Economy, Business And Markets

End of Chaos in Forex Market?

Business & Markets Desk
End of Chaos in Forex Market?
End of Chaos in Forex Market?

The deadline for registering Bureaux de change with the Central Bank of Iran ended on Wednesday.

The bureaux had to apply for an operating permit from the central bank, by meeting the bank's requirements and accepting its oversight.

Currently, there are over 1,400 bureaux in Iran's foreign exchange market, but only 428 are certified and regulated by the central bank, latest statements by the bank show.

These shops form the heart of foreign exchange trading in Iran.  CBI Governor Valiollah Seif is worried about the state of their supervision.

Banks have played a weak role in the foreign exchange market in Iran, especially in day-to-day trading. This role was further weakened by financial sanctions imposed to restrain Iran's nuclear energy program.

The small role of lenders along with the central bank's diminished power during the administration of president Mahmoud Ahmadinejad led to the creation of thousands of unauthorized financial institutions, including many money-changing shops.

The CBI has spent the past two years organizing the foreign exchange market. First the bank cracked down on roadside dealer from changing money in Ferdowsi Street and Sabze Meydan—centers for foreign exchange trading in Tehran. Then it introduced an electronic system to register all currency trading.

The banks' actions, coupled with improving international relations, have led to decreased volatility in rial's exchange rates.

Iran's international relations and economic prospects have improved as a result of ongoing negotiations between Iran and P5+1—the United States, Britain, France, China, Russia and Germany—which culminated in a deal that will lift sanctions in exchange for curbs on Tehran's nuclear activities.

Furthermore, the bank revised foreign exchange regulations last August. It lowered the minimum capital and collateral requirement for owning a bureau de change to encourage shop owners to register with the bank, while setting a deadline for registration.

It also abandoned a two-tier system that limited smaller shops from trading foreign exchange and precious metals, while leaving foreign exchange transfers to larger shops.

The bank intensified its pressure on bureaux de change after Vice President Es'haq Jahangiri asked the bank to deal with unauthorized bureaux. August 19 was the bank's deadline for the bureau owners.

"After the deadline, unauthorized bureaux will come under the law against foreign exchange smuggling, and trading of currencies by them would be against the law," Hamid Tehranfar, vice governor for supervision, said earlier.