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Risks

The Guarantor for the protection of personal data, the most often cited as the guarantor of privacy, has promoted the signing of a "code of ethics on the central risks." Its entry into force in early 2005 and the draft can be downloaded from the website http://www.garanteprivacy.it . The new code of ethics will have a strong influence on the functioning of the credit market. The "central risks" are in fact private databases into which issue information for those seeking a personal loan, mortgage, credit card and access to such banks and financial institutions to verify the reliability and solvency of the customer first to grant a loan.

Privacy and credit market

often talk of central credit only to highlight the conflict, actual or potential, including their functions and the right to confidentiality of information. In fact, many of the rules governing them tend to limit the use of information held by them to protect consumer privacy. This is obviously a concern that inspired the Guarantor. And the code gives consumers the right to know and correct the information held by the central . States that data on late payments can be made available only after a minimum period ranging from sixty to one hundred twenty days depending on the circumstances, and that data from public sources can not be added to the databases containing the credit information. Finally, the code limits the maximum time for which the information may be stored in "memory" of the central credit . In particular, information negative on late payments can not be stored for more than a year (for delays of no more than two installments or months), and two years for major delays, those relating to infringements can not be maintained for more than three years after the end of the report credit positive information it may not be maintained for more than two years. Despite the protection of privacy is an important social objective, it is useful to remember that the central risk have a major impact on the functioning of the credit market, and that a very strict protection of privacy can cause damage to other people away, preventing them access to credit or making it more expensive. To alleviate or solve the problems caused by asymmetry of information between banks and customers, the central credit allow banks to better assess the risk level of customers. In several works, it was shown that this greater availability of information to banks often results in a benefit for customers, at least for those able to repay the loan, it will receive credit more abundant and less expensive, because it will be more easily recognized as creditworthy. In technical terms, it reduces the problem of "adverse selection". Moreover, credit growth is higher if the exchange of information occurs in a credit market that would otherwise be uncompetitive. The exchange it eliminates or reduces the differences between the information in which each bank has, and then tends to increase the degree of competition between banks. Therefore, the development of central credit , public and private, is a tool of antitrust policy in the credit market.

timely, complete and accurate

The presence and activities of the central influence the behavior of those accessing the funds. If a debtor knows that the bankruptcy or late payment is recorded in a database they have access to all banks, has led to greater caution, to avoid being labeled as a risky customer. Each defendant understands that if insolvency risk of ruining your reputation with all banks, not only with the one from which it has borrowed. In the future, it will be even more difficult to obtain loans from other banks. The exchange of information and then also reduces the so-called "moral hazard", or unfair dealing in the credit market. This can also result in a benefit for the community, because the reduction of suffering banking tends to result in a reduction of interest rates for the generality of customers. An international survey coordinated by the World Bank, documenting the effectiveness of central also depends on how information is exchanged and what data are vested in the central credit . In particular, the ability to identify the lenders insolvent and the accuracy of the information produced is higher when the exchange of data also affects the amount of credit granted and guarantees given by the debtor (positive information), and not just the defaults (negative information) . In addition, small and medium-sized enterprises and consumers, most often subject to exclusive relationships with lenders, to benefit more from the exchange of information between banks. For the same reasons, it is essential that the information in question is believed to be accurate, timely and complete. The characteristics of accuracy and timeliness are not in conflict with the need to provide access to data central risk to the subjects surveyed, to the extent that such access can help you correct any erroneous or out of date. For the same reason, however, it is recommended that information relating to defaults or late payments are available immediately. Reduce delays in reporting the effectiveness of central credit without getting any positive effect for consumers. The requirement of completeness, however, can create friction with the protection of privacy, but nevertheless is of the utmost importance because each element of information can be placed in perspective in the overall assessment of the merits of customer risk. Incomplete information can sometimes damage the same person to whom it relates, because it can lead banks to allocate a greater severity of neglect due to occasional, as the delay of one installment payment by a debtor normally punctual. The solvency of an economic entity (which reflects its overall balance sheet) and characteristics of integrity tend to be persistent over time, and thus create a strong persistence even in the behavior of debtors. For this reason, the memory of the central risk on debtors is crucial to predict the future behavior of each debtor. At the time same, it is right that the memory system is not excessive in order to ensure that old information does not receive an inappropriate burden on the part of banks and prevent insolvency will lead to permanent exclusion from credit markets. It is therefore necessary to strike a proper balance between these two requirements. The following table shows that the major industrialized countries time to retain data relating to loans granted and repaid in full range from a minimum of three years (in Germany and Sweden) to a maximum of six (in Britain). In the U.S. there is no limit to the preservation of positive figures. Fall below the threshold of time in three years of data retention would be a anomaly in the international framework of most developed countries where consumer credit, which may harm consumers.

From: www.lavoce.info
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