Finnish banks divide private customers into different categories

Ratings are confidential and are not reported even to customers

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Finnish banks have begun to divide their private customers into groups based on a set of common characteristics, such as credit rating. The scores are indicated by numbers or letters.
      Previously such credit assessments applied only to corporate customers, while at least Nordea, the OP Bank Group, and Sampo Bank have started to assign their private customers to segments based on their financial behaviour.
     
The customer base of a bank can be divided for example into ten different groups. According to the banks, the rating is confidential and it is not revealed even to the customer. Because of competition, the OP Bank Group does not report even the accurate bases for the scoring system nor the scale that is being used.
      The scoring process is implemented by the use of a computer application, which monitors the repayment of loans, statements of accounts, and potential overdrafts, among other things. The rating has also a certain influence on the terms and margins of housing loans.
     
A good credit rating means a low marginal interest rate, while a customer with a low rating will have to pay a higher interest rate.
      However, even the market situation and many other factors have an impact on the margin, while it is true that a creditworthy customer usually pays a lower margin, says Sampo Bank regional director Kenneth Kaarnimo.
      According to Nordea’s Jussi Mekkonen, the rating code remains in the memory of the computer and not even the personnel of the bank can automatically see it. In the OP Bank Group the person who makes the loan decision can see the rating, while in Sampo Bank in principle all personnel can see it. However, all viewings are recorded on the log of the computer, which should prevent unjustified viewing.
     
Computers are continuously used at banks to assess the repayment ability of customers, as the forthcoming Basel 2 recommendations on banking laws and regulations will call for such monitoring.
      A detailed evaluation is made each time when a customer is applying for a new loan or wants to change the terms of his or her old loan. At that point banks can also check whether or not the customer has any payment defaults in the registers of Suomen Asiakastieto, the leading provider of business and credit information in Finland.
      However, all banks wish to stress that regardless of the rating given by a computer, it is a person who makes the actual credit decision.


Links:
  Suomen Asiakastieto

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