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Finance Structures Need Overhaul

Finance Structures Need OverhaulFinance Structures Need Overhaul

Reforming the economy’s finance structure is essential and doing so will help pave the way for decent economic growth, Akbar Komeijani, deputy governor of the Central Bank of Iran said late Sunday.

Komeijani pointed to some necessary measures for improving the financial structures he believes can work to ease the grinding pressure on providing finance, which is almost totally on the money market.

“Firstly, banks should revise their balance sheets and improve the quality of their assets. Second, capital markets need to be revived by developing a market for buying government debts. And thirdly, new funds should be injected into the economy through foreign investments,” he told a Conference on Foreign Investment Opportunities, the CBI website reported.

Komeijani then addressed the major challenges besetting Iran’s financial structures. He listed credit crunch, high volume of unsold bonds of state-controlled companies, uncertified financial and credit institutions, interest rates set by decree, the government’s insufficient liquidity and the long line of businesses seeking loans as the main causes behind the present state of affairs.

Pointing to global standards for financing he said that the optimum balance is reached “when we task the capital markets with long-term financing and assign the money market the responsibility of alleviating short-term problems regarding manufactures insufficient liquidity.”

The senior banker stated that the capital market in Iran is underdeveloped while the banking industry carries the financing burden to a great extent. “In the previous year (ended March 20, 2014) banks provided 89% of the capital needed by different sectors of the economy. Therefore our economy is a banking-centered economy.”

Government debts, said to be 1.6 quadrillion rials ($ 35.5 billion) in summer, the ratio of bad loans to the total loans (12.2% and worth 909 trillion rials ($30.3 billion), low level of bank assets and their capital adequacy ratio are key factors limiting the ability of lenders to meet new loan demands of businesses and industries, he said.

Financialtribune.com