Parliament on Tuesday voted in favor of restructuring the top policy and decision-making body of the financial markets in the framework of plans to reform the Central Bank Law.
A new body is to be formed to function as the main authority of financial markets designated as the ‘Higher Board of the Central Bank,’ and will replace the existing Money and Credit Council (MCC).
The board will be headed by the governor of the Central Bank of Iran but with fewer members compared to the MCC.
According to IBENA, the economy minister or his deputy, head of the Plan and Budget Organization, two economists specializing in monetary and banking policymaking, two banking experts, one in legal affairs and the other in financial affairs, the CBI deputy for monetary policymaking and CBI's deputy for regulatory and supervisory affairs will sit on the new board.
The Majlis also approved formation of a separate body to focus exclusively on supervising the banking industry known as the ‘Regulatory and Banking Supervision Committee’.
A deputy CBI governor will head the committee. Members of the group will include the CBI deputy for regulatory and supervisory affairs, the CBI deputy for legal affairs, the two economists specializing in monetary and banking policy who double as members of the higher board and three experts in banking regulations holding a Ph.D. in related fields with at least 10 years of relevant experience.
So far, the MCC has been the highest policymaking body of the CBI headed by the bank governor focusing on the CBI’s general policies and supervising monetary and banking affairs. Among other things, the council’s mandate included passing rules on loans and credit guarantees and advising the government on banking/monetary affairs.
Observers say the move to restructure the influential body can help improve the efficiency of its decisions as it will draw on the knowledge, experience and valuable expertise of its members.
The Majlis Research Center supported the restructuring of the key policymaking body last year on the premise that it can and should reduce the government’s dominating role and influence in CBI decision-making.
Need for Professionals Not Gov’t Functionaries
"While members of both MCC and the high council are appointed by the government, either directly or otherwise, members of the latter will be selected mainly from among financial and monetary professionals, not government functionaries," the influential think-tank said.
The new law is also aimed at addressing the requirements of shariah in banking affairs. A Fiqh council is to be formed to ensure that policies are shariah-compliant.
Five Faqihs (Islamic jurisprudents) specializing in commercial and banking affairs, a CBI deputy governor, CBI deputies for legal affairs and supervision, one economist well-versed in Islamic banking, ten attorneys with in-depth knowledge of Islamic banking, one commercial bank CEO will sit on the Fiqh council.
In June 2021 parliament approved the outlines of the Central Bank Bill as part of broader banking legislation to reform the CBI’s organizational structure and its governance.
The Central Bank Law – first passed in 1972 – was crafted to updat and modernize banking regulations. Enhancing the independence of the CBI, improving monetary policies and augmenting CBI supervision over the money market are among its key goals.
As part of that bill, the CBI would have more clout in policymaking and supervising banks and credit institutions. To this end two bodies were proposed: one for setting monetary/banking policies and the other for supervising creditworthiness and performance of financial institutions.
