Credit Registry

CREDIT REGISTRY

What is the Credit Registry?

It is an integrated system that consolidates the information provided by financial intermediaries, credit management and financial services companies, with regard to direct and contingent loans they have granted to individuals and legal entities or other finance sector institutions and economic groups of debtors.

The above mentioned institutions assess compliance and payment capacity of debtors and assign them a monthly category based on the standards issued by the Superintendency of Financial Services. Based on compliance and categorization they prepare a report and send it on a monthly basis to the Superintendency of Financial Services. The Superintendency consolidates the information sent by all the institutions in the Credit Registry.

Who is responsible for providing the information?

Banks

Investment banks

Financial Houses

External Financial Institutions

Financial Intermediation Cooperatives

The institutions themselves are responsible for correctly showing the loans granted in the accounting records. Likewise, they are responsible for the accuracy and updating of information sent to the Credit Registry.

What information does the Registry provide?

Financial intermediation institutions, credit management companies and financial services companies must report on: a) identification of the debtor, b) if it is an individual or a legal entity, c) if the debtor is or is not a resident d) the activity sector of the debtor.

In addition, the institutions must provide the following information on their debtors:

I) the type of participation of the debtor – owner, co-signer or guarantor;
II) if the credit is valid or has been recorded as an overdue placement, credit in process or delinquent loan (based on days of payment delay), or if delinquency fees have been charged, contingency accounts and allowances;
III) currency denomination of the credit;
IV) destination of funds;
V) risk classification performed by the institution and, where appropriate,

VI) risk classification by a credit rating agency.

Today it is not necessary to inform debtors of smaller amounts⁴ when they are not part of an economic group or their debts are not recorded as credits in process, delinquent loans or if delinquency fees have been charged. However, as of information from July 2013 all debtors
will be reported.

Objective of the Credit Registry

The Credit Registry provides useful information for analyzing credit applications and for regularly monitoring the credits granted. For example, when an individual or a legal entity request a loan, a guarantee or a credit card, the corresponding financial institution must assess the ability to pay of the person or entity before granting the request. It also reviews their record of compliance with obligations as obtained in the Credit Registry.

Moreover, the information provided by the different institutions in the Credit Registry assists the Superintendency of Financial Services to fulfill its supervisory role and credit risk management analysis of supervised institutions to the extent that it provides data on asset quality.

Credit Risk Categories

Institutions classify direct and contingent loans granted to non-financial sector individuals or legal entities as Commercial, Consumer and Housing, according to the destination of the loans. The breakdown of the categories and criteria to rate each type of debtor and portfolio can be found in the regulations of the Superintendency.

Briefly, and to further illustrate the rating criteria used for commercial portfolios is the following description:

Category 1A - Operations with approved self-liquidating guarantees

Operations fully backed by certain guarantees of very good quality and liquidity, so if the debtor fails to repay the loan, the financial institution can easily recover its money by execution of the guarantee.

Category 1C - Debtors with strong payment capacity

Customers with valid operations or less than 10 days overdue. They have recorded positive results in the last 3 years and the assessment on their ability to pay is that it will remain very good even if faced with major changes in macroeconomic conditions. Structured credit operations with very good prospects for recovery can be included in this category.

Category 2A - Debtors with adequate payment capacity

Customers who may encounter some difficulties, less than 30 days behind on their payments or 60 days behind in delivering the information requested. They may have occasional losses.

Category 2B - Debtors with potential problems to pay

Debtors who may run into difficulties, less than 60 days behind on their payments. Losses in the last three years, if any, are not significant. They may also be less than 90 days behind in delivering the information requested by the institution.

Category 3 - Debtors with compromised repayment capacity

Debtors with bad credit standing, less than 120 days behind on their payments or in delivering the information requested by the institution. This is the lowest rating for debtors with significant losses over the past three years, or who have bad rating in another institution.

Category 4 - Debtors with very compromised repayment capacity

Debtors with very compromised repayment capacity, more than 180 days behind on their payments or more than 120 days behind in delivering the information requested by the institution, or with significant losses over the past three years.

Category 5 - Debtors with bad debts

Debts than cannot be recovered; debtors more than 180 days behind on their payments or more than 120 days behind in delivering the information requested by the institution.

Although it was stated above that we classify the debtor, it is also possible to classify a loan. Moreover, it is possible to classify a loan with a different rating than that of the debtor. This is because institutions can grant loans on a sound and collectible basis because they have very good collateral or liquidity, or because they are structured under certain conditions that make recovery possible under the agreed conditions. In these cases, operations can be classified according to their own risk, independently to that of the debtor. It is common that these loans have better ratings than those of their debtors.

For example, a category 3 debtor (with compromised repayment capacity) could have a category 1A loan (with approved self-liquidating guarantees), this could be the case of an exporter that shipped its products and gave its lending institution an irrevocable documentary credit, confirmed by a foreign bank with good credit rating.

It could also happen that the debtor agrees with its bank to repay the loan in several installments, thus the operation is structured in a way that the bank collects the debtors sales, under certain conditions, to ensure a successful recovery of the debt. This type of structured operation is classified as 1C, independently of the debtor’s rating.

The general rules on Credit Registry operations and the legal obligation to disclose information is published on the Central Bank's website as follows: