A disturbing development is under discussion by German regulators that may have ramifications for other EU countries and potentially elsewhere.  Germany has always been a tough battleground in the tug of war between transparency and privacy.   It has already the toughest privacy regulatory scheme overall.  Following the German lead, the EU has taken on most of the key elements of the German privacy law (Datenschutz-Gesetz).  Unfortunately the focus is always on restricting the use of information irrespective of the fact that new restrictions may not be beneficial for consumers.

 What are the reasons for regulators to limit the use of information:  Perceived excessive use of credit scoring and customer profiling has upset German consumer and privacy advocates.  They argue that often credit is denied and the consumer does not know why.  If they have their way, credit bureaus and information companies will have to make methods of calculating credit scores more transparent, detail the type and value of any score delivered, and may have the use of statistical modeling restricted.  Source: EPS Insight of April 20, 2006: See http://www.biia.com Member News section.

 USE OF UNSOLICITED RATINGS IN BASEL II CALCULATION:  The Ministry of Finance in Germany has sent a draft proposal to banks advising them not to use unsolicited ratings from three international rating agencies (Fitch, Moody’s, Standard & Poor’s) to calculate capital requirements under new Basel II guidelines.  Rating company bashing is always fashionable, but this draft proposal is tantamount to censorship.  Perhaps the next proposal would be to curb unsolicited trade credit ratings.  Source: EPS Insight of April 07, 2006: See http://www.biia.com Member News section.

BIIA Newsletter May – 2006 Issue