To ensure an environment of sound credit risk management, banks and other financial institutes operating in the Philippines are required to comply with the Bangko Sentral ng Pilipinas (BSP) policy on sound credit risk management. The rationale for this policy is to strengthen credit risk management practices, further aligning existing BSP regulations with the Basel Core Principles for effective bank supervision.

The policy allows for a degree of flexibility in defining customer relationship management standards for their desired credit products. However, financial institutions must still maintain appropriate processes for credit control, administration, measurement and monitoring.

TransUnion Philippines has a range of products that may assist organizations in complying with the following aspects of the policy:

• Credit risk management systems
  The policy states that credit risk management systems must be commensurate with risk-taking activities. TransUnion’s DecisionEdge, a platform accessed via our Acquisition Manager solution, enables organizations to manage applications, access bureau data and receive instant credit decisions based on credit data and their internal policies.
• Credit scoring models
  A credit scoring model may be used to measure credit risk provided it sufficiently captures the credit behavior and other characteristics of the targeted borrowers. TransUnion’s Bureau Score turns bureau data into more accurate risk predictions, helping organizations to make business decisions.
• Risk measurement methodology
  Financial institutions must adopt risk measurement methodologies that control and monitor the quality of credit as a total loan portfolio. Due to the risks change over time, the distribution of exposure should change in time. TransUnion products enable institutions to conduct portfolio reviews in order to monitor changes in their portfolios and take appropriate action if necessary.
• Loan loss methodology
  A loan loss methodology that can reasonably estimate provisions for loans must be developed and documented. TransUnion offers a consulting service that may assist financial institutions in measuring these provisions by using certain scores.
• Capacity to repay
• A customer’s current capacity to repay credit must be considered before credit is extended. TransUnion’s powerful analytical capabilities and rich consumer database can be used to estimate and validate customer’s income.

Sound credit management is key to protecting both financial institutions and consumers, and to building a healthy economic system in which access to credit is beneficial, not harmful, to the consumer. TransUnion’s products, solutions and expertise can assist organizations in developing and maintaining processes that enable them to achieve strategic goals ensuring sound credit risk management.