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©The Star (Letters Section) (Used by permission)
by MLTJ,  Kuala Lumpur

BEING a banker once, I cannot help but express my understanding and views on this matter. I think, a lot of people have a misconception on the roles of Credit Reference Agencies (CRA) such as CTOS and how banks use their information for their evaluation and decision-making.

While both parties continue to debate, let me share why banks require the services of CTOS. Banks are in the business of taking deposits and providing lending facilities to the public.

They need useful background information to undertake proper due diligence before entering into any contractual relationship with potential customers.

With the rising number fraud cases, money laundering, terrorism financing, creative or cosmetic accounting, banks are now expected to further enhance their internal controls and risk management processes.

Hence, the need to have access to CRA information is imperative and a fundamental step for protecting the banks’ interest.

An individual who has no record with CTOS may not necessary be granted a loan as he is still subject to many other credit assessments by the bank.

For example, if an individual does not have the repayment capabilities or collateral, the bank would not grant him a facility.

Ultimately it is the bank’s call and CTOS information is just being used as a guide.

I am sure we all need timely and the latest information. Nevertheless, even with the advent of technology, information we receive from the stock market has yet been timely and perfect.

Thus, there are people that could easily make profits from arbitration.

In view of this, what then is the appropriate definition of “updated information” that is acceptable to all? No one seems to look at this point and concretely or specifically suggest how best the information can be “updated”.

Most banks by now, have prepared for Basel II risk-based framework.

Effectively managing risk is one of the banks’ core concerns and this would also mean long-term survival of the banks.

As customers of the banks, we would naturally want convenience and utmost security when transacting with banks.

If we expect these qualities from the banks, reciprocally the banks, too, have certain expectations from customers.

They are also interested in quality customers.

If an individual has been discharged as a bankrupt or has fully paid up all outstanding amounts from a borrowing, it is the onus of the individual to provide documentary evidence to the bank that he is clean.

If he desperately needs a loan, it will be in his interest to provide the necessary information for the bank to proceed.

Generally, CTOS and the other CRAs are doing a good job providing useful information to the banks as well as to other financial institutions.

Banks should not be subjected to any regulatory restrictions when it comes to choosing which information provider that would best suit their needs.

After all, CTOS is only an information provider with no mandated authority to blacklist or act.

Hence, the shallow thought of suspending CTOS at this juncture is, rather emotional and unwise without offering an acceptable solution.

As much as an individual who needs financing badly, banks too, need to survive.

Without CTOS and CRA, banks and financial institutions are indeed exposed to significant risk and potential threats. It is like driving at night without lights.

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