Credit bureaus are still a relatively new feature in Ukraine’s financial infrastructure. After a comprehensive legal framework for their operations was established in 2005, which is in line with relevant EU legislation, the first bureaus received their licences in 2007. Currently, there are seven credit bureaus operating in Ukraine.
While the number of credit histories stored grew over the last years (from around 10 m in 2008 to 19.2 m currently), the bureaus’ performance cannot be considered satisfactory. A number of problems seem to prevent them from operating in an effective manner:
1. There is little interest of banks in providing information about good borrowers, mainly due to competition concerns. As a result, the data bases have a bias towards derogatory information, which is not very useful
2. Data fragmentation is a key concern as the market is split among seven bureaus and there is little exchange between them. Here, it has to be mentioned that most credit bureaus were founded around one or a small number of major banks
3. While the protection of borrowers’ rights is legally in place, it is de facto for borrowers very complicated, time-consuming and costly to realise these rights (e.g. involves a burdensome procedure to access their own credit reports)
4. The regulation and supervision of credit bureaus does not seem to be considered a key priority by the relevant authority (State Commission for Regulation of Financial Services Market)
While it is beyond the scope of this report to provide a comprehensive set of policy recommendations, a number of preliminary statements can be made. In the context of reducing derogatory bias and data fragmentation, the question of information sharing on a continuing voluntary basis versus mandatory sharing needs to be addressed. In addition, incentives for banks have to be created in order to change their current behaviour. In the context of a policy dialogue with the authorities, the importance of effective credit bureaus has to be stressed, including the crucial link between interest rates and the level of information disclosure. Especially the latter point is a very good “selling point” in the public debate.
