Economy, Business And Markets

Majlis Uneasy With Extended Delays in Banking Reform

Majlis Uneasy With Extended Delays in Banking ReformMajlis Uneasy With Extended Delays in Banking Reform

As the government of President Hassan Rouhnai prepares to submit a long-awaited banking reform draft bill to the Majlis, lawmakers say they are committed to examine the proposal promptly, IRNA reported on Friday.

“Structural reforms in the banking industry plus changes to regulations governing the work of the Central Bank of Iran were among the seven pillars of the economic reform plan that the former administration failed to undertake,” Muhammad Reza Pour Ebrahimi, vice-chairman of the Parliament Economic Commission said.

Despite several reminders sent to the economy minister and CBI Governor Valiollah Seif to get over with the reform job, the MP regretted that the chamber so far had not received any bills pertaining to the reforms. “In the absence of a concrete response from the government, Parliament proceeded independently by setting up a technical, albeit unofficial, working group three months ago to study the various angles of the much-needed reforms in the banking system and come up with a proposal.”

Lawmakers would take focus carefully on the drafts to be presented by the administration and draw on them as reference documents to make decisions, he said. However, if the presentation process is further delayed, “the lawmakers will have no alternative but to present their own proposals on banking reform to the plenary.”

CBI deputy governor, Akbar Komijani, late last month said the reform bill would be sent soon to the government for final review.

The economy minister had also announced that his ministry is in close collaboration with the CBI to prepare a six-point banking overhaul plan.

According to Ali Tayyebnia, the six features of the reform plan have been concocted to improve Islamic banking in line with the efficiency of  financial tools, render banks’ investments and activities more transparent, update the electronic banking system, restructure oversight  and design special ranking and rating systems to promote competition among lenders.

 Based on the draft amendment bill, the usury-free banking act will become a part of the banking law. The new bill calls also for two provisions to modify monetary and banking laws and augment CBI performance.

 Toward Unified Exchange Rate

In an interview with ISNA on Friday the lawmaker said the economy is fully braced for a unified exchange rate regime and the CBI could manage the process.”  

He noted that “transparency in the foreign currency market” is the key to implementing the unified rate regime and called for hard currency spending to be “based on the trade balance which is currently negative” excluding oil revenues.

Foreign currency transfer to and from Iran was described by the MP as the “main challenge to the economy” saddles with years economic and financial sanctions due to the nuclear energy program.

To help facilitate a unified exchange rate system, Pour Ebrahimi welcomed recent proposals to launch a currency futures market similar to the gold market.

Prominent economists and experts, like this MP, have often said that rent-seeking and corruption are largely the products of long multiple exchange rate systems in the complex forex system in Iran. Entities that have connections and easy access to subsidized hard currency could grow and expand while others were flung on the periphery suffering huge losses as forex rates went through the roof pushing most companies out of business, the parliamentarian told the news agency.

Last week as forex were climbing, to the surprise of most market analysts, Tayyebnia responded by saying that the market is getting “quite close” to a unified foreign exchange regime, noting that the difference between the official and free market forex rates are now narrowing.