Iranian regulator extends deadline for credit rating agency to set up shop

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IRAN: As the landmark multi-nation nuclear deal which swung the doors open for Iran to return to the international stage hangs in the balance amid a tussle between the top leaders of the Republic and the US, the world’s largest Islamic financial market is pressing on with plans to welcome rating agencies, a move for transparency which is likely to facilitate inward and outward investment flows.

The Securities and Exchange Organization (SEO) of Iran is inviting interested parties to set up credit rating agencies in the Islamic Republic. The regulator recently amended regulations governing the operations of credit rating agencies which were put in place last year, a few months following the lifting of sanctions which triggered immense international interest in the once insular market. Under the new framework for rating agencies, central bank-licensed institutions are only allowed to hold up to 10% of an indirect stake in these agencies, according to the SEO. Applicants have until the 28th October to submit a formal application. 

The push to hoist Iran to international standards attracted visitations from global firms, including the likes of Deloitte, Fraser, PwC, EY and KPMG, interested in building a local presence and ushered a slew of international deals and partnerships with major superpowers including China. It was understood that Iranian authorities were in discussions with Moody’s Investors Service and Fitch Ratings to reinstate sovereign credit rating surveillance on the Middle East’s second-largest economy.

Since the removal of the sanctions in January 2016, the Iranian government and business community have been active in the Sukuk market. Just this week, the government issued IRR35 trillion (US$1.06 billion)-worth of Sukuk Ijarah through two ministries while the country’s largest auto manufacturer is reportedly looking to come to market with a IRR7 trillion (US$211.09 million) Murabahah facility. Having Islamic papers such as these rated would likely attract foreign Shariah dollars into the Republic.

While the SEO is welcoming new credit rating agencies to the country, the banking regulator – the Central Bank of Iran – on the other hand, has reportedly decided to design a new national rating system for banks which will be implemented by an existing affiliate, the Iran Credit Scoring Company. It was also reported that not all bank ratings, which take into consideration the current turnover and balance sheet among others, will be made public depending on the creditworthiness of these institutions, which will fall into four categories: no visible risk, low risk, average risk and high risk.

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