The Central Bank of Iran has made an announcement saying it is the sole authority when it comes to regulating the foreign exchange market and setting the record straight on the operation of bureaux de changes. The announcement says issuing operating licenses for foreign exchange offices is the purview of the CBI and the Association of Bureaux de Change Operators cannot issue permits on its own.
The announcement comes after reports emerged that some lawmakers are pushing for a measure to halt the CBI’s new directive regarding the establishment and registration process for bureaux de change. The MPs have proposed the directive be suspended until more crucial legislation like the CBI Law and Banking Reform Law are passed by the Parliament.
The CBI issued new regulations regarding the currency shops six months ago which required a several measures be taken by the moneychangers. The latter’s main complaint relates to the new mandate issued by the CBI, which asks them to increase their minimum capital requirement.
Bureau owners won a similar case last year by convincing the CBI to backdown from its decision, which divided exchange companies into two major categories: Type One bureaux that had to increase their capital to 40 billion rials ($1.3 million) up from 10 billion rials required previously and Type Two bureaux which had to augment their capital tenfold from 20 billion rials ($600,000) to a whopping 200 billion rials ($6 million).
Veep Intervenes
Strong protestations from the bureaux operators invited reaction from First Vice President Es’haq Jahangiri to rescind the ruling. The bureaus’ bifurcation was also ruled out and instead money exchange shops in big cities had to raise their capital base to 40 billion rials and in smaller towns to 20 billion rials.
Market observers have voiced opposition ever since the new mandate was announced. They believe that the CBI’s new directive results in “creation of monopolies in the forex market.” They claim the CBI has created “a number of bureaux de change that operate according to the wish and whim of the regulator and hence have access to (undeserving) perks and bonuses.”
Heidar Mostakhdemin Hosseini, a senior analyst told the reformist Shargh newspaper on Sunday that Iran’s business climate suffers from monopolies in all sectors. He pointed to the CBI’s new mandate regarding the moneychangers saying that the new regulation is not in line with the ground realities of the currency market and has created dissatisfaction among the bureaux owners. “The forex market is also monopolized and controlled by the government.”
Hosseini referred to the bureaux affiliated to with banks saying there is “no logical reason as to why banks should start foreign exchange offices.”
More Complex
“The new mandate makes the regulations more complex in comparison to the previous one. The CBI has taken liberty to alone vet the managers and boards of the bureaus connected to banks,” he said, adding that this has given rise to speculations about nepotism by the CBI.
He criticized the CBI for what he claims to be permits issued for “selected people” without naming names or specifying their possible links to the bank. “The permits were issued for selected groups that created the conditions for corruption in monetary policies.”
The former senior banker noted that if the CBI wants to issue permits it should grant it to all the interested parties not a selected few. “Acting the way the CBI does creates a monopoly in the hard currency market.”
Masoud Daneshmand, head of the Iran-UAE Chamber of Commerce also pointed to the bureaux de change’s role in transferring foreign currency to and from the country during the sanctions. He said that it is not fair to disgrace the moneychangers now that the sanctions are over to the benefit of some bureaus tied to banks. He says the CBI permits are issued only for some while others are hurled on the periphery.
“Lack of a transparent market leads to corruption. Sometimes the CBI sells foreign currency to specific currency offices in exchange for rials.”
Daneshmand pointed to the reconnection of Iranian banks to the international inter-bank transfer system saying “when Iranian banks are reconnected to SWIFT there is no more excuse for the money exchange offices linked to banks to exist.”
