Fewer new loans, but overdue payments rise
According to statistics from the Banking and Non-Banking Credit Registers, 226 billion Czech korunas of bank loans were granted in 2009, which is almost 20 per cent less than in 2008, whereas 33.7 billion korunas of new non-banking credit was granted. The proportion of long term unpaid credit increased - for banking credit, the figure went up from 0.57 per cent of the total credit in December 2008 to 0.69 per cent in December 2009, while for non-banking credit it rose from 2.08 per cent in December 2008 to 2.86 per cent in December 2009. The Banking and Non-Banking Credit Bureaus have introduced a set of guidelines for responsible borrowing in response to the growth in unpaid financial obligations.
"Despite the fact that the proportion of long term unpaid financial obligations has increased over the past year, it is still relatively low in comparison with the majority of the original member states of the European Union. We must not forget, however, that the statistics relate to established financial institutions which use positive credit registries to lend responsibly. For institutions which do not check their clients' financial situation and compensate for this with higher priced credit products, the situation is likely to be much worse," said Petr Kučera, Executive Director of CCB – Czech Credit Bureau, which administers and provides technical services to the Czech Banking and Non-Banking Credit Register.
In total, 226 billion Czech korunas of new bank loans were granted in 2009. The lowest monthly amount of credit, 14.4 billion korunas, was loaned in January, while the highest of 25.3 billion korunas, was loaned in March. The total non-banking credit provided in 2009 was 33.7 billion korunas. The total value of credit contracts increased slowly until September, when it rose the most, with a total of 396.5 million. After that, the volumes kept decreasing all the way to 268.6 million in December, which was the lowest monthly non-banking credit loaned in 2009.
"Trends in new bank loans more or less mirrored the trends in new mortgages and building savings bank loans, whose monthly volumes continued to rise from February to July only to stagnate from then on. Monthly volumes of other new credit stagnated for most of the year except for March which saw a somewhat significant increase in the credit granted," said Zuzana Pečená, Executive Director of CBCB – Czech Banking Credit Bureau, which administers the Czech Banking Register.
Overdue payments, however, kept rising in contrast to new loans. No age groups or specific credit products were exempt from this trend. The greatest share of total long term unpaid credit, 1.18 per cent, was seen for young people under 24 years of age. People between 30 and 34 years of age constituted the least risk with only a 0.49 per cent share.
Among the bank credit products with the highest long term default rate were operating loans with a share of long term unpaid credit of 11.4 per cent. The credit product which constituted the least risk were building savings bank loans with a share of just 0.03 per cent. Among the non-banking credit products with the highest rate of default were those related to legal persons and natural persons/small businesses operating leases where the share of long term unpaid obligations reached 2.94 per cent. With natural persons the situation was different (with consumer credit traditionally showing the highest risk), whose share of unpaid debt reached 4.4 per cent.
"Problems and delays in repayment are usually caused by excessive indebtedness, i.e. because people take on more credit than they are able to repay. Therefore, financial institutions no longer monitor only the historical defaults, but they are more and more interested in the client's whole credit history (both positive and negative) which they can discover by using the positive registries. Over the last quarter, we have had three new members including the two largest providers of consumer credit, Cetelem and Home Credit," said Karel Kolář, executive director of LLCB, which administers the Czech Non-Banking Credit Register.
With these new members, the number of companies connected to the Non-Banking Credit Register reached 27, which provide over 83 per cent of the personal credit market, as well as leasing, credit card and factoring providers. Together with the Banking Credit Register, whose 22 members cover almost 100 per cent of the banking market, both positive registries now have 49 members who can make use of the registries' benefits.
"Positive credit registries not only help protect the credit market, but also encourage it. On the one hand, they limit the access to credit to people who, even though they may have no negative record yet, could get into a situation in which they would not be able to repay their debts. On the other hand, these registries enable banking institutions to provide new credit to people who would otherwise not be able to get it due to a negative credit history, even despite the fact that the risk of their being unable to repay the debt is very low now thanks to recent positive history," explained Petr Kučera, executive director of CCB – Czech Credit Bureau.
Representatives of the Banking and Non-Banking Registries announced at a press conference earlier today that they would try to spread the guidelines for responsible borrowing publicly. In response to the rising share of unpaid obligations, they introduced the "Ten Commandments" which advise people on the things to consider before taking on new credit. They expect an increased general awareness of the risks of excessive indebtedness and the principles of healthy financial management.
"We do not aim to replace the very valuable services and advice of various centers for consumer protection which many people have come to consult in difficult financial situations. First and foremost, we want to encourage the public to consider the risks related to borrowing and to assume a more responsible attitude to it, as prevention is always more effective than the subsequent cure”, concluded Petr Kučera.
Note on calculation methodology:
The Banking Credit Register calculates unpaid obligations in the long term on the basis of the ratio of installments (including its related charges – interest, penalties, fees etc.) overdue by 3 or more months, to the credit total which consists of the loan value + related charges.
Methodology between banks is different in both the numerator and the denominator. Some show the share of problem credit as a ratio of the outstanding amount to the credit total (loan balance without the related charges).
Joint-stock company CCB - Czech Credit Bureau is the administrator of the Banking and Non-Banking Registries, i.e. it provides technical services to them related to management and strategic growth. The operator of the Banking Register is the joint-stock company CBCB - Czech Banking Credit Bureau. The operator of the Non-Banking Register is the interest group of legal persons LLCB - Leasing & Loan Credit Bureau.
CBCB (Czech Banking Credit Bureau, a.s.) - Company Profile
CBCB (Czech Banking Credit Bureau, a.s.) has operated the Banking Register for nine years. The five founding banks (Česká spořitelna, a.s., Československá obchodní banka, a.s., GE Money Bank, a.s., UniCredit Bank Czech Republic, a.s. and Komerční banka, a.s.) are the company's stockholders. Thanks to the register, Czech banks are able to exchange information on their clients' financial standing and reliability. At present, 22 banking institutions use the register.
More information on www.cbcb.cz
Current users of the Banking Register:
Česká spořitelna, a.s., Československá obchodní banka, a.s., GE Money Bank, a.s., UniCredit Bank Czech Republic, a.s., Komerční banka, a.s., Raiffeisenbank a.s., Hypoteční banka, a.s., Citibank Europe plc, administrative section, Českomoravská stavební spořitelna, a.s., Stavební spořitelna České spořitelny, a.s., Wüstenrot - stavební spořitelna, a.s., LBBW Bank CZ a.s., Wüstenrot hypoteční banka, a.s., Raiffeisen stavební spořitelna a.s., Modrá pyramida stavební spořitelna a.s., Volksbank CZ, a.s., Oberbank AG (Czech Republic branch), Waldviertler Sparkasse von 1842 AG, BRE Bank S.A.,HSBC Bank plc – Prague branch, Všeobecná úverová banka a.s., Prague branch and Raiffeisenbank im Stiftland eG Cheb branch.
LLCB, z.s.p.o. - Organization Profile
Legal persons' special interest group Leasing & Loan Credit Bureau (LLCB) was founded 8 October 2004 in order to allow for mutual exchange of information between creditors on their clients' financial standing, reliability and payment behavior – for both natural and legal persons. LLCB collects customer data from creditors, processes this data and operates the Non-Banking Register. The Non-Banking Register has a total of 27 members as of February 2010, comprising mostly leasing and credit providers.
More information on www.llcb.cz
Current users of the Non-Banking Register:
ČSOB Leasing, GE Money Auto, GE Money Multiservis, UniCredit Leasing CZ, Santander Consumer Finance, ŠkoFIN, s Autoleasing, Leasing České spořitelny, RCI Financial Services (formerly Renault Leasing), D.S. Leasing, Credium, Toyota Financial Services Czech, PSA Finance Česká republika, s Autoúvěr, S MORAVA Leasing, UNILEASING, D. S. Leasing Full service, Agro leasing J. Hradec, Impuls Leasing Austria, Diners Club Czech, Raiffeisen Leasing, SG Equipment Finance, Factoring České spořitelny, NLB Factoring, Cetelem ČR, Cofidis and Home Credit.