The Central Bank of Iran has ordered the Iran Credit Scoring Institution (ICSI), the only of its kind authorized to offer credit assessment, to restrict its services to banks and authorized credit institutions.
In a decree published last week, the CBI required the ICSI to stop offering services to third-party companies. The ICSI said Friday that it has cut ties with its representatives in line with the CBI order, IBENA reported.
As of Saturday, the ICSI will only offer services to banks and authorized financial firms, namely leasing firms and credit institutions, the company said in a press release.
The company added that the measure does not mean that individuals cannot make use of its services, but ICSI services would henceforth be accessible directly from the company instead of its representatives. It stressed that all companies are welcome to make use of the services after signing contracts directly with the ICSI.
Last year, the CBI published rules for the establishment of credit rating firms.
Companies are required to analyze client financial records and provide them reports on the credibility of individuals or corporates by assigning scores on a scale of "very poor", "poor", "average", "good" or "very good", in accord with CBI requirements.
Ratings are determined after assessing the financial performance of the customer within a fixed period plus solvency, ability and willingness to pay. The score indicates credibility and discipline in meeting debt obligations.
For example, customer deferral in paying small debts, such as utility bills, is considered as unwillingness to pay. However, if the default is due to bankruptcy or force majeure, it suggests insolvency.
Creditworthiness is also set via other parameters, namely delays or punctuality regarding maturities, financial wrongdoing, unpaid checks and tax commitments.
Rating agencies will have to collect data from provider entities and update their database as soon as they receive new data.
The CBI listed names of state bodies that are required to provide data to rating agencies, namely the National Organization of Civil Registration, the judiciary, Ministry of Justice, Iran National Tax Administration, Central Insurance company of Iran, Customs Administration, Ministry of Cooperatives, Labor and Social Affairs, the ICT Ministry, National Iranian Gas Company, Ministry of Energy and the Law Enforcement Forces.
The CBI is responsible for providing data about client credit records. In March it said it was preparing a credit rating platform for bank customers based on their credit scores. The platform is now partially functioning through which customers’ check transactions and loans are processed.
The platform enables the CBI to detect lending violations by banks. Most banks are involved in unusually big loans to vested interests and customers who have defaulted and are facing corruption charges.
