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Economically illiterate Ministers are placing the efficiency and credibility of Malaysia's financial institutions at risk

Media Statement
by Tony Pua


(Petaling Jaya, Monday) : The DAP reads from the reports in the local newspapers with shock and dismay over the ill-informed statements made by our Ministers against Credit Tip Off Service (CTOS) Sdn Bhd.  These statements were made following various allegations made by the Deputy Minister in Prime Minister's Department, Datuk M. Kayveas against the company. 

Deputy Prime Minister Datuk Seri Najib Tun Razak asked that CTOS "should not create problems or prevent borrowers from getting loans from financial institutions".  Most shockingly, Deputy Finance Minister, Datuk Dr Awang Adek Hussien has called on Banks "to stop using the services provided by CTOS". 

Credit information enables efficient and sound banking system 

What CTOS provides is a service which is in demand by financial institutions to evaluate the credit-worthiness of their borrowers.  Such information enables lending to be processed efficiently and at a lower risks for banks. No financial institution in the country will be willing to provide loans if such information is lacking or unavailable. 

What CTOS does is to collate information which are publicly available and gazetted instantly to subscribers will then make their own assessments with regards to the credit-worthiness of the borrowers.  As a result our financial and banking system has become more efficient as loans can be processed in greater confidence within a faster processing period. Banks offering loan approvals within 24-hours cannot do it today without such information. 

On the other hand, without the CTOS service, Banks will still have to assess the credit-worthiness of the potential borrowers by reviewing bankruptcy gazettes, public notices in newspapers, company registration information in Companies Commission of Malaysia (CCM), a tedious and time-consuming process.  Such a process is inefficient, unwieldy and prone to errors. 

Hence, when the Deputy Finance Minister called on Banks to stop using the CTOS service, he is in effect asking our Banks to increase take on unnecessary risk, which will only result in higher non-performing loans (NPLs).  Datuk Dr Awang Adek Hussien is also effectively asking them to be less efficient and as a result, less competitive compared to foreign financial institutions. 

The general public are winners with a service like CTOS 

While parties with a poor credit history are clearly unhappy with the availability of services such as CTOS, it must be made known that the overwhelming majority of Malaysians benefit tremendously from such a system. 

A negative search in CTOS for example, will often mean that a person's track record is clean.  A search on 94% of all Malaysians will result in a negative search.  Hence because of the availability of a credit information service like CTOS, these 94% of Malaysians will have their loans or business requirements processed at a faster, more efficient and effective manner.  In fact, for many, it may mean higher facilities as well as lower interest rates. 

Hence, what our Ministers are unfortunately trying to do is to in effect, to protect Malaysians with potentially weaker credit history while sacrificing the interest of the majority of Malaysians with excellent credit standing. 

The key is accurate information 

Action should only be taken against CTOS should the information found within the system contain errors, which will then unfairly jeopardise the interest of the victim.  CTOS should hence make all necessary effort to ensure that the data within the system is accurate. 

In the event whereby CTOS faces difficulty in maintaining an updated record, all efforts must be made to obtain these relevant information.  The Government should at the same time ensure that information such as bankrupts who have been discharged, are made available publicly on a timely basis. 

Stop making unfounded allegations 

The Ministers should therefore stop making unfounded and uneducated allegations against companies such as CTOS, for they are critical in ensuring that our business and financial system and operates in a substantially more efficient and effective manner.  They should instead seek direct clarification with CTOS to better understand their services and what necessary improvements should be made. 

It is disappointing that in the midst of attempting to build world-class banks in an increasingly globalised and competitive environment, our clueless Ministers are seeking to eliminate one of the most critical components - "information", from being accessed by our financial institutions. 

Instead of taking such a retrogressive step, they should encourage greater competition in this field so as the system will become even more efficient and reliable, benefiting not only our banking industry, but also all Malaysians.


*Tony Pua, Economic Advisor to DAP Secretary-General

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