Expression of Interest For Credit Reporting/ Scoring In The Wake Of Crisis And Disasters: Experiences And Practices

Expression of Interest for Credit Reporting/ Scoring in the Wake of Crisis and Disasters: Experiences and Practices The International Committee on Credit Reporting (ICCR) is the only recognized standard setting body in credit reporting. The role of the Committee is to promote safe and efficient credit information sharing that facilitates responsible access to credit and supports the stability of financial systems. The Committee started as a Taskforce that was convened by the World Bank in 2007. On an ongoing basis, the Committee develops standards, principles, policy guidelines, best practices and notes that are designed to strengthen the policy, practices and regulatory oversight relating to credit information sharing and related activities. The committee has produced the General Principles for Credit Reporting (GPCR) and several guidance publications which have been adopted as standards for credit reporting. CONTEXT AND BACKGROUND There are also increasing incidences of crises which have brought to the fore the issue of treatment of credit data during a crisis. Crises like health pandemics, climatic events such as floods and forced displacements led to widespread financial distress among consumers and small businesses. have potential impact on the integrity of the credit reporting system and ultimately the financial markets. These events disrupt borrowers ability to meet obligations, often leading to deteriorating credit scores and restricted access to finance. Traditional credit reporting systems rarely account for temporary shocks, creating systemic risk and inequity. Crises tend to disproportionately impact individuals and businesses as they result in missed payments which impacts on their creditworthiness. Crises tend to result in lower/ declining credit scores of affected borrowers which makes it harder for them to access credit required to survive and recover phases. In cases where credit is still available it leads to high costs of credit, which can slow the pace of recovery and increase the likelihood of default. In the absence of proper safeguards, crisis fueled delinquencies create false bads. A crisis creates widespread financial disruption that makes it hard to separate false bads (temporary payment issues caused by external shocks) from real bads (signals of long-term credit risk). This is largely attributed to the forbearances that borrowers seek, data distortions and lack of policy and reporting clarity. Inadequate and untimely data reduces the reliance placed by credit providers on the credit reporting system and can lead to credit rationing. Lack of timely and adequately due to operational and regulatory reporting challenges creates gaps which result in signal noise in credit data, impacting of lenders decision making. This can impact the integrity of credit reporting systems and medium-term reliance on the system. During the Covid-pandemic, there was initially a lack of consistent guidance on the treatment of credit data which resulted in some countries suppressing submission of credit data. In order to mitigate adverse impact on credit consumers, some jurisdictions implemented credit information suppression which can have deleterious effect on the integrity of credit reporting systems and will widen the trust deficit in the credit market. The data freeze implemented during the pandemic impacted the reliability of credit bureau scores highlighting that data suppression policies injure both the consumer and the lender. Markets with mature credit reporting systems defaulted to crisis codes to flag facilities affected by the disasters while some authorities requested lenders to maintain pre-pandemic account status. While the Committee issued a guidance note on treatment of credit data during the Covid pandemic recommending the use of crisis codes, a few countries have adopted and implemented the code. The B-Ready 2025 found that less than 30% of countries had implemented crisis reporting codes. Given the recurrences of crises there is a need to share best practices and consider whether there is a need for additional guidance from the Committee. OBJECTIVE This Terms of Reference relates to the procurement of a specialist consultant to assist the ICCR (the Client) to produce a paper on Credit reporting/ scoring in the wake of disasters: experiences and practices. SCOPE OF WORK 1. Examine how crises (pandemics, natural disasters, climate-related shocks) disrupt borrowers ability to meet obligations and distort creditworthiness signals. 2. Highlight the challenge of distinguishing temporary hardship (false bads) from genuine risk indicators. 3. Identify how countries have responded to crises 4. Highlight case studies and practices emerging from various jurisdictions including how the practices affected credit scores, access to finance and reliance on the credit reporting system. 5. Explore the balance between consumer protection and data integrity. 6. Assess implications for lenders risk models, regulatory compliance, and macro-prudential supervision. 7. Recommend best practices for crisis reporting including frameworks for activating and deactivating crises codes. 8. Propose recommendations for review of General Principles on Credit Reporting and Key Principles for Effective Regulation and Supervision of Credit Reporting Service Providers. APPROACH AND METHODOLOGY The study should include a combination of desk research, case studies and consultations interviews, focus groups and surveys) with a wide range of stakeholders. The consultant is expected to have at least three meetings with the Working Group at the following times: - introductory meeting to validate the scope of work. - during the consultation and draft stage. - at first draft and review stage. - delivery of final document and a presentation of the report. The consultant will work under the guidance of the ICCR Research & Knowledge Management Working Group and follow the process agreed with this Working Group. Tender Link : https://wbgeprocure-rfxnow.worldbank.org/rfxnow/public/advertisement/6358/view.html

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