Economy, Business And Markets

Countdown Begins for Uncertified Bureaux de Change

Finance Desk
Countdown Begins for  Uncertified Bureaux de Change
Countdown Begins for  Uncertified Bureaux de Change

Unlicensed bureaux de change are in hot water as countdown to their deadline—Aug. 19—to obtain a permit from the Central Bank of Iran approaches.

The uncertified bureaux de change had in the past ignored calls to embrace transparency by operating under the CBI's supervision, but now they either have to eat the humble pie or close shop.

"After the deadline expires, bureaux de change without an license will be legally banned from foreign exchange dealings," Hamid Tehranfar, vice governor of the central bank for supervision affairs, told the press on Sunday.

Tehranfar added that bureaux de change that remain unlicensed by Aug. 19 will be charged with the crime of foreign currency smuggling.

"This deadline won't be extended and the CBI will begin its crackdown on these companies if they fail to meet the deadline for obtaining license," Tehranfar warned.

Band of Renegades

Unlicensed bureaux de charge are part of a wayward fraternity that are usually lumped together as ''unauthorized credit and financial institutions''. Their exponential growth–especially during the incumbency of former president Mahmoud Ahmadinejad—has faced policymakers with a dilemma as to how to confront them.

Upon taking the reins at the central bank, Governor Valiollah Seif took a notably hard line against unlicensed companies, but gradually softened his tone to suit a more conciliatory approach. As part of a new charm offensive, Tehranfar declared on Saturday that the CBI is not after "dismantling" unauthorized companies and that the "market's need" accounted for their gargantuan growth.

CBI's about-face on unauthorized financial companies was greatly influenced by the painful experience of closing the now-defunct Mizan institution, which resulted in hundreds of its employees losing their jobs and its board members going to change.

Overall, it is estimated that over 6,000 unlicensed financial and credit institutions operate throughout the country. Of the nine large credit institutions, only three have central bank permits. The judiciary's reports show that 300 leasing firms (loan companies) are also working unchecked, endangering the public money and out of 1,600 active bureaux de change, only 428 have CBI's operation license. Moreover, over a quarter of 204 credit cooperatives lack the regulator's permit as well.

Against the Tide

It is apparent from Tehranfar's comments that bureaux de charge are largely excluded from the charm offensive. He made it clear in his remarks that unlicensed bureaux de charge that miss the deadline will be dealt with "firmly" and asked citizens to boycott them altogether.

He added that 350 bureaux the charge renewed their licenses while 450 other are awaiting the approval of their documents. "Over 2,000 new applicants have also submitted their credentials and we hope their entry to the forex market will help stabilize it," he said.

The Aug. 19 deadline was set by Vice President Es'haq Jahangiri who issued a directive to the central bank last year for regulating these companies.

The volatilities of the forex market in the previous years–with it its climax in 2011—have especially sensitized the government about bureaux de charge which have often been blamed for stoking instability in the market.