Central Bank to establish moveable collateral registry

The Central Bank of The Bahamas is in the final stages of establishing an online registry for moveable collateral, which would allow borrowers to use more of their assets other than real estate or fixed assets to secure credit.

The announcement came as the CBOB reported a 25 percent increase in loan applications to domestic banks in the first half of the year.

“Indications from the latest lending conditions survey reveal that the volume of applications for business and personal loans increased during the first half of 2021, with a corresponding overall net increase in the volume of approved credit. Although the success rate for mortgage applications was slightly lower, more loans were approved overall,” Central Bank Governor John Rolle said during a quarterly economic briefing yesterday.

“Consumer credit applications had both a higher success rate and also a significantly greater number of approved requests. Nevertheless, more than half of the unsuccessful applications for both mortgages and other personal credit were still due to a lack of affordability, due to pre-existing debt servicing levels that were considered too high. Under-employment is also still a factor in unsuccessful credit applications. In the meantime, debt consolidation relief was the largest single reason for consumer credit applications – about one-third. Such active lending for debt consolidation also signals less capacity, even for qualified borrowers to finance new big-ticket expenditures.”

The Central Bank said approximately 13,744 loan applications were processed in the first half of 2021, the majority of which (82.6 percent) were accepted and processed in New Providence. Consumer loan applications represented 87 percent of total loans, of which 76.3 percent were approved.

“Most loan denials were due to high debt service ratios, underemployment and insufficient time on the job. In the mortgage market, the number of applications received was higher by 61.4 percent, when compared with the first half of 2020. Specifically, the commercial mortgages component registered a more than five-fold increase and comprised three percent of total mortgages. Demand for commercial credit declined vis-à-vis the first half of 2020,” the most recent bank lending conditions survey found.

As for the movable collateral registry, Rolle said it would compliment and expand the range of options that individuals and businesses have in terms of raising capital.

“As a further push to improve the environment for lending, particularly for enterprises, the Central Bank along with the Ministry of Finance are at the advanced stage of a diagnostic exercise to establish an online registry for moveable collateral,” he said.

“Broad private consultation on the proposal will begin as soon as the government is fully briefed through the Cabinet. A moveable collateral registry would facilitate and encourage increased, secure lending for business ventures by both banks and sophisticated private financiers.”

Rolle continued, “A good example that many people are familiar with is how businesses can often structure and assign their tax receivable, or how intellectual property rights can be assigned, or even the possessions that individuals have that may be investments in stocks and government bonds, to the extent that they can be lodged in safe places and secure credit, that is an advantage. So from that point of view it allows for a centralized tracking of where such assets would have been pledged and it allows investors to give credit against such assets, knowing that their security against the asset is unique and the asset is not being pledged multiple times for credit.”

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source https://thenassauguardian.com/central-bank-to-establish-moveable-collateral-registry/