The CEO of a credit reporting agency says reporting companies are the best way to enter the world of modern banking
The CEO of a British reporting agency stated that the economic condition and the market status of different countries are such that governments and financial markets are always thinking to find a way for the economic growth, we can mention the increase of granting credits to applicants.
The CEO of a British reporting agency stated that the economic condition and the market status of different countries are such that governments and financial markets are always thinking to find a way for the economic growth, we can mention the increase of granting credits to applicants.
Comparing the banking system of Iran and Europe, Amir Homayoon Kashani Kia has said: one of the main conflicts of banks in all economic systems, whether in Iran or other countries is the return of paid facilities. In the economic system of different countries, the procedure of providing facilities is based on receiving bank documents but the process related to these documents and loan payment in the banking system of developed countries are different from Iran.
He added: banking system in Iran is different from the banking system of other countries, especially Britain that follow the global banking system. This difference is evident in the facility payment section.
The CEO of this British company continued: the banking system of Iran makes rigorous excessive demands for micro- facilities but not for large scale facilities. In a country like England rigorous demands are made for both micro and large-scale facilities which mean there is rigorous demand for returning the money but it’s different from Iran.
Kashani Kia added: when an applicant wants to receive facilities in a country like England the conditions are fundamentally different from Iran. In England, if you ask for a loan it is not enough to only provide collateral or a bank account turnover. In the meantime, the bank cooperates with insurance companies to get the money back. When someone decides to receive facilities then ranking companies like Modi ،Fitch ،S&P need to review the applicant’s performance and the rank of the applicants. This ranking which is based on the applicant’s credit will be sent to the banks. Of course, it should be mentioned that micro-loans are reviewed by smaller ranking companies.
He also noted that insurance companies are a big help in the process of returning the money to the banks. Insurance companies based on the applicants' rank guarantee the returning of the money. The insurance for facility return is also defined in the Iranian law but unfortunately, it is not implemented. Generally, ranking agencies by issuing a rank for an applicant cause the insurance companies to pay the premium loan based on that rank. One important point about insuring this investment is the rate of the insurance company which depends on the applicant's rank and credit.
The CEO of the smartnexus Ltd reporting company stated: in the next step, banks ask the applicant about the project that this loan is going to be invested for and also ask the applicant about returning the money. In this phase, the role of the credit reporting agencies is specified. These agencies are the same credit reporting agencies or so-called credit bureau that have a decisive role in providing facilities and its payment, as these institution’s reports can be an important factor for the bank to pay the loan.
He also added: banks ask the credit reporting agencies to review the projects that the loan is going to invest in so that this project won’t have any legal, registration, banking, or most importantly, economic and profitability problems. At the same time, the credit reporting agencies must check to see if the bank’s money will be returned by this investing or not. After the final report is provided for the bank, the amount of the loan will be determined based on that report.
There is one important point that needs to be considered. Credit reporting agencies can reduce the risk of the banks which means this report can’t damage the bank’s credit. When a banks has trouble getting its money back and has to ask the insurance companies for their help, its credit is damaged. Insurance companies are not also interested in cooperating with these banks. As a result credit reporting agencies can minimize this risk and guarantee the returning of the money.
It should be mentioned that as 80% of the global financial operation are carried out in the UK and Commonwealth of Nations rating and credit reporting agencies are established in these countries and are providing services.