Lenders are forced to re-run credit checks after Central Bank’s debt register failure

Stock image

Donal O'Donovan Twitter Email

June 21 2022 02:30 AM

The Central Bank has told lenders to re-run thousands of credit checks after admitting its Central Credit Register (CCR) was not operating correctly on June 8 and 9, the Irish Independent can reveal.

However, the Central Bank refused to say whether loans were incorrectly approved and drawn down by borrowers with arrears as a result of the problems with its system.

It is not clear how many borrowers had loans approved in the 21-hour period affected but the CCR processes in the region of 7,000 queries per working day for lenders who rely on the records of loan repayments it maintains to make lending decisions.

The Central Bank said it became aware of the issue on the second day of the incident and contacted lenders to inform them of a problem before recommending that all queries run in the affected period be resubmitted at no extra charge.

A spokesperson said action was taken immediately and the issue was resolved in line with its procedures.

However, the Central Bank said it cannot take responsibility for any loans incorrectly OK’d and drawn down as a result of the situation.

A spokesperson for the Central Bank said it is not responsible for loan decisions because lending policy is an issue for individual firms and that credit reports are only one factor in assessing borrowers.

“Credit reports are important but are not the only input in supporting lenders to make thorough assessments of the creditworthiness and suitability of a borrower.

“It is a matter for each lender to decide their own credit policy and terms and conditions of a loan application,” the spokesperson said.

Given the wide powers the regulator exercises over banks, sources said that view is unlikely to be challenged formally. All lenders contacted declined to comment.

Banks processing loan applications were not aware there was a problem until the message telling them to re-run their checks was issued by the regulator.

Sources at the banks say in most cases there is a lag between credit checks and the draw-down of money especially for large loans such as mortgages. All of those bigger cases have been rechecked.

However, firms that offer rapid loan decisions may have issued funds on foot of the unreliable data.

It is understood issues arose when the CCR changed some validation processes without informing the lenders that rely on the records.

The incident is embarrassing for the Central Bank, which has issued fines and stern warnings to the businesses it regulates for IT failures and for failing to manage outsourced functions.

Executives at regulated firms will also take note of the lack of transparency from their regulator, which informed banks but not the public or policy makers that there had been a serious incident with a system the Central Bank is legally mandated to operate.

The Troika identified the need for a reliable register of all borrowers as a key post-financial crash reform back in 2010, after EU and IMF officials were shocked to discover the scale of debt built up by individual developers before the bust, in many cases across a number of lenders who were each unaware of the others’ exposure.

Individuals are not charged for checking their own records with the CCR, and the Central Bank said individual users were not affected by this month’s issues.