Economy, Business And Markets

Banks to Raise Capital via Public Offerings

Banks to Raise Capital via Public OfferingsBanks to Raise Capital via Public Offerings

Parliamentarians on Saturday decided to allow the administration to raise the capital of state-owned commercial lenders in an attempt to increase their lending power.

The parliament approved part of the budget bill to raise the banks’ capital by 50 trillion rials ($1.4 billion at market exchange rate) in the next Iranian year, beginning March 21.

The money will come from the sale of the government’s stake in state-owned banks and Insurance companies, which are part of the government’s budget revenues. The government’s stake in these firms is set to be offered to the public, according to Article 44 of Iran’s Constitution (the privatization law)

The Management and Planning Organization, ministry of economic affairs and finance and the central bank are to hash out the details for the capital increase.

Article 44 of Iran’s constitutional law divides the economy into state, cooperative and privately owned sectors. Heavy industries, mining, foreign trade, banking, insurance, energy, irrigation, media, telecommunications, airlines, shipping, rail transport are the domain of the state according to the article, leaving services, agriculture, commerce and small industries to the private sector.

Based on the modern reinterpretation of the law, introduced in 2006, the government started to privatize its holdings. The Expediency Council decreed that the government sell at least 80 percent of its sta ke in state-owned firms that were set to be privatized. In practice the shares ended up in the hands of various governmental firms or state affiliated companies.