Governor of the Central Bank of Iran has sent a directive to banks and credit institutions asking them to come up with a plan to improve their capital adequacy ratio.
Abdolnasser Hemmati said that "banks and credit institutions, due to their differing nature and distinct status in the economy, are often exposed to risks."
He reminded bankers that their CARs would provide them with enough capital and resources to enable them continue their work. Referring to previous CBI efforts to prod banks to adopt Basel II and Basel III standards, the directive calls on lenders whose CARs are lower than 8%, to come up with a plan to address the shortfall.
As Iranian banks were stuck with low CARs and struggled to conform to international standards, CBI issued a directive in 2017 to strengthen their capital cushion.
According to the directive, banks have five years to upgrade themselves as per the new rules that are based on Basel principles.
Minimum capital requirement (8%) under Basel II and 13% under Basel III obliges banks to maintain the minimum capital ratio of regulatory capital over risk-weighted assets.
Caption: CBI directive exhorts banks and credit institutions to improve their CARs.
