April 10, 2020

 Take credit whenever you want, i.e. new rules for granting retail loans

In the autumn of last year, a draft amendment was presented, which allows the application of simplified creditworthiness rules, but to a limited extent.

According to the GFI statement, in the final recommendation, this limit was increased to four times the average wage. Simplified rules may apply to all banks, but the GFIC wanted to promote banks with high equity.

Proposed that only simplified institutions

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In October last year, they proposed that only simplified institutions with a capital adequacy ratio exceeding 12 percent and meeting all norms p could use the simplified rules Liquidity imposed by banking supervision.

The described changes in the lending path apply to the following financial situations:

1) up to once the average monthly salary in the enterprise sector when taking a loan from a bank with which we did not cooperate,

2) up to four times the average monthly salary for an installment loan,

3)up to six times the average monthly remuneration for a loan taken out at a bank with which we cooperate for at least six months,

4)  up to twelve times the average monthly remuneration for a loan taken out at a bank with which we cooperate at least twelve months.

The statement of the Commission for Banking Supervision explains that Recommendation T is addressed directly to all banks covered by Polish law and also to branches of credit institutions operating in Poland.

Assessing the customer’s creditworthiness

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The recommendation, therefore, introduces the possibility of using – simplified rules for assessing the customer’s creditworthiness. In the process of assessing the creditworthiness of a retail customer, banks must use external databases, in particular those with inter-bank databases.

In accordance with GFI recommendations, banks should have internal written procedures specifying the form and scope of information for each customer seeking a retail credit. In the case of foreign currency loans, banks should provide clients with an appropriate range of information about the associated risks and consequences.

The announcement wrote that the GFIC expected that its recommendations would be introduced no later than by July 31, 2013.

Comment:

It seems that the Good Finance Investment Corporation has rationalized and adapted its position towards the method of granting loans to reality. The amendment of the recommendations allowed an increase in the number of loans in the next quarter without documenting the client’s income.

This should help boost credit sales, especially for products such as installment loans and consumer loans in general. Most analysts view this issue from the point of view of increasing bank balance sheets by increasing the number of loans. Remember that this is a stimulation of consumption, but in a short period of time.

It should be repaid by the debtor without undue burden on his budget

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In order for the loan not to become a bad loan, it should be repaid by the debtor without undue burden on his budget. It will not always be possible, especially with high economic fluctuations and an unstable labor market.

Nevertheless, the GFIC’s decision is bold and logical, though belated (by at least a year) attempt to reverse the stream of financing of individual consumption from Good Finance sources and not subject to the control of banking supervision.

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