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CBS announces reform of the CIS and amendments to the FEA |18 September 2020

CBS announces reform of the CIS and amendments to the FEA

Mr Valentin (Photo: Anel)

In addition to commercial banks, Seychelles Credit Union (SCU) and the Development Bank of Seychelles (DBS), other institutions will towards the end of 2021 have access to the Credit Information System (CIS), a database system that enables the collection and exchange of credit information of individuals and businesses owned and operated by the Central Bank of Seychelles (CBS).

The CIS was established in 2012, in line with the Section 32(a) of the CBS Act 2004 which permits the CBS to collect credit information and any other relevant information and share to permitted parties, to allow permitted institutions to receive and consolidate basic credit data, or central repository of credit information, to provide access to reliable, standardised information on credit history, and to provide information on financial behaviours of borrowers, thereby minimising the systemic and credit risk and resulting into favourable credit agreement for responsible individuals and firms.

As explained by Financial Inclusion Analyst Jonathan Valentin, permitted institutions when considering applications from customers for certain services such as loans, can access and record loans offered to customers, overdraft facilities, credit card transactions, bank guarantee, relevant information about guarantors and letters of credit.

Over the eight-year timeframe since the establishment of the system, CBS has observed certain limitations in the legislative framework and CIS system, and has sought the assistance of the World Bank to reform and broaden the scope of the CIS system, so as to address the limitations and relieve the public of their misconceptions about the system.

“The current system employs manual intervention for data collection and data validation processes and as we all know, this leaves room for human error. The new system however, will be equipped with strong validation rules to validate all entries on CIS. We are thinking to do so by linking it to other public records such as that held by the Civil Status so there is a parameter which can be verified, either the applicant’s name or Identity number,” stated Mr Valentin.

Other limitations to be addressed in the new system are its lacking capacity for data extraction for analysis, as there is no possibility for analysis as only individual records can be accessed. This is to be remedied by a search inquiry module to allow for filtering of credit facilities information and produce reports as desired to access aggregate information about a sub-group of customers.

Furthermore, the present system is restricted to showing only the current status of facilities and not the behaviour of the customer over time. The new CIS system will be designed to provide credit report showing repayment history for a period of 24 months.

The legislative framework in place currently also fails to provide a mechanism for dispute resolution. As such, the new system will make provisions for CIS-specific dispute resolution mechanism, with a timeframe of 5 to 15 days. Should there be a breach of regulation, and a customers’ CIS records are accessed illegally, amendments to the present legal framework will impart powers to CBS to administer penalties for breach with immediate effect, without having to institute legal action.

In view of CBS’s objective to broaden the scope of the CIS for institutions not currently permitted to access and input information to the system, through reform, new credit-related entities not regulated by CBS will be able to join CIS so as to broaden the scope of information to include activities such as staff loans, financial leasing, hire purchase, utilities, judicial obligations, tax and rent, which are currently not recognised. A series of intensive consultations are scheduled in the coming months with relevant institutions so as to determine how they can benefit from such information.

Work is underway to draft the legislative framework and initiate the procurement process, to start the system. It is expected to be completed by Q4 2021.

At present, there are a total of 115,541 facilities on the CIS system, spanning back to 2012.

The CIS, is governed by the General Principles for Credit Reporting (GPCR) formulated by the World Bank and serves as a central database.

 

Amendments to the Foreign Exchange Act

In addition to the reform of the CIS, cabinet has approved CBS’ two proposed amendments to the Foreign Exchange Act 2009,through which the Ministry of Finance, Trade, Investment and Economic Planning imparts powers to the Governor of the Central Bank under the delegation of powers and duties, to make amendments to the law.

With the amendments, credit unions and payment service providers, such as Airtel Mobile to engage in foreign exchange transactions. A set of regulations are to provide directives to Credit Unions on the conduct of such transactions.

The second amendment relates to a new schedule listing authorised dealers. Amendments are to be tabled before the National Assembly for approval.

 

Laura Pillay

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