The ‘Tiresias’ of the State is coming

By Tasos Dasopoulos

Credit ratings for individuals (natural and legal persons) will be issued by the new Independent Credit Evaluation Authority promoted by a bill of the Ministry of Finance with the aim of reducing current and future overdue debts in the public and private sector.

The main goal of the new authority that will operate as “Teiresias” the public will have as its main goal to smooth out the asymmetric information of banks and the public about the real financial situation of the citizens. So far the banks can know the debts of a private individual to the same or other banks but not what they owe to the public. The government, on the other hand, only knows what citizens owe to tax authorities, insurance funds and OTAs, but not what they owe to banks.

The new authority will be independent, that is, it will not be subordinate to any ministry or public body, and will be accountable only to the Parliament. It will be managed by a five-member board of directors, with a five-year term, while both the president and the members should be executives from the market or retired civil servants, relevant to the subject. Through an integrated information program that will be created, data will be collected on the general financial behavior of citizens towards their debts to the public by analyzing a series of parameters that will be collected in a database. Commercial banks will also have access to this data, so that they can better determine their credit policy by knowing about each borrower, not only what he owes to the banks but also what he owes to the public.

This exchange of information will have as a first result, the reduction of non-performing exposures for the banks, but also the excessively high overdue debts for the public. This, given that the private and public sector, will know for each citizen their real financial situation.

It will also make it easier to identify the so-called “strategic defaulters”, who either have large debts to the public and manage to borrow large sums from banks, which they know in advance that they cannot service or, on the contrary, have the financial surface but they do not fulfill their obligations to the banks..

Personalized loan arrangements

The Independent Credit Evaluation Authority will be able to issue, at the request of the interested parties, credit worthiness certificates for any natural or legal person, following a relevant electronic application of the interested party. The certificate will be issued free of charge and will constitute a solvency certificate for transactions with the public and private sector for the period it is issued.

In dealings with the public, persons who have a certificate of solvency, they will be able to claim a more personalized arrangement of their debts, with more installments and a lower interest rate than the existing fixed case-by-case arrangements.

Similarly, someone who wants to get a long-term loan (e.g. a mortgage) from a bank, will be able to claim a lower interest rate or if he finds himself in financial difficulty during repayment, he will be able to more easily achieve his refinancing with favorable conditions. Of course, it is enough to have such a certificate with a good rating.

Regarding the issuance of a credit rating certificate for a private entity, it requires its consent to the lifting of tax secrecy.

This new authority will operate in Greece on the model of other authorities that have been operating for years in other European countries such as Ireland (Central Credit Register), Germany (Schufa Holding AG), Austria (KSV1870) and France (FICP – “Fichier national des Incidents de remboursement des Crédits aux Particuliers”), Belgium and Portugal.