A new report from the Asia-Pacific Credit Coalition (APCC) and the Policy and Economic Research Council (PERC) on the Hong Kong credit information sharing market recommends regulations be updated to facilitate financial inclusion and competition. The report, titled “Credit Information Sharing in Hong Kong,” reviews the market dynamics in Hong Kong, including data gaps, the real estate bubble, and the new credit bureau entrant.
This report was part of the Asia-Pacific Financial Forum’s (APFF) efforts to develop a roadmap for an optimal financial data ecosystem within the Asia-Pacific Economic Cooperation (APEC) member economies. The APEC Roadmap for a New Financial Services Data Ecosystem’s objective is greater financial inclusion and efficiency within the APEC economies through a data sharing ecosystem that encompasses legal and regulatory considerations. Data is at the core of financial services, and the industry’s increased interconnectedness demonstrates the need for legal and regulatory regimes that facilitate cross-border data flows.
In Hong Kong, a new entrant entered the credit information sharing market after three decades of being served by a single private credit bureau. This has the potential to spur competition among lenders within Hong Kong and facilitate regional economic integration. However, for these benefits to occur, regulations must be amended, because Hong Kong’s existing regulatory framework did not anticipate multiple credit bureaus. The reporting mandate should apply to all licensed credit bureaus, with uniform transborder data access rights across bureaus, particularly if one bureau begins serving the multi-jurisdictional Greater Bay Area. This would ensure competition and a level playing field, and prevent fragmentation of the credit information sharing system. The report also surveyed China’s credit information sharing market, due to its influence on developments in Hong Kong.
The report also found other challenges confronting Hong Kong’s credit information sharing system. One notable challenge is data gaps in Hong Kong’s credit reporting system, which is incongruous with its position as a global financial services hub. The lack of positive mortgage payment data exacerbates the real estate bubble, preventing lenders from assessing whether borrowers are over-extended. Hong Kong’s real estate market is currently ranked as the world’s least affordable, with declining homeownership rates and almost half of all homeowners relying on public housing. The report re-assesses Hong Kong’s Ease of Doing Business evaluation, specifically revising down the Ease of Getting Credit score from 7 points out of 8 to 5.5 points, in light of intelligence on the ground. The report concludes fully reporting non-financial payment data could dramatically increase financial inclusion by allowing lenders to evaluate borrowers on proven metrics, and decrease the number of borrowers who rely on usurious fringe financial institutions. Again, an expansion of data collected and used should be applied equally to both bureaus.
Report co-author and PERC President Dr. Michael Turner said, “Hong Kong is at a cross-roads on several levels. In order for Hong Kong to retain their status as a regional financial hub, change is needed. Happily, some simple fixes to their credit reporting system will bear immediate results in terms of making housing more affordable and promoting competition in consumer lending.”
The report from APCC and PERC will be presented at the next Asia-Pacific Financial Forum conference.