Economy, Business And Markets

Mabnaa Poised to Transform Banking System

Mabnaa Poised to Transform Banking SystemMabnaa Poised to Transform Banking System

Banking business in Iran has a long history and since its early days in 1887, the banking industry has undergone many reforms but none has so far been so definitive to stand the test of time.

The nature of Iran’s economy has turned it into a bank-based enterprise and this makes the necessity of banking reforms all the more vital. Mabnaa is the latest hot model that seeks to transform the banking system. It aims to establish a common, standard and professional language in the banking system. The project is itself a subsidiary of a bigger initiative called Nashta—a set of principles geared toward promoting transparency in the banking system.

 Major Overhaul

In its first initiative approved at the 50th annual meeting of the Central Bank of Iran, Mabnaa sets forth the plan to “systematically analyze” banking transactions.

Furthermore, it urges bankers to devise innovative and new services to enhance their presence in the market. The system also obliges banks and credit institutions to adapt themselves to the latest set of rules and regulations introduced by CBI.

Other measures put forward by the model include the integration of all working systems and making room for progress and innovation in banking services and transactions.

The reform plan requires that all commercial lenders as well as credit and financial institutions to keep a record of their banking operations, including deposits and loans both in the Iranian rial and foreign currencies within one year after the mandate is announced. The record keeping, the model orders, should be conducted according to the technical and administrative standards of the central bank.

The model ultimately transforms the status quo by integrating all commercial banks and financial institutions under the regulatory watch of CBI. This new pattern demands a much-needed harmony in the banking system by making use of the most successful banking practices prevalent around the globe.

 Toward World-Class Banking

Drafting the ambitious reform plan began last year after a memorandum of understanding was signed between the Money and Banking Research Institute and the Informatics Services Corporation. The agreement states that the new banking system should draw inspiration from progressive international models like Information Framework—a tool for analyzing and structuring information, the Banking Industry Architecture Network—an independent, member-owned, non-profit  association to establish and promote a common architectural framework  for enabling banking interoperability and Sarbanes-Oxley Act of 2002. The legislation passed by the US Congress protects shareholders and the general public from accounting errors and fraudulent practices in the enterprise, as well as improves the accuracy of corporate disclosures.

The collaboration of MBRI, the research arm of the Central Bank of Iran, and ISC, a company involved in several high-profile e-banking enterprises, would be key in launching the initiative. The two bodies will work together to come up with a franchise that best suits the banking climate in Iran.

The model will gradually replace the old, dysfunctional system through the multiple resources the enterprise has at its disposal. Mabnaa has been dubbed “Iran’s new banking school” to its groundbreaking impact.

The launch of the first online banking encyclopedia titled Wiki Mabnaa during a monetary conference in Tehran last month was a landmark achievement for the franchise.  As a free volunteer-edited and specialized encyclopedia in the field of money and finance, the online service was jointly created by the MBRI and ISC. The new service aims to provide officials, academics, experts and journalists with updated information on banking.

 Brave New World

As the drafting of the model gets underway, CBI officials have hailed the new structure as heralding a new era in the banking system.  Secretary-general of the bank, Mahmoud Ahmadi, praised the new system for its transparency and full force of the CBI’s regulatory watch behind it.

“With the commencement of Mabnaa, the banking system will be rewritten based on international frameworks which will allow the CBI to monitor the banking system more effectively,” Ahmadi was quoted as saying by Banker website.

Nasser Hakimi, head of the Information Technology Office at the CBI, also believes that Mabnaa would eliminate much of the chaos and irregularity in the banking system.

“As long as a unified and integrated system is lacking in our banking and transparency is a rarity, the system will not improve,” he cautioned.