The consumer credit reporting market in Korea has an unique two tier
structure. The raw data on individual consumer's credit-related information such as loan exposures and credit delinquencies are pooled by the Korea Federation of Banks (KFB), which is a non-profit private organization. This first stage pooling of data is mandatory, imposed by regulation. And thus, the first tier of the information sharing system in Korea has similar characteristics and functions of the public credit registers (PCRs) operated in other foreign countries. On the other hand, the second tier of the system is composed of number of privately operated credit reporting agencies (CRAs) whose main function include credit scoring, dissemination of information and credit report services. The KFB and CRAs are closely linked through electronic information networks.
The other distinct feature of Korea's credit information sharing system is the registration of 'credit delinquents'. Creditors can register an individual as a credit delinquent when there occurred arrears exceeding ￦300,000 which is overdue more than three months. Under the current system, with respect to the arrears, only the data of credit delinquents is pooled at the KFB. Consequently, financial institutions do not share information on arrears which do not fall into the category of credit delinquency through the common information pool. The number of registered individual credit delinquents exceeds 2.7 million as of the end of January, 2003.
The main conclusions and arguments of this study with respect to the future policy measures to improve structural and regulatory environment of the credit reporting market in Korea are as follows. First, it is argued that the compulsory pooling of fundamental data imposed by regulation is necessary considering the nature and competitive environment of the financial industry in Korea. Financial institutions including banks and credit card companies have less incentive to share information of consumers since they compete with each other throughout the whole region of the country. Second, the definition of credit delinquents ought to be eliminated from the related laws and regulation. In principle, the benchmark for credit decision should be set by each financial institution in accordance with its strategic market positioning. Third, the category of the pooled data should be revised while expanding the scope of the data set. In particular, a proper measure must be taken to make the information more dynamic in its nature, representing credit history of an individual. Fourth, the government must put more emphasis on the fair usage of credit information and the protection of privacy. The regulatory framework and measures should be enhanced. Lastly, various channels and accesses to credit reporting market must be readily available to individual consumers to promote their active participation. The active consumer participation is very important in many aspects and essential for the healthy growth of the credit market in Korea in the future.
개인 신용정보시장 인프라 개선 방안(Issues on the reform of Korea's consumer credit-reporting market infrastructure)
|Series Title; No||정책조사보고서 / 2003-07|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Financial Policy|
|Holding||한국금융연구원; KDI 국제정책대학원|