The process of merging five banks and credit institutions, affiliated to the armed forces, with the state-owned Bank Sepah, will be completed by the yearend Abdolnasser Hemmati, says the governor of the Central Bank of Iran.
"A large portion of the share of these five banks has been transferred to Bank Sepah. The remaining shares are being transferred," he told reporters on the sidelines of a weekly Cabinet meeting on Wednesday.
"The evaluation of banks’ assets is in progress," he said He expressed optimism over the positive effects of the major merger on the banking industry.
In March the CBI said five banks and credit institutions, namely Ansar Bank, Bank Hekmat Iranian, Mehr Eqtesad Bank, Ghavamin Bank and Kosar Credit Institution will merge with the state-owned Sepah.
The merger is billed as a crucial monetary undertaking in the past half century. It is a follow-up to earlier decisions by the Money and Credit Council – the main monetary decision-maker -- and the Supreme Council of Economic Coordination -- an ad-hoc decision-making body comprising heads of the three branches of government.
Recent reports say 24 million customers have 2,150 trillion ($17.9 billion) in deposits with the five merging institutions. Likewise, these lenders have given 1,300 trillion rials ($10.8 billion) in loans.
Reform Plans
Speaking about the state of banking reforms, Hemmati said the reform plans are in progress but “it is a time consuming process.”
“The key problems bankers are facing, such as poor balance sheets, lenders’ inability to recover non-performing loans and the government's mountain of debts to banks will be addressed gradually," he told the press.
Bank reform plans consist of a bill to reform the cumbersome banking regulations, the Monetary and Banking Law of 45 years ago and additional ways proposed by the government to reform the CBI.
The bill is set to address key challenges of the sector such as capital inadequacy, huge volume of non-performing loans, arcane rules, and dubious operations of illegal credit institutions that have been punishing the economy for years.
Hemmati said the CBI is strict about unauthorized operations by banks. "None of the unregistered financial institutions will henceforth be allowed to function."
"Tthere are some licensed institutions with poor balance sheets," he said, adding that he CBI has employed various tools to take control of loss-making financial institutions.
