Governor of the Central Bank of Iran (CBI) Valiollah Seif has announced that his institution is to launch a national rating system for banks, Iran Labour News Agency reported on September 17.
Iranian banks, companies and citizens cannot currently turn to any recognised rating system to assess their creditworthiness. US-based companies that might perform the task are banned in the country, meaning the Iranians have opted to develop their own internal system.
CBI-affiliated Iran Credit Scoring Company (ICSC) will operate the system. To date, it has only scored companies upon request.
Seif noted that due to the sensitive predicament of some banks – he did not name the banks he had in mind – not all the ratings would be made public. It is thought several Iranian banks are bordering on insolvency but are continuing to function with government help.
The ICSC rating system is based on four main definitions: “No visible risk,” “Low risk,” “Average risk” and “High risk.” It will assess current turnover and the balance sheet. In addition, the system will rate banks on their ratio of assets to liabilities and management of resources, to name a few areas, to begin with.
It is expected that when the system is fully operational further methodology will be introduced to enable Iranian banks to meet requirements of international banking standards such as Basel II.
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