The assessment of a potential borrower's reimbursing capacity is a key element of the credit

allowance process among financial institutions. Many countries took steps to implement a central
register of all loans granted to individuals, a so-called positive credit file. But the establishment of
such a file raises privacy protection's questions. In Europe, Belgium is the only country with centrally-
managed positive and negative credit files, which could be a base for a future European central file.

The Central Individual Credit Register was established 25 years ago by the National Bank of Belgium
(BNB) to register all payment defaults related to personal installment loans and credit purchases
(negative credit file).

Since 2003, the Central Register records all information on all consumer credit and mortgage loans
contracted by individuals for private purposes, regardless whether there are any payment arrears
(positive credit file). The latest significant change dates from 2011. The approved overdraft -which is
an explicit credit facility whereby a lender allows a consumer to withdraw sums in excess of the
available balance on the account - must also be recorded in the Central Register.

Belgium is the sole country in Europe where positive and negative credit information is gathered only
by a state-owned credit bureau. In France and in Finland, state-owned credit bureaus gather only
negative credit information. In Spain and in Portugal, both state-owned credit bureaus and private
companies (not owned by financial institutions) can gather positive and negative credit information.
In all other European countries, positive and/or negative credit information is solely gathered by
private companies due to the absence of a state-owned credit bureau.

The positive credit file, which registers all credit applications, and the use of an electronic identity
card (eID) ensure that Belgium is ahead of its neighbors in the fight against over-indebtedness. As a
result, the cost of risk for credit card issuers, such as Buy Way, is twice as low in Belgium than in
France.

The proposed introduction of a positive credit file in France in 2011 raised a lot of controversy. The
majority of parties involved were, for different reasons, against it. Banks warn for the very high cost
of implementing the positive credit file and consumer organizations fear that the file will be used for
commercial purposes. Everybody agrees, though, that the French government should take action
against indebtedness.

However, as in the Belgian case, privacy issues can be solved if the positive credit file is established
with a strong legal framework. Regarding the cost argument, credit companies must rely solely on
statements of the customer without a positive credit file. The more vulnerable a customer is, the
more important it is to be able to match their statements with a database. To grant credit
responsibly, credit companies must have the right tools and information to assess the application.

A Credit Register system can only operate optimally when there is cross-border cooperation. The
fight against over-indebtedness must be conducted in a European context. It seems appropriate to
establish a European network of closely cooperating national credit registers. Moreover, a common
set of rules and guidelines is essential to ensure the integrity of the information that is stored and
exchanged.