According to VCCI, credit scores are crucial to credit institutions because low-scores are more likely to be inspected and closely supervised by banking authorities. For this reason, banks should be allowed to file complaints when they disagree with the credit results, and the authorities have to respond to the complaints and clarify their assessments.
Thus far no regulations have been introduced to regulate complaints, settlement of complaints and time frames to respond to complaints in regard to credit ratings. Such regulations, if put in place, would add more transparency to assessments and incur no additional administrative costs.
The VCCI believes foreign bank branches should be allowed to provide the results to their parent banks on condition the results be kept secret.
“Such an amendment to Article 23 is reasonable and would not affect the banking authorities as well as other credit institutions,” according to the chamber of commerce and industry.
Under the draft circular, credit institutions and foreign bank branches shall be classified into five credit levels: A (excellent), B (good), C (average), D (fair) and E (poor). This classification is based on the CAMELS rating system that has been accepted by many countries worldwide.
However, VCCI said the five-level system was ineffective as they were not good indicators of bank performances. Many banks with huge performance differences had ended up in the same credit level.
For instance, banks are ranked B if their total score is less than 4.5 and greater than or equal to 3.5. This means banks with 4.4 score and banks with 3.5 score are treated equally.
In fact, the credit risk gap between a 4.4-score banks and 3.5-score bank is huge. Therefore, sub-levels are needed to assess credit institutions properly.
“Each credit level should be divided into sub-levels based on different credit scores in order to better classify credit institutions,” VCCI said.
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