An independent central bank is instrumental to economic growth and stability, said Hussein Ghazavi, the newly-appointed deputy minister of economy for banking and insurance affairs. Financial and banking experience of other countries shows that independence of the top monetary policymaker goes a long way in helping ensure a vibrant economy.
Financial development of the banking, insurance and investment market is also a prerequisite to sustainable economic growth according to Ghazavi. He opined that achieving this is subject to close coordination between the Central Bank of Iran and the Ministry of Economy.
“Financial development means efficient financial and credit institutions that provide easy access to capital and other financial services,” he was quoted as saying by the website banker.ir.
Financial development also implies creating the necessary tools for banks’ efficient interaction, establishing modern information systems, laying the groundwork for strong supervision of the banking sector and developing the financial markets, he added.
Reforms to the underperforming banking industry in order to make it compatible with the Islamic Shari’ah are a key priority, the official said. He added that closer collaboration between the CBI and the Ministry of Economy would contribute immensely to the much-awaited reforms.
Awaiting Majlis OK
“Iran’s next development plan (2016-21), the country’s budget bill, the banking reform bill and the central bank reform bill are all pending approval by the Majlis. Once approved, they would help overhaul the banking sector.”
Ghazavi pointed to the importance of establishing a financial rating agency for assessing the banks and said initial measures have been taken to start such a company.
“The agency’s shareholders will be the CBI and the other domestic lenders. Rating Iranian banks will be helpful when it comes to overseas banking. It will also make cooperation with foreign banks easier,” he said.
Covering the volatility risk in the forex market is important and must be addressed according to Ghazavi. He singled out the experience of countries like Turkey and Pakistan saying that there are specific mechanisms to settle such issues. “We are consulting with the Securities and Exchange Organization to find workable mechanisms to cover risks emanating from forex market fluctuations.”
Ghazavi referred to the newly created fund for guaranteeing deposits and stressed the need for its independence through the banking reform law.
