The government should ease rules related to the sale of excess assets of banks to augment much-needed transparency in the banking sector and tame the galloping inflation, a deputy head of the Majlis Economic Studies Center said.
“Banks indeed are responsible for underpinning the real economic sector. Any activity that deviates them from this fundamental role, like doing business, buying/selling real estate…is a departure from their purpose of being,” Mousa Shahbazi was quoted by IBENA as saying.
Voicing the concerns of prominent economists and academia, Shahbazi said that the surplus assets, among other things, have for years led to disorderly and confusing bank balance sheets.
Non-banking activities of lenders have long been censured by economists on the premise that it is a major hindrance to healthy and transparent banking that have resulted in mountains of bad debts and non-performing loans.
Banks and credit institutions own an estimated 1,000 trillion rials ($2.8 billion) in non-financial assets, which have piled up largely due to impaired loans, bad debts, settlement of government debts to banks, branch closures and troubled investments.
“Over the years, we have seen an increasing number of banks pouring money into real estate. Moreover, at times the government has settled its debt to some banks with property. This is actually the [main] source of surplus property of banks that we see today.”
The parliament and government(s), Shahbazi said, have often called on banks to get rid of the superfluous property and steer clear of investments in and dealing with businesses that have nothing to do with banking per se. However, those pleas have fallen on deaf years as banks continue on the same old damaging path, he rued.
Challenges Galore
“They [banks] say that the procedures pose a legion of legal problems and other challenges which cannot be easily overcome. Even banks willing and able to sell their assets face hurdles that in the end prevent them from doing so.”
Shahbazi said that the problem can only be solved if there is a strong will and determination on the part of the government to remove the legal barriers and bottlenecks.
Economy Minister Ehsan Khandouzi said last week that private and state-owned banks sold 670 trillion rials ($1.8 billion) in surplus assets since 2015.
“Shares in non-bank businesses accounted for almost half the assets and the rest was overextended real estate,” he said.
As per the numbers, Bank Saderat accounted for 22% or 145 trillion rials ($408.45 million) of the assets, followed by Bank Melli with 21% or 143 trillion rials ($402.8m), Tejarat Bank 110 trillion rials ($309.8m) and Bank Mellat 96 trillion rials ($270.4m).
Refah Bank with 48 trillion rials ($135.2m), Bank Sepah 47 trillion rials ($132.3m) and Bank Keshavarzi with 40 trillion rials ($112.6m) were the other lenders.
The minister said banks' progress in ending non-banking business will be the main criteria for assessing the performance of their CEOs. “We met all CEOs of banks to explain what needs to be done about selling the excess assets.”
He said, “We required them to focus on selling large and appreciated assets rather than small holdings. For example, Bank Melli should free up 300 trillion rials ($850m) of its shares in Shazand Petrochemical Company and Bank Sepah needs to sell property to the tune of 30 trillion rials.”
