Remarks by the Director of the Bank of Israel’s Information Technology Department regarding the National Credit Database at today’s Fintech Conference

To (Hebrew) presentation​

The Director of the Bank of Israel’s Information Technology Department, Avner Ziv, made a presentation today at the Fintech conference sponsored by the “People and Computers” organization, on the “National Credit Database” project being led by the Bank of Israel in conjunction with the Ministry of Finance and the Ministry of Justice.
 
During the presentation, he explained that the Bank of Israel views the credit database project as an important tool in increasing the availability of information concerning credit data on households and retail businesses in a way that will support increased competition among existing players in the credit market as well as the entry of new ones, for the good of customers.  The database will also contributed to increased financial stability by leading to improved quality in the credit portfolio of lenders, since the lenders will be better acquainted with the real risk from the customer and the customer’s level of leverage.  The information will also assist the Bank of Israel in tracking developments in the credit market.
The Knesset Economics Committee, chaired by MK Eitan Cabel, is currently working on the preparation of the “Credit Database Law” for Second and Third Reading in the Knesset.  In contrast with the existing law, which enables only the gathering of negative information on borrowers, thereby creating a “black list” of about 10 percent of the population, the new law also includes positive information on lenders (credit repayment history) making it possible for population groups that currently suffer from “credit exclusion” to also gain access to credit. The information in the database will make it possible for households from relatively weak population groups to show responsible and normative economic behavior, thereby earning access to credit under fair terms.
The system, which according to the law will be established at the Bank of Israel, will gather data from all lending institutions (in the banking system and outside it), and will make it possible for them to obtain data on the credit history and rating of customers with the customers’ agreement.  In this way, every borrower will be able to easily obtain loan proposals from any bank or nonbank entity, in contrast with the current situation in which the customer’s data are known only to the bank at which he manages his account.
According to the project’s business model, a central database will be established at the Bank of Israel, based on which private credit rating agencies will be able to obtain a license and to process data and generate ratings products for lenders in the market, and for private customers wishing to clarify their status.  The agencies will also be able to offer additional services defined in the law, such as consulting services to assist customers in improving their credit ratings.
The State of Israel is already considered a “rising power” in the field of financial technology (Fintech). The credit database will enable a significant breakthrough in the variety of services that can be developed and offered once it is established.
Alongside the advancement and opportunities to improve the economy, the project is especially sensitive to privacy issues.  As such, the Bank of Israel is acting according to guidelines from the Information Security Authority, and is cooperating with the cyber industry to ensure the security of information in the database.
The credit database is intended to begin operations in 2018, subject to the completion of the legislative process.  Professional teams from the Bank of Israel are working vigorously on the planning for the project so that its establishment can begin immediately upon completion of the legislative process.  As such, the Bank of Israel has published a request for information from entities operating in the field.