Governor of the Central Bank of Iran, Valiollah Seif, announced his bank has developed a blueprint for self-reform as part of the central bank’s measures to prepare for the post-sanctions era.
“The CBI has prepared 54 projects in order to overhaul its own structure, as reforming the regulatory body is instrumental in enhancing the banking sector,” he told the Fifth Annual Conference on E-Banking and Payment Systems held in Tehran’s iconic Milad Tower on Monday.
He added that such plans would also encourage commercial banks to initiate their own reforms.
Seif reaffirmed recent statements from senior officials that only “a couple of days” are left for the Implementation of Iran’s nuclear agreement with the P5+1 that was reached last July in Vienna.
He said adapting to international banking standards would be a major challenge for the Iranian banks in the post-sanction era.
“Banks and financial institutions should work hard to fill the chasm as quickly as possible,” Fars News Agency quoted him as saying during the conference.
“Even though the banking system has improved in recent years, isolation from the global system made e-banking development costly because banks did not get the (expected) return on their technology investments.”
Increased competition among banks also led to a reduction in e-banking fees according to the senior banker. “Banks should plan for earning higher profit from electronic services and fees in the future.”
Sustainable Growth
Economy Minister Ali Tayyebnia also said sustainable economic growth is the ultimate solution to the woes visiting the country and economy.
“Sustainable growth can and should be the avenue through which to mirror a respectful and powerful image of the country to the world,” he told the conferrers.
“A dynamic economy can check poverty while delivering on the welfare agenda.”
The senior cabinet member pointed to the next economic development plan (2016-21) and said 8% growth rates have been envisaged in the plan. “It is a tough task to achieve these growth levels, a feat that would need seven quadrillion rials ($231 billion) a year.”
Complaining that the “domestic economy is too-reliant on banks,” he conceded that the bulk of the burden to achieve 8% growth would indeed be the “function of lenders.”
Tayyebnia admitted that the banking industry has been struggling over the years and faced a plethora of challenges rooted in “structural problems, mistaken policies and economic sanctions.”
“The current credit crunch is the byproduct of the woes besetting the banking sector.”
The volume of soured debts plus the government debts to commercial banks is exerting monumental pressure on the lenders.”
He regretted that no mechanism has so far been found for clearing the huge government debts to the banks and revealed that a special office in his ministry has been working for over a year to determine the total of government debts.
“So far we do not have any concrete figures, but the estimated government debt to banks is in the neighborhood of 3.8 quadrillion rials ($125.9 billion). Arrears of the National Iranian Oil Company are in the region of 1.6 quadrillion rials ($53 billion) which is not included in the government’s overall debt.”
He urged the government to clear its debts saying that such a measure could help revive the struggling banking sector.
Lenders’ non-performing loans is another serious challenge, according to Tayyebnia. “Banks’ bad debts amount to over 900 trillion rials ($29.8 billion).”
He, however, note that addressing the cash crunch of banks is a top priority for the government in the post-sanctions era.
“Settling issues related to the banking system is key to achieving sustainable growth.”
On the diplomatic efforts to normalize relations with the outside world and the historic nuclear accord, he said the government has made “good achievements in the diplomatic arena which will have positive effects on the economy.” The international restrictions related to the nuclear program had largely targeted the banking sector creating serious limitations for banks, he recalled.
“The banking industry was successful during the sanctions years and its performance during the embargo is commendable.”
Happy Bankers
Mahmoud Vaezi, minister of communication and IT, was another notable speaker who told the conferees that banks would be the “real beneficiaries” of the lifting of sanctions since it will enable them play an effective role in country’s future.
“The banking sector was the first to embrace information technology; however, the CBI should take further steps to promote and enhance e-banking,” he said.
Previous administrations did not take ICT seriously although the sector is a leading driver of the economy, the minister added.
The government, under the sixth economic development plan (2016-21), intends to provide 80% of Iranian households with internet access, he noted.
“The plan calls for 600 trillion rials ($19.9 billion) worth of investment in the ICT sector,” he said.”The private sector is set to provide two-thirds of the amount.”
In light of the above, Vaezi urged the banking industry to do its best to enhance and innovate its services.
