By Marina Romanova
Russia’s central bank is discussing the agreement on credit history exchange between Eurasian Economic Union nations to allow citizens of Russia, Kazakhstan, Kyrgyzstan and Armenia to get loans in various financial institutions within the Union, Russian business daily Kommersant reports.
The Agreement on exchange of information was adopted and enforced by the working group of the Financial Markets Advisory Committee of the Eurasian Economic Commission (EEC) on October 21, 2016. The main goal of the arrangement, as it defined on EEC website, is “to create conditions for free capital flow in the financial markets of the Union states, to ensure access for residents of member states to credit products in banks throughout the EEU and reduce credit risks for banks of the Union States.”
“There are no more ideological differences’ among Union members in regard to the Agreement, only some technical issues remain. If everything will go well, we will have a working financial instrument by 2018,” Timur Seleimenov, Minister of Economy and Financial Policy at the Eurasian Economic Commission, said to the akchabar.kg
The document determines the procedure for information exchange and its use in order to deepen the integration processes in the financial markets, and to ensure inter-country exchange of confidential information between governmental and private financial institutions to protect the rights of lenders. In general, the Agreement will help creditors to learn about potential clientele borrowing and bill-paying habits from another EEU country and to lend her/him money in a host country.
According to available information experts offered to proceed with credit report and score information via credit report bureau in every particular country included in the EEU. Banks will send requests in credit report bureaus in case of necessity and special department will forward the request to a necessary bureau of particular company which citizens are applying for a credit.
Daniel Zelensky, head of United Credit Bureau, subsidiary of Russia’s Sberbank, says bureaus receive numerous of such requests. However, according to the Russian federal law, banks have no right to provide third parties with such information. That is why this question needs to be regulated.
Currently, there are twenty two both state-run and private credit bureaus in Russia, two – in Kazakhstan, Belarus, Kyrgyzstan and Armenia have one national bureau each.
However, the implementation of the agreement will face not only legislative inconsistencies, but technical problems. For instance, EEU countries have different systems of encryption of electronically transmitted information, while data exchange require uniform standards. The possible solution, Kommersant speculates, could be to set the exchange of data through a single center, which will “translate” from one encryption type to another, yet it will significantly raise the costs of the agreement implementation.
Currently, majority of Russian banks are reluctant to lend to non-residents, including due to the complexity of the verification of the borrower and sanction the loan in case of default.
“It is not enough to grant the loan, it is important to return the funds, in the case of foreigner client it is difficult”, Alexander Antonenko, HKF-Bank consumer crediting department head said to the Kommersant. “The court to recover the debt will also be very problematic: according to the Russian law, we must sue our client at the place of his/her residency.”
In early 2010th, few Russian banks including Alfa Bank and second largest national financier VTB were lending to foreigners, including bank product such as consumer loans and mortgages. Though, non-resident won’t get approval for mortgage unless client would agree to settle for up to 50 percent down payment plus 9 to 30 percent interest rate, which usually was way too much for majority of the customers. The alternative condition to obtain a mortgage required collateral such as existing home/apartment in Russia and was not regarded as a reasonable option either.
According to Timur Seleimenov, the next round of the Union states internal procedures in regard to the credit history exchange will take place in central bank of the Republic of Kazakhstan on December 8, 2016.