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CBI Bans Processing Checks From 3 Banks

CBI Bans Processing Checks From 3 BanksCBI Bans Processing Checks From 3 Banks

The Central Bank of Iran is playing the role of “the regulator” in the money market as it tries to regain control and stature.

A copy of a directive issued by the CBI to all commercial lenders was published by online media outlets on Friday. The directive bans the acceptance and processing of checks from three banks. The names of the banks were crossed out on the copy.

Sources familiar with the matter also declined to comment on the names. Two of the banks are regulated by the CBI, but the third bank is not, news agencies reported, citing the directive.

“The recently issued directive by the CBI indicates that not only are the states of unauthorized banks and credit institutions unstable, but also, the financial condition of other banks that are under central bank supervision are not good either, and could easily destabilize,” ISNA said on its website.

The directive forbids the processing of over one billion rial ($29,000 at market rate) checks issued by the three banks.

The central bank denied all responsibility for damages caused by breaching the directive. It also will penalize any bank that circumvents its order, if Checkavak e-check system shows any breaches.

CBI’s directive was to take effect from Jan. 29, and is to remain in force until further notice. It includes the rejection of all personal, bankers, and interbank checks from these unspecified banks with over $29,000 value.

The central bank claims it’s determined to protect people’s deposits, though it is unclear whose interests the bank and news agencies are protecting by keeping the names from public: the public or the banks’ owners.

Although the names of the banks were removed, the disclosure that one of them was unauthorized shines the spotlight on Ayandeh Bank.

In the CBI’s October listing of legal financial institutions, Ayandeh Bank – formerly known as Tat Bank before merging with another financial institution – was the only bank not listed as an authorized ban. Surprisingly, the lender was praised last Saturday during a ceremony attended by top monetary officials.

The focus on illegal financial institutions has for a while been part of the central bank’s agenda to stabilize the banking system. The number of financial institutions grew considerably during the past ten years, as an influx of liquidity due to high oil revenues, coupled with corruption, made the banking business the one to be in. Now the central bank is cleaning house.

There are roughly 7,000 unauthorized financial institutions working in Iran, according to Hamid Tehranfar, deputy governor of the central bank. These include one bank and many lenders, cooperatives, and Qarz-ol-Hassaneh institutes, which pay no interest on deposits.

Nine financial institutions including Samen Al-A’emmeh, Samen Al-Hojaj, Arman, Nour, Freshtegan, Mizan, Fazel, Mol-Al Movahedin, and Ferdowsi, were also excluded from CBI’s authorized list, according to Eghtesad News.

Financialtribune.com