Economy, Business And Markets

Private Banks React to CBI Proposal

Private Banks React to CBI ProposalPrivate Banks React to CBI Proposal

The private banks have fiercely slammed the new sample bank charter, recently issued by the Central Bank of Iran (CBI), suggesting private banks to sell 20 percent of their shares to the government, Forsatnet reported on Wednesday.

The CBI has ordered lenders to hold an extraordinary shareholder meeting and change their charters to comply with the sample charter provided by the bank.

Apart from severe objections from the banking sector, the announcement has triggered wide criticisms among economists, who believe the decision is a clear interference in the private banks' affairs.

“It is very natural for the private banks’ shareholders to oppose the charter. It's like giving them an axe and asking them to cut their own roots," Farshad Qorbani, an economist, said.

"Such a decision could have been expected from the previous administration but not from the Rouhani administration, which advocates the free market economy," he said.

Qorbani argued that the decision "will frustrate the private sector as a whole."

According to Article 57 of the charter, the board of governors of private banks should not engage in executive matters and should delegate the authority to an "executive board".

"This will discourage experienced bankers to join the banking system," according to Qorbani. He believes that the CBI's recent move does not solve any problem of the ailing banking system.

It seems that the CBI is trying to compensate for its mismanagement in the previous decade, which eventually led to the emergence of numerous authorized and unauthorized credit and financial institutions, Mohammad Kohan-Dezh, another economist, said. "However, the fact is that the supervisory measures of the CBI are turning into orders and interference.”

"The regulator should now explain the legal basis of the dictated charter to the public," he said. Legally, the CBI cannot interfere in people's ownership rights.