The Board of Directors of the Central Bank decided to approve the issuance of controls for the use of alternative data for credit evaluation through digital evaluation models – Behavioral Scoring Models.
He said that in the event that banks grant financing based on digital evaluation models that analyze data alternative to traditional credit granting requirements such as customer behaviors, social data, and financial and non-financial transactions, the following controls must be adhered to:
1 – That this be restricted to very small and small companies – including newly established companies – whose annual turnover / sales amount to 20 million pounds at most, with the necessity for banks to periodically monitor the volume of their business in order to ensure that it is in line with the mentioned limit.
2- Direct financing should be in local currency only.
3- Establishing policies and work procedures for digital evaluation models, to be approved by the bank’s board of directors, and reviewing them periodically.
4- The bank prepares a digital evaluation form, taking into consideration the following:
a. Preparing a digital evaluation form according to the type of product and available data on customers.
B. The necessity of developing the necessary procedures and standards to test and evaluate the model and amend it periodically according to the results of these procedures.
C. Review performance indicators and evaluation form inputs according to the quality of the granted portfolio periodically and make the necessary adjustments, if any, by the authority concerned with approving the model in the bank.
Dr.. Verifying the validity and validity of the digital evaluation model through an independent agency, with the aim of evaluating the effectiveness of the models and the accuracy of the results, while providing the Central Bank with the report of this body upon initial application. Banks that have used a specialized agency to build the evaluation model are excluded from this item.
5. Taking into consideration building the technical capabilities of the bank’s employees, whether those responsible for the model or its users.
6- Notifying the Central Bank when starting to use the digital evaluation forms that are the subject of the instructions.
7- Provide the Central Bank with the following:
a. Policies approved by the bank’s board of directors referred to in Clause 3, provided that the strategy for dealing with risks and expected losses includes the ratio of loans and irregular facilities expected in the granted financing portfolio based on digital evaluation models.
B. A comprehensive quarterly statement of the total financing portfolio granted based on digital evaluation models, including the percentage of non-performing loans and facilities in the portfolio, according to the models received from the Office Supervision Sector in this regard.
The central article issues controls for using data analysis in credit evaluation instead of financial statements. It was written in the Stock Exchange newspaper.