The Majlis on Monday began an investigation into the performance of Iranian banks.
In a letter to 25 banks and credit institutions, the parliamentary committee in charge of the probe ordered CEOs to send financial statements covering their performance over ten years until fiscal March 2022.
According to the letter published by Tasnim News Agency, banks that fail to submit the financial data could face the law.
All banks, including state, semi-private and private as well as credit institutions are the subject of the rare parliamentary probe.
The probe will look into issues banks are grappling with, including “unbridled issuance of money and expansion of broad money”, “compound interest on loans” and “role in non-banking operations”.
Cumbersome banking rules, poor supervision, bad corporate governance and failure to distribute banking resources fairly across the country and among production sectors of the economy are also issues of concern that will be investigated.
Mohsen Dehnavi, one of the MPs behind the probe, earlier blamed weak banking supervision and uncontrolled issuance of money for the lack of economic growth.
Criticizing banks’ lending performance, the lawmaker said loans had helped more in boosting the services and trade sectors, instead of supporting the key manufacturing industries
While bank lending has increased substantially, observers say it hardly contributed to economic growth as funds were mainly diverted into speculative markets.
“Lenders are systematically expanding the monetary base despite the fact that most industries are struggling with liquidity crunch,” he was quoted as saying.
The probe is also expected to address non-performing loans and loan defaulters. The decades-old problem of big loan defaulters is seen as the main challenge of the ailing banking sector.
It has weakened bank balance sheets and forced many to stop lending despite the chronic need of businesses to borrow. The CBI recently disclosed the names of big loan to defaulters running into the hundreds.
Weak balance sheets is another major issue of concern, which lawmakers say is the product of lax oversight by the CBI.
Last September, Bank Melli Iran, the major state lender, published its first financial report that revealed shocking details about its dysfunction.
The report showed 675.23 trillion rials ($2.2 billion) in accumulated BMI losses in the last fiscal year (March 2020-21). The losses were equivalent to 73% of the lender’s capital, which literally make the bank eligible for bankruptcy. However, after the publication of the BMI report no follow-up was made available to the public and the bank continues to operate as before.
