The Central Bank of Iran in a new directive has prohibited banks, whether directly or indirectly through subsidiaries, from acquiring non-banking fixed assets.
It also set a 30% ceiling of fixed assets that lenders are allowed to hold, the CBI website reported.
According to the circular, which is an amendment to a previous directive, the guidelines were revised in light of changing conditions and regulatory requirements, as well as obligations set forth in macro- level regarding the necessity of not acquiring and retaining non-bank fixed assets by the country's banking network to help raise the efficiency of the key sector.
Additionally, the ceiling for fixed assets is 30% and if the credit institution is in breach it will be prohibited from acquiring or owning any fixed assets until it readjusts and play by the rules.
The mechanism for calculating the net fixed asset ratio has also been revised. The accumulated profit is excluded from the formula. Seized non-bank assets are not included in calculations because such assets must be transferred in the framework of relevant regulations, such as the guideline for the transfer of surplus property of the lenders.
The CBI has said that it will continue to monitor credit institutions' compliance with the new regulations and take action against those who fail to comply. It has also urged credit institutions to seek advice and guidance on how to best uphold the new rules.
The regulator has been encouraging banks to increase their capital adequacy ratio and improve risk management. The new guidelines apparently are expected to support such efforts.
Last week, the minister of economy, Ehsan Khandouzi, said the government has fulfilled its promise and transferred surplus assets of banks to the tune of 580 trillion rials ($1.13 billion) by the end of the calendar year (March 20).
Earlier reports said private and state-owned banks have sold 670 trillion rials ($1.8 billion) in surplus assets since 2015. 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 ($309.8 m) 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 who let go of their assets.
Bankers Notified
The minister said that progress in ending non-banking business is and will be the main criteria for assessing the performance of bank CEOs. “We have told the bankers what can and should be done about selling excess assets.”
Banks and credit institutions own an estimated 1,000 trillion rials ($2.8 billion) in non-financial assets, which have piled up over the years mainly due to impaired loans, bad debts, settlement of government debt to banks, branch closures and distressed investments.
Non-banking activities of lenders have long been censured by prominent university teachers and economists on the premise that it is a major hindrance to healthy and transparent banking that has resulted in the explosion of bad debts and non-performing loans.
In a report seen on the Majis Research Center website, the influential body suggested that the government take responsibility of selling the assets. Per law, state banks are obliged to sell their excess assets subject to the decision of the head of their general assembly.
The parliament’s research wing proposed revising the rules in ways that the government should be responsible for selling the bank assets if they (lenders) fail to do so within six months after announcing the revised rules.
"The government must transfer the proceeds to the banks immediately after the assets are sold…lenders must be obliged to use those funds to support business projects that are export-based and/or labor-intensive."
