The information provided by the SME Credit Bureau can further support efforts by banks to strengthen risk management for their SME portfolios, regardless of the level of sophistication and size of the institutions. Banks with an SME credit model already in place can benefit from the Bureau information in various ways. For example, as the Bureau rating is determined based on diverse information obtained from various sources including CCRIS, trade credit data and the Companies Commission of Malaysia, banks can use such information to bridge any information gaps and address the limited pool of internal data available for their internal models. Such gaps currently exist, as banks in general are highly dependent on borrower information alone. In addition, given the diversity of information available within the SME Credit Bureau, banks would now have access to information on various economic sectors that may not be available within existing credit portfolios. At the same time, Bureau ratings could be used by the banks to validate the robustness of their own internal models by comparing the ratings produced between their internal ratings and that by the SME Credit Bureau. For smaller and less sophisticated banks, the Bureau information will supplement the current SME credit assessment methodology that is traditionally qualitative in nature. Such banks will be able to obtain quantitative information from the Bureau database to enhance the overall credit evaluation process, thereby supporting more informed and objective credit decisions.
The dispersion seen in this probability distribution can be attributed to two factors: disagreement across point forecasts and uncertainty around individual point forecasts.6 Uncertainty, which is calculated by first taking the standard deviation of each dealer’s distribution and then averaging these individual uncertainties, provides a sense of how confident respondents are about their individual point forecasts. Based on this calculation, the uncertainty around dealers’ expectations for the size of the SOMA portfolio at the end of 2014 is large. In fact, at around $ billion it is almost as large as the entire size of the large-scale asset purchase program announced in November 2010 or the MEP announced in September 2011. Moreover, this uncertainty has not changed significantly since the start of the purchases in September 2012. The dispersion around individual point forecasts likely reflects uncertainty about both how the economy will evolve and how the FOMC will adjust its purchases in response to changes in the economic outlook or changes in its understanding of the efficacy and costs of the policy. Disagreement among dealers about the likely amount of purchases is measured as the standard deviation across their average forecasts for the size of the SOMA portfolio at the end of 2014. In the January survey, disagreement was about $ billion, significantly lower than its level in October.