Description:
This paper is about the importance of
the information in Public Credit Registries (PCRs) for
supporting and improving banking sector regulation and
supervision, particularly in the light of the new approach
embodied in Basel III. Against the backdrop of the financial
crisis and the existence of information data gaps, the
importance of complete, accurate and timely credit
information in the financial system is evident. Both in
normal times and during crises, authorities need a device
that allows them to look at the universe of credits in a
detailed and readily way. And more importantly, they need to
develop tools that exploit as much as possible the
information therein contained. PCR databases contain
individual credit information on borrowers and their credits
which makes it possible to implement advanced techniques
that measure banks' credit risk exposure. It allows
optimizing the prudential regulation ensuring that
provisioning and capital requirements are properly
calibrated to cover expected and unexpected losses
respectively. It also permits validating banks'
internal rating systems, performing stress tests and
informing macroprudential surveillance. In this respect, it
is envisioned that the existence of a PCR will be a key
factor to enhance the supervision and regulation of the
financial system. Furthermore, the extent, accuracy and
availability of the information collected by the authorities
will determine the usefulness of the PCR as part of their
toolkit to monitor the potential vulnerabilities not only on
a microprudential level, but also on a macroprudential one.