Banks Banned From Providing Collateral for Subsidiary Companies
Economy, Business And Markets

Banks Banned From Providing Collateral for Subsidiary Companies

The Central Bank of Iran has banned commercial banks from providing loan collateral for their subsidiary companies. The ban targets one important aspect of the non-banking activities of banks which has gained momentum in recent years.
The directive, available on the central bank’s website, was issued to banks on Monday. It points to an alleged collusion between certain commercial banks and credit institutions, whereby they “exploited loopholes in the law” to prop up each others’ subsidiary companies.  
“Since the purpose of this collusion is to circumvent the regulatory laws, many basic lending rules like credit and collateral assessments are being bent,” the directive states.
The website adds that this practice, if it goes unchecked, would generate a banking oligarchy that would complicate the financial system and leave banks and credit institutions vulnerable to possible loan defaults by these  companies.  
Bank’s non-banking activities have recently come under heavy criticism due to their perils for the economy and manufacturing sector in particular. Banks resorted to investments ranging from the real estate to imports to compensate losses instigated by nuclear-related sanctions.
The CBI’s directive concludes with warnings to bank CEOs and board members to refuse any collateral for their affiliate companies and also reject any proposal by other banks or credit institutions to collateralize their loans.
“The consequences for failure to uphold this mandate will be borne by bank executives and board members,” it said.

Short URL : http://goo.gl/aqz2Jb

You can also read ...

Italy's Ansaldo Set to Produce Power From Iran's South Pars Gas Flares
Italy's Ansaldo Energia signed a memorandum of understanding...
Fate of Cryptocurrency in Iran Hangs in Balance
Virtual currencies are slowly but steadily gaining traction...
IRISL Returns to the Fold of Int’l Shipping Giants
The Islamic Republic of Iran Shipping Lines plans to replace...
Dairy Exports to Hit $1b
Iran is one of the top milk producers and has ambitious plans...
1st Currency ETF  in the Pipeline
The Iranian capital market’s first foreign currency exchange-...
Money and Credit Council Approves Liquidity Risk Management Rules
Money and Credit Council, a top financial decision-making body...
84% Rise in Rice Imports
More than 1.05 million tons of semi and wholly milled rice...
Iran Insurance Growth at 20%
The collective figure of Iranian insurance companies’ premiums...