a role in advocating for themselves in most countries. Bosnia and Herzegovina regarding the accuracy of their credit histories. illustrates the approach in the region. The The legal right for a data subject to challenge the Central Bank has the powers to collect accuracy of his or her credit history is essential complaints and issue penalties and disciplinary to identifying data protection violations and at sanctions, while the Data Protection Commission the macro level in exposing any regulatory gaps. has corresponding powers to consult on legislation, collect complaints, conduct Depth of credit information investigations, and issue monetary fi nes. All countries surveyed reported that the credit Although this is consistent with the development reporting system collected data on loans. We of a dual system of credit information reporting, additionally asked what information about there is a signifi cant risk of implementation those loans was reported (that is amount, gaps if personal data are being treated interest rate, maturity). Most of the features of differently in different institutions. Similar loans and lending transactions are reported, powers exist in other countries in the region, with one exception – interest rates. In with most supervisory agencies authorised to Hungary, Kyrgyz Republic, Romania, Slovak issue fi nes of varying amounts.4 In the Slovak Republic and Turkey, respondents indicated Republic, Section 19 of the Act on Protection that interest rates were not collected, while of Personal Data makes the personal data in other countries (Bosnia and Herzegovina controller responsible for internal supervision and Bulgaria) far fewer respondents identifi ed of protection of personal data. Data controllers, interest rates than other loan information. such as credit bureaus, with more than fi ve While the limitation on including interest rates employees are required to appoint one or more in a borrower’s credit history may be related personal data protection offi cials to ensure to bank secrecy laws or practices, it could be that data are processed properly and legally. benefi cial for users and for data subjects if this The Offi ce for Protection of Personal Data in information was contained in credit reports. the Slovak Republic also conducts inspections, issues decisions, and has the power to impose Legal effi ciency of credit sanctions and substantial fi nes. A few countries information reporting systems (such as Georgia, Kyrgyz Republic, Romania) indicated that there was no dedicated regulatory The main purpose of the study was to evaluate or supervisory authority for the credit reporting how effective the credit information reporting system and a few more, including Russia, system in place is. For that purpose, the indicated that regulators had no enforcement questions in the main survey of 16 countries or penal authority. In the Kyrgyz Republic, the were grouped into two main categories: those credit bureau is only registered with the Ministry referring to the basic legal function of credit 12 Law in transition 2012

information reporting systems, and those score well due to the very fragmented structure of describing how economic benefi ts have been the system in place, in which different databases maximised. These main categories in turn serve different users and data subjects consist of fi ve subcategories, each comprising (something unique in the transition region). Croatia is an between two and fi ve questions. For each of these, survey answers were coded from 0 Croatia is an interesting case insofar as interesting case, (categorical negative answer) to 6 (unqualifi ed it received a high score on maximising it received a high positive answer), yielding a theoretical maximum economic benefi ts, but the lowest score score on maximising of 114 points for the basic legal function and among all 16 countries with regard to the basic 108 for maximising economic benefi ts. The legal function. As in the case of Mongolia, economic benefi t, maxima actually attained in each category were this was due to the lack of a specifi c legal but the lowest with 105 for the basic legal function (in Poland) and framework and the restriction of access to 97 for maximising economic benefi ts (in Serbia). information under its prevailing system to regard to basic To allow for a better visual presentation, the fi nancial institutions. In Table 2, Croatia is in legal function results were adjusted on a scale of 100, where fact classifi ed as having a “limited system” each main category carries a maximum of 50. of credit information reporting in place.

Chart 2 shows the results for the two main The chart also shows how the legal effi ciency categories and the total score by country. The scores from the survey compared with the depth results demonstrating the highest legal effi ciency of credit information index compiled by the were recorded in Hungary, the Kyrgyz Republic, World Bank and IFC as part of its Doing Business Poland, Romania, Russia and Serbia, all of which project (the right axis). This is calculated as the achieved total scores above 80. This refl ected sum of six binary checks, which award a point good performance in both of the main categories, if: the credit history information gives positive although the Kyrgyz Republic and Serbia scored aspects (for example, a track record of regular a little lower than the other countries on the basic payment) and also negative ones; individuals legal function while doing particularly well on and fi rms are covered; data from retailers, maximising economic benefi ts. The countries with trade creditors and utilities are collected in the lowest legal effi ciency results were Mongolia addition to data from fi nancial institutions; and, perhaps surprisingly, the Slovak Republic. more than two years of data are distributed; Although reform was under way at the time of the small loans are included; and borrowers have survey, Mongolia had not yet enacted a specifi c a legal right to access their data. The point is legal framework for credit information systems, granted if either of the private bureau or public and access to its existing system was limited to registry scores positively on the question. fi nancial institutions. The Slovak Republic did not

Chart 2 Legal efficiency of credit information systems in transition countries Total legal efficient results (0-100)

High efficiency 100 6 80 5

60 4

3 40 2 20 1 Low efficiency 0 0 Latvia Turkey Russia Poland Croatia Serbia* Georgia Bulgaria Hungary Romania Mongolia Kyrgyz Rep. Kyrgyz Slovak Rep. FYR Maced. Kazakhstan

Depth of credit information index (0-6) Bosnia and Herz. QBasic legal function Q Maximising economic benefits O Doing Business 2011 – Depth of credit information index Source: Source: EBRD, Credit information reporting system survey, 2011 and Doing Business Report (2011). * Excluding Kosovo. 13 General section

As one would expect, there is a correlation is shared within a system (or whether the in the chart between the World Bank index system creates “silos” of information that and the legal effi ciency index, but it is low, cannot be accessed), whether information is and mostly driven by the basic legal function suffi cient and accurate, whether the system The main cause subcomponent. The dimensions checked by is open to broad participation, and whether it the Doing Business index overlap only partly respects information sensitivity and protects of discrepancies with the 10 subcategories covered by the legal confi dentiality. The following analysis describes between the World effi ciency survey, primarily under the basic some of the main factors that determine cross- Bank index and legal function. Therefore, the main cause of country differences in these categories. discrepancies between the World Bank index the legal effi ciency and the legal effi ciency results of the EBRD The two systems that appear to least fulfi l the results of the EBRD Survey is that the latter takes a much broader basic legal function of a credit reporting system view of what defi nes the quality of a credit are Croatia and Mongolia. As mentioned above, Survey is that the information system – via its “maximising neither of these jurisdictions has enacted a latter takes a broader economic benefi ts” category. Another reason suffi cient legal framework and importantly, could be that the Doing Business index, each has limited access to the system to view of what defi nes having to design simple measures that can certain market players – namely fi nancial the quality of a credit be applied to 100+ countries, is based on institutions – to the exclusion of other credit binary (yes/no) information, whereas the providers. A broad understanding of credit information system present survey uses a six-point scale which and inclusion are essential to a system which tries to capture the quality of implementation, relies on credit information as its primary based on the views of not just the systems driver. The situation is changing in Mongolia operators but also the users and regulators. as part of current reform efforts. The Slovak Republic is also fairly weak in fulfi lling its basic It is important to distinguish the two parts legal function due to the very fragmented of a system’s legal effi ciency – fi rst, how structure of the system in place, according well the credit reporting system fulfi ls its to which different databases serve different basic legal function, and second, how users and also data subjects (something it succeeds in maximising economic unique in the region). Georgia also scores low benefi ts that it should bring. in fulfi lling its basic legal function because of the lack of a basic legal framework for the Basic legal function credit reporting system, including no regulatory/ Chart 3 plots the subcategories that constitute supervisory authority and no guidelines for the basic legal function as defi ned in the access to credit information by users. survey, that is to say, how widely information

Chart 3 Basic legal function of credit reporting systems in transition countries (subscores) Results (0-50)

High efficiency 50

40

30

20

10 Low efficiency 0 Latvia Turkey Russia Poland Croatia Serbia* Georgia Bulgaria Hungary Romania Mongolia Kyrgyz Rep. Kyrgyz Slovak Rep. FYR Maced. Kazakhstan Bosnia and Herz. QSharing of credit information Q Accuracy and sufficiency QOpen participation Q Respecting sensitivity QRespecting confidentiality Source: EBRD, Credit information reporting system survey, 2011. * Excluding Kosovo. 14 Law in transition 2012

Sharing of information While it is important that suffi cient data Sharing of information concerns the various are collected to give an accurate borrower credit reporting information systems. If only profi le, there is a risk that collecting excessive one credit reporting system (either a public information may actually be detrimental. An A critical factor registry or a private bureau) exists in a country, important issue is the length of time that data – the sharing of information is impossible. in particular negative data – are retained and in assessing Nevertheless, in six countries in the survey distributed by a credit reporting system. In information gathered where several systems exist, this opportunity for general, negative data should be retained by by a credit bureau is cross-checking has been missed. Only in Bosnia credit bureaus and registries for up to fi ve years, and Herzegovina, Poland and Russia does such while positive data are often retained longer. The whether both positive sharing take place. Moreover, a diversity of Kyrgyz credit bureau, for example, has a policy of and negative credit credit information reporting systems should not retaining positive data for 10 years, and removes promote a “silo” mentality where data providers negative information after three. The absence of data are collected or data subjects are assigned exclusively to legislation in Mongolia means there is no legal and distributed one system (such as in the Slovak Republic). limit on how long data are retained and included on credit reports. In Russia credit bureaus may It is perhaps less surprising that cross-border retain all data for 15 years (far exceeding what is links have not yet been developed between permitted in most other jurisdictions) but there is institutions from different countries, given not yet evidence that credit bureaus will choose that the process has barely started in the to do so. In Georgia, two concerns emerge on European Union (although Hungary, Poland this subcategory: fi rst, there seems to be no and Romania – all new EU members – have system or legal requirement for ensuring data taken a lead). Since many private bureaus accuracy. CreditInfo expects data providers to are owned or operated by large international be responsible for the correctness of the data organisations, there would be a great advantage they collect. Second, the collection of data in establishing such links, especially in countries is not limited to credit reporting purposes. which have close commercial connections with their neighbours. The Kyrgyz Republic Open participation seems to have recognised this opportunity. An important characteristic of credit information systems is the extent to which they are open Accuracy and suffi ciency of information to a range of market participants. A system A critical factor in assessing information should not be exclusive, where small market gathered by a credit bureau is whether both players are denied vital information. This does positive and negative credit data are collected not seem to be the pattern in the transition and distributed. Most transition countries which region. However, there is still a bias in favour have a credit information system in place have of fi nancial institutions: in the majority of the chosen to include positive and negative data countries surveyed, only fi nancial institutions in either a public registry or private bureau. can receive data from at least one of the One notable exception is Poland, where it existing reporting systems. Interestingly, appears that the main database – Biuro this situation prevails when a central bank Informacji Gospodarczej InfoMonitor (BIG operates the credit information reporting InfoMonitor) – contains only negative economic system but also when the system has been entries, although this is supplemented by privately developed (for example, by banking positive information from the Biuro Informacji associations). In FYR Macedonia, the Credit Kredytowej (BIK) credit bureau. In Latvia the Registry of the National Bank, which was the private credit bureaus that operate beside the only system in operation until 2011, includes Credit Register of the Bank of Latvia also collect only data on fi nancial institutions (domestic only negative information, while the Central banks, savings houses and branches of Credit Information System (CCIS) in Hungary foreign banks), while the private credit bureau contains only negative data about debtors, (MKB) similarly includes data from fi nancial based on legal provisions. Hungary’s Credit institutions but also other credit providers, Reference service (CR), on the other hand, service providers and government entities contains positive information about debtors (such as the tax authority and pension fund). but is not supported by a legal framework. The MKB was founded in December 2008 and started operations in January 2011. 15 General section

In Hungary the private credit bureau BISZ explicitly restricting data usage to permissible Zrt operates the Central Credit Information purposes, although the data providers and System (CCIS), the Credit Reference service users who were surveyed maintained that (CR) and Credit Bureau services. Initially the aim of data requests was solely to assess Data protection restricted to banks, savings cooperatives and the credit history of existing or prospective credit unions, its remit was then widened to borrowers. Croatia is a similar case. Georgia requires that include all fi nancial institutions and those also provides no specifi c legal restriction. information is investment companies engaged in investment collected and lending. Enterprises engaged in commercial Respecting the sensitivity of information lending have become eligible to subscribe to This refers to subjects’ right of access to their distributed solely the CCIS since 2010. Institutions such as tax own data and the right to challenge incorrect for assessing authorities, ministries, municipalities, public information and have it corrected promptly. utility and telecommunications providers and They should be able to request corrections creditworthiness non-governmental organisations (NGOs) are through an internal mechanism at the credit not allowed to subscribe to the service. bureau and to have those requests recorded, investigated and acted upon. Such a right is The Credit Reporting Agency in Serbia is a evident in all the countries surveyed. The usual private credit bureau established in 2004 practice is for credit bureaus and registries by the Association of Serbian Banks. Only to allow data subjects to access their credit fi nancial institutions are required to provide report once a year for free and then to charge data. Government entities and other credit small fees for additional access. In some providers are excluded although some, countries, such as Bulgaria and the Kyrgyz such as telecommunications companies, Republic, there are procedures in place may access credit histories as users. for the correction of erroneous credit data although there is little evidence regarding their Data protection requires that information is effectiveness. In contrast, the Serbian Credit collected and distributed solely for assessing Reporting Agency reported approximately 8,000 the creditworthiness of potential borrowers. corrections taking place in 2009, and the public In most countries permissible purposes are registry in Turkey indicated that an average specifi ed in legislation or regulations. Where of 80 corrections take place each month. a country does not have a credit information reporting law in place, there may be concern Respecting the confi dentiality of information that data can be requested for purposes other The consent of data subjects for their personal than assessing a subject’s creditworthiness. data to be collected and used in credit reporting In Mongolia, for example, there is no law systems is a generally accepted data protection

Chart 4 Maximising economic benefits of credit reporting systems (subscores) Results (0-50)

High efficiency 50

40

30

20

10 Low efficiency 0 Latvia Turkey Russia Poland Croatia Serbia* Georgia Bulgaria Hungary Romania Mongolia Kyrgyz Rep. Kyrgyz Slovak Rep. FYR Maced. Kazakhstan Bosnia and Herz. QSimplicity Q Speed QCosts Q Certainty QFit-to-context Source: EBRD, Credit information reporting system survey, 2011. * Excluding Kosovo. 16 Law in transition 2012

principle. Borrower written consent is required credit history is very important, since accuracy before credit information may be reported in depends very much on the subject’s opportunity the majority of transition countries. The most to review, and if necessary challenge, the data. common approach is to obtain consent as Credit reports are part of a loan application. In Kazakhstan a Speed loan agreement cannot be signed, and credit The speed of processes depends to a large available online to cannot be advanced, if there is no written extent on how simple they are to use. Speed users in all of the 16 authorisation from the client to report credit is also essential in ensuring the accuracy of surveyed countries information to the credit bureau. There are, data subject credit histories when they are however, some countries that do not require affected by changes. It is important that users consent. In addition to Mongolia, where there are made aware of any such changes as quickly is no law or practice requiring consent, survey as possible. In six of the surveyed countries respondents in FYR Macedonia and Turkey (Bosnia and Herzegovina, Georgia, Hungary, the all indicated that consent is not required. In Kyrgyz Republic, Serbia and Turkey) signifi cant Latvia too, respondents were confl icted as changes are reported immediately, or within to whether or not consent was required. a week, and this prompts user notifi cation. However, users in all the other countries must In summary, it is encouraging to note update their records on their own initiative that, with exceptions, most of the (through regular monitoring of the reporting surveyed countries have achieved a credit system) or changes will not be recorded before information reporting system which, by the next reporting cycle (which may undermine and large, fulfi ls its basic legal function. the validity of the credit information).

Maximising economic benefi ts Costs Chart 4 shows the scores of the subcategories As evidenced in Chart 4, the costs of obtaining that together evidence how the system is a credit report are low in all of the surveyed maximising economic benefi ts as defi ned in the countries. In the majority of countries, members survey. They refer to simplicity, speed, costs, of the credit registry or bureau can obtain a certainty and fi t-to-context. As the Mongolian report for free or for less than €1, or alternatively system is under development, many scores through an annual or monthly membership fee. were marked as unclear, which led to an In all cases, data subjects have the right to one overall poor grading on these subcategories. free report of their own credit history each year (with additional reports often costing under €10). Simplicity Credit reports are available online to users in Certainty all of the 16 surveyed countries. Data subjects, Certainty about credit reporting is an issue in however, fi nd it harder to access their own just under half of the countries surveyed and credit histories. In some countries they have revolves around two key questions. First, what to make a request through their bank, which are the requirements for obtaining consent from will pass the query on to the credit information data subjects? Respondents in Bosnia and reporting system. In Georgia the data subject Herzegovina, Bulgaria, FYR Macedonia, Latvia, must present his or her identifi cation in person Mongolia, Poland and Turkey were confused by, at CreditInfo’s offi ce, although once verifi cation or gave contradictory answers to, this question. has been completed the subject may access Clarity regarding consent of the data subject a service which allows the monitoring of credit is essential for public confi dence in the credit information online. Similarly, in Latvia data reporting system. Second, is existing credit subjects have to present themselves at the data in dispute? Most of the surveyed countries Credit Register in person and prove their identity do not record ongoing disputes initiated by (or, in the case of a subject’s representative, data subjects over their credit histories in produce a document certifying that person’s the information supplied to lenders. Notable legal right to represent the subject). Furthermore, exceptions include FYR Macedonia, the Kyrgyz a credit history cannot be sent electronically Republic, Russia and Serbia. In the Slovak to individuals for security reasons, although Republic, it seems that data subjects (which the Bank of Latvia is working to amend this. are fi rms exclusively) are not allowed to access Simplifying a data subject’s access to his or her their credit history in the public registry. 17 General section

Fit-to-context Conclusion and policy implications Fit-to-context refers to market coverage (which shows whether the use of the credit reporting The survey has proven to be a unique tool system is suffi ciently broad to serve the in assessing credit reporting systems and The survey reveals market) and also the perceived effectiveness demonstrates a few important lessons. First, of the system from the perspective of users looking at positive features, both legal and that most credit in predicting the repayment behaviour of data institutions, without consideration of the overall information users subjects. Based on the Doing Business coverage picture will tend to produce a distorted picture believe the system data, it is clear that the region still has some of how a system operates in practice. A detailed way to go in this respect (Croatia, Poland, analysis at the ground level of how the system in place is effective Serbia and Turkey are notable exceptions). is used by and impacts all key stakeholders is essential for determining whether, and to Most of the users of credit information in what extent, a credit reporting system truly the survey felt that the system in place was fulfi ls its basic economic function. Second, reasonably effective in determining the an analysis of whether the credit information creditworthiness of data subjects. Only the reporting system is maximising the economic private credit bureaus in Bosnia and Herzegovina benefi ts which underlie the need for the system and Hungary were rated negatively, although in is essential for understanding the system. each case only one or two fi nancial institutions When a system operates simply, fast, at low had provided a response. In Latvia (the country cost, with certainty and fi ts in the context of the with the highest number of user responses particular country, the impact of the law and at 14), none of the fi nancial institutions gave institutions is assessed. Any law, no matter the registry a negative rating, while 9 of the how good on paper, can drastically diminish 14 rated it as “effective” or “very effective”. economic benefi ts for the stakeholders if the implementation of the law is such that In summary, the credit reporting systems it does not maximise these features. in place in the 16 surveyed countries score well in terms of the user-friendliness of their Credit information systems that fulfi l their basic processes (and perhaps even higher than some legal function operate in all but a handful of of the more established systems in the world). transition economies. Nevertheless, the survey However, the relative immaturity of systems shows that there are large, and sometimes in the transition region is evident in relation to surprising, differences in the quality of these certainty and fi t-to-context. Since most of these systems across countries. These differences systems are not yet 10 years old, what they have relate not only to basic aspects, such as data already achieved is nevertheless impressive. coverage, accuracy, protection and access, but also to economic benefi ts that should

Chart 5 Credit information systems in transition countries: legal efficiency and private-sector involvement are positively correlated Total legal efficiency results (0-100)

100 90 80 ROM 70 KGZ RUS SER POL 60 FYR HUN 50 BUL BOS KAZ LAT 40 TUR CRO 30 GEO

20 SVK 10 MON 0 0 1 2 3 4 5 Private sector involvement in the credit information reporting system (0-5) Source: EBRD, Credit information reporting system survey, 2011. BOS – Bosnia and Herzegovina, BUL – Bulgaria, CRO – Croatia, GEO – Georgia, FYR – FYR Macedonia, HUN - Hungary, KAZ – Kazakhstan, KGZ – Kyrgyz Republic, MON – Mongolia, LAT – Latvia, POL – Poland, ROM – Romania, RUS – Russia, TUR - Turkey, SER – Serbia (excluding Kosovo), SVK - Slovakia. 18 Law in transition 2012 ✔ ? ✔ Turkey ✔ ? ✘ ✘ ✘ ✘ Slovak Slovak Republic ✔ ✔ ✔ N/A ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✘ ✔ ✔ ✔ ✔ ✔ ✘ ✔ ✔ ✔ ✘ ✘ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✘ ✘ ✘ ✘ ✔ ✔ N/A ✔ ✔ ✔ ✔ ✔ ✘ ✘ ✔ ? Latvia Mongolia Poland Romania Russia Serbia ✘ Kyrgyz Kyrgyz ✔ ✔ Republic ? ✔ ✔ ✔ ✔ ✔ ✘ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✘ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✘ ✘ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✘ ✔ ✘ ✘ N/A N/A N/A N/A Georgia Hungary Kazakhstan ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✘ ✘ ✔ ✔ ✔ FYR ✘ Macedonia ? ✘ Bulgaria Croatia ✘ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✘ ✔ ✘ ✔ ✘ ✔ ✔ ✘ ✔ ✘ ✔ ✔ ✔ ✘ ✔ ✔ ✔ ✔ ✔ ✔ ✘ ✘ ✔ ✔ ✘ ✔ ✘ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✘ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✘ ✔ ✔ ✔ ✔ ✘ ✔ ✔ ✔ ✔ ✔ ✔ ✘ ✘ ✘ ✘ ✘ ✔ ✘ ✔ ✘ ✘ ✔ ✔ ✘ ✘ ✘ Bosnia ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✘ ✔ ✔ ✔ ✔ ✘ ✔ ✔ ✔ ✔ ✘ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✘ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✘ ✘ ✔ ✔ ✔ ✔ ✔ and Herz. ciency of credit information 2.5 Is the credit information not excessive (time-limited data retention, etc)? 2.2 Is the amount of collected data adequate positive data, etc)? (completeness, including 2 Accuracy and suffi 2 Accuracy as to ensure 2.1 Is credit information collected in such a way accuracy? 3 All credit providers and data subjects as potential potential subjects as 3 All credit providers and data borrowers 3.1 Does the legal framework take an open approach to participation in the system? 2.3 Are the collected data necessary for credit reporting ned permissible purpose, etc)? purposes (for a clearly defi 2.4 Is the credit information kept up to date (data should be regularly updated)? I Basic legal function I Basic of credit information 1 Sharing wrongdoing? from inaccurate information or other unlawful 1.1 Does the system allow data providers to share credit 1.1 Does the system information with all credit reporting organisations? allow all credit information reporting 1.2 Does the system organisations to share credit information with users who enquire for that information? erent of information between the diff 1.3 Is there sharing credit reporting organisations? 1.4 Is there sharing of information between credit reporting 1.4 Is there sharing erent countries? organisations from diff 3.2 Are users not excluded from participating in the system 3.2 Are users not excluded from participating in the system of organisation? because of their type of promote a broad understanding 3.3 Does the system credit? 4.2 Can data subjects request the rectifi cation of their credit 4.2 Can data subjects request the rectifi if inaccurate or processed information and credit history, unlawfully? 4.3 Does the legal framework provide for liability resulting 3.4 Does the legal framework clearly defi ne circumstances 3.4 Does the legal framework clearly defi under which a user can request credit report? 3.5 Does the system take an open approach to which 3.5 Does the system entities can be a data subject? of information 4 Respecting sensitive nature 4.1 Can data subjects access their own credit information? Table 4 Table Credit information reporting systems in transition countries 19 General section ✘ ✘ ✘ ✔ ✔ ✔ ✔ ✔ Turkey ✔ ✔ ✔ ✔ ✔ ✔✔ ✔ ✔ ?? ? ? ? ? ? ?? ? ? ✔ ✘ Slovak Slovak Republic ✔ ✔ ✘ ✔ ✔ ✔ ✔ ✘ ✔ ✔ ✔ ✘ ✔ ✔ ✔ ✘ ✔ ✔ ✔ ? ✔ ✔ ✔ ✔ ✔ ✔ Not applicable ? ?? ? ✘ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✘ ✔ ✔ ✔ ✔ ✘ ✔ ✔ ✔ ✔ ✔ ✔ N/A ? ? ? ? ??? ? ✘ Uncertain ? Latvia Mongolia Poland Romania Russia Serbia Categorical no Kyrgyz Kyrgyz ✔ ✘ ✘ Republic ✘ ??? ?? ✔ ✘ ✔ ✔ ✔ ✔ ✘ ✔ ✔ ? ? Georgia Hungary Kazakhstan ?? FYR ✘ ✔ ✔ ✘ ✔ ✘ ✔ ✔ ✘ Macedonia ? ? ✔ Bulgaria Croatia ??? ? Response is negative, but there are some mitigating factors in law or practice factors in law or practice some mitigating are but there Response is negative, ✘ ✘ ✔ ✘ ✘ ✘ ✔ ✘ ✔ ✔ ✔ ✔ ✘ ✘ ✘ ✔ ✔ ✔ ✔ ✘ ✘ ✘ ✔ ✘ ✘ ✘ ✘ ✘ ✔ ✘ ✔ ✘ ✔ ✔ ✘ ✔ ✘ ✔ ✔ ✔ ✔ ✘ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✘ ✘ ✘ ✔ ✘ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✘ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✘ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✘ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✘ ✔ ✔ ✘ ✔ ✔ ✔ ✔ ✘ ✔ ✔ ✔ Bosnia ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✘ ✔ ✔ ✔ ✔ ✘ ✔ ✔ ✘ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✘ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✘ ✔ ✔ ✔ and Herz. ✘ ts Yes, but with some reservations but with some reservations Yes, ciently broad to serve the market’s dential nature of information nature dential ✔ Yes Yes ciently certain? system? needs? powers in place? creditworthiness of data subjects? histories? subject for credit information to be shared? purposes? credit history of data subjects quickly? subjects? suffi and certain? subjects clearly defi ned and understood? subjects clearly defi subject’s credit history noted? ✔ 5 Respecting confi II Maximising economic benefi 6 Simplicity Is it simple for users to obtain credit reports? 6.1 6.2 Is it simple for data subjects to access their credit 6.2 a credit report 7.2 Is correcting fast? 5.1 Does the legal framework require consent of data 5.1 5.2 Is access to credit histories limited permissible 5.2 6.3 Is making a correction in credit report Is making simple? 6.3 7 Speed a credit report 7.1 Is accessing fast? 7.3 Can users be made aware of sudden changes in the of sudden changes Can users be made aware 7.3 8.2 Is accessing their credit reportIs accessing inexpensive for data 8.2 8 Costs a credit reportIs getting inexpensive for users? 8.1 8.3 Is correcting a credit report 8.3 Is correcting inexpensive? 9 Certainty a credit reportIs the permissible purpose for issuing 9.1 9.2 Is the access by data subjects to their credit history clear 9.2 9.3 Are the requirements for obtaining consent from data Are the requirements for obtaining 9.3 9.4 Are there clear data quality standards? 9.5 Are ongoing disputes on data subjects regarding the data disputes on data subjects regarding Are ongoing 9.5 Fit10 to context suffi Is the system 10.1 with enforcement ective regulatory system Is there an eff 10.2 10.4 Are data subjects aware of their rights under the Are data subjects aware 10.4 10.3 Do users fi nd the system eff ective in predicting the ective in predicting eff nd the system Do users fi 10.3 Key Note: Serbia excludes Kosovo. 20 Law in transition 2012

be derived from the system, including speed Is there a correlation between the structural and costs. Some countries score highly features of these systems, on the one in some respects but poorly in others. hand, and their performance (as measured by total legal effi ciency), on the other? There is a clear Accordingly, priorities for reform vary markedly from country to country. Table 5 maps these To answer this question, a value based on the correlation that priorities based on the limitations identifi ed extent of private-sector involvement in credit private-sector in the survey, using a “traffi c light” colour information systems was given to each country provision of credit code. A diverse picture emerges not only in the survey, as per Table 3 ranging from 1 across countries, but also across the areas (only public registry) to 5 (private provision in a information where reform should be focused fi rst. competitive environment). Chart 5 plots these benefi ts the quality values (on the horizontal axis) against the total Nevertheless, the mapping also shows that all legal effi ciency results (on the vertical axis). of the system these areas have been successfully tackled by at least one existing system, which should There is a clear positive correlation in the chart encourage countries to learn from each other. (with a coeffi cient of 0.61), suggesting that private-sector provision of credit information, Lastly, the survey may be able to shed some particularly in a competitive environment, light on the question which has perhaps been benefi ts the overall quality of the system. the thorniest and most controversial in the However, there are also some counter- development of credit information reporting examples, such as in Croatia, Georgia, Latvia systems in the last decade or so – that of and the Slovak Republic, which show that the most effi cient model between a public private bureaus do not automatically result registry and a private bureau. It has shown that, in an effi cient system. Nevertheless, the despite a trend towards the “privatisation” of positive correlation is noteworthy, especially reporting systems, the transition region has for those transition countries which do not developed a diversity of models where the yet have, and may be planning to establish, share of private-sector involvement varies. a credit information reporting system.

Table 5 Mapping priorities for reform of credit information reporting systems

Basic legal Maximising economic benefi ts function Simplicity Speed Cost Certainty Fit-to-context Bosnia and Herzegovina Bulgaria Croatia FYRM Georgia Hungary Kazakhstan Kyrgyz Republic Latvia Mongolia very effi cient Poland effi cient Romania some ineffi ciency Russia ineffi cient Serbia* unclear Slovak Republic Turkey Source: EBRD, Credit information reporting system survey, 2011. *Excluding Kosovo. 21 General section

Notes Authors

1 http://siteresources.worldbank.org/FINANCIALSECTOR/ 1 2 Resources/GeneralPrinciplesforCreditReporting(final).pdf 2 http://www.doingbusiness.org/ 3 See for example EBRD work on mortgage law: Mortgages in transition economies, 2008, EBRD. 4 For example, in FYR Macedonia the Directorate for Protection of 1 Frédérique Dahan Personal Data can issue fines ranging from MKD 25,000 to 50,000 Lead Counsel, Financial Law Unit, EBRD (approximately €400-800), while the Bulgarian Commission for Personal Tel: +44 (0)20 7338 6050 Data Protection can issue fines up to BGN 100,000 (over €51,000). Fax: +44 (0)20 7338 6150 Email: [email protected] European Bank for Reconstruction and Development One Exchange Square London EC2A 2JN United Kingdom

2 Elizabeth Kirk Associate, White and Case LLP Tel: +1 212 819 7822 Fax: +1 212 354 8113 Email: [email protected] 1155 Avenue of the Americas New York, New York, 10036-2 787 United States