Economy, Business And Markets

New Phase in Banking Reforms

New Phase in Banking Reforms New Phase in Banking Reforms

A new milestone in the banking overhaul plan is now visible following Vice-President E'shaq Jahangiri's acceptance of a reform proposal from the Association of Private Banks, Parsian Bank CEO announced at a news conference on Sunday.

"Mr. Jahangiri has issued a decree to his economic team, asking them to consider the proposals made by the association," Kourosh Parvizian said, without elaborating on the contents of the proposal or the milestone.

 In a decree issued in July, President Hassan Rouhani instructed Jahangiri to help implement a series of long overdue reforms in the struggling financial sector.

The directive reemphasizes the need for reforms to help promote the economy in accordance with advancements in foreign policy. The president further called on Jahangiri to devise a comprehensive financial reform plan that could help banks avoid a crisis, develop the capital market and restructure government debt.

 "Favorable View"

Parvizian defended his bank's foray into the foreign exchange market, saying the private lender acts as "leverage"to help the Central Bank of Iran.

"The CBI has a favorable view of the work done by the foreign exchange department of Parsian Bank" and wants it to help stabilize the volatile foreign exchange market, Parvizian told a press conference on Sunday, IRNA reported.

His comments came at a time when the bank is being assailed for its alleged role in the recent turmoil in forex market which saw the US dollar jump to record highs against the rial.

Market observers often complain about bankers who have recently descended on the feeble forex market, selling suitcases full of dollars at their offered rate. According to one foreign exchange dealer, every morning each bank dispatches as many as four agents to the market. These bankers—aka uncle banker – change up to 50 million in US currency into rials and then "disappear".

Among banks who have a noticeable presence on Ferdowsi street—Tehran foreign exchange hub— Parsian Bank has established itself as the persona non grata. Foreign exchange dealers often talk about a third forex rate known as "Parsian rate." This is while the country has officially only two foreign exchange rates: the "free market" and the "official".

Parvizian ascribed what he termed "success of the foreign exchange market" in the past two years to the work done by banks but said Parsian does not "meddle" in market dealings since it does nothing "different" from others. He added that regular bureaux de changes are doing their normal business.

Privately-owned bureaux de changes have been under mounting pressure in recent weeks to increase their capital adequacy and register with the regulator. These private dealers and moneychangers regard the banks' involvement in the forex market a threat to their survival.

The CEO described Parsian's forex dealings as "transparent" and said if there is any suspicion about disruption in the market, CBI's database should move to clarify fact from fiction.

 As for the greenback's surprise rally in the past several weeks, Parvizian retorted by saying that an "increase in demand" for overseas travel was the cause.  It should be noted that few experts and respected analysts buy this pedestrian argument and are convinced that "hidden hands are at play."