The Economy Minister Farhad Dejpasand has joined the increasing number of economists and bankers censuring the banking bill being debated in the Majlis.
He was speaking at a meeting to examine flaws in the “Central Bank Bill”, the outlines of which were approved in the chamber as part of comprehensive banking legislation. The bill calls for structural reforms in the Central Bank of Iran and in its upper echelons.
Unlike what lawmakers claim about the potential of the bill in increasing the CBI’s independence, officials at the meeting believe otherwise.
They say the new law will allow unwanted intervention of irrelevant bodies in banking affairs. The law may also breach the law on separation of powers as it proposes that the three branches(executive, legislature and judiciary) intervene in CBI affairs, which obviously would erode not enhance its independence.
Dejpasand pointed to the “accountability issue” and “reduced independence” of the central bank as the main sticking points of the bill.
“The CBI will not be more independent than it already is. It will be further detached from the executive [branch] of power and be subject to supervision by the three branches of power instead,” he was quoted as saying by IRNA.
Dejpasand criticized proposed changes to CBI management under which the “authority given to decision makers will not be compatible with their [potential for] accountability.”
As per the bill, the central bank in essence will be run by a “high council” and the governor will be relegated to second position.
Members of the council will fall in two categories: executive and non-executive. The governor and vice governor will function as executive members while non-executives will include professionals in the banking, monetary, accounting, financial management and law fields.
Incomprehensive
Abbas Memarnejad, a deputy economy minister, said the bill has failed to envision the legal framework for key banking and monetary issues.
Among issues unseen in the bill are rules on bankruptcy and bank mergers, compliance with anti-money laundering norms as required by the Financial Action Task Force (the global watchdog for money laundering) as well as provisions addressing e-banking and cryptocurrencies.
Kamran Nadri, a banking expert, criticized setting a floor and ceiling for interbank interest rates and proposed that the rates be determined by interbank market dynamics.
While there are opposing views about the proposed banking law, both opponents and proponents agree on one main issue: the present banking law is obsolete and needs reform. The present laws were passed half a century ago and are riddled with flaws that, among other things, simply failed to safeguard the value of the national currency.
Defending the new law, the Majlis Research Center says it has the potential to improve the governance of the central bank, saying that under the present governing apparatus the CBI has failed to protect the national currency.
