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Banks’ Rating Requires CBI Enforcement

Banks’ Rating Requires CBI Enforcement
Banks’ Rating Requires CBI Enforcement

An economist with the prestigious Sharif University of Technology believes bank ratings would be of no use if the Central Bank of Iran fails to publish the results and put them into effect.

“The central bank should be capable of enforcing suitable measures against banks with poor performance, like preventing them from attracting deposits, temporarily seizing them or even revoking their licenses,” Farshad Fatemi was quoted as saying by Eghtesad News on Monday.

President Hassan Rouhani instructed the CBI to issue ratings for all money and credit institutions that would compel them to improve and meet international norms and regulations.

According to CBI’s Vice Governor Akbar Komijani, the Central Bank of Iran is developing a set of criteria for assessing domestic banks, which will be ready in the next fiscal year (starting March 20).

Elaborating on other necessities for rating banks, he said, “Banks need to be fully informed about assessment mechanisms of CBI and its criteria. CBI should also ensure that the data provided by the banks are authentic and up-to-date.”

Fatemi said the central bank is the best entity for rating the banking system, “because at present, the CBI requires banks to perform better.”

“CBI’s rating for the banking system is a common trend across the world, which can later be delegated to rating institutions,’ he said.’

According to President Rouhani’s chief of staff, Mohammad Nahavandian, Iran is in negotiations with some rating agencies, without identifying them. He added that he expects the agencies to provide a full rating.

None of the major ratings firms among Fitch Ratings Inc., Moody’s Investors Service and Standard & Poor’s Ratings Services rate Iran.

Hamid Tehranfar, CBI’s deputy for supervision affairs, last week hoped that Iran’s passage of the anti-money laundering law would help improve the country’s rating in different areas, including the risk of doing business.

Tehranfar welcomed the entry of international rating agencies like Moody’s and Fitch into the Iranian market, but said CBI has not been contacted by any agency, except KPMG. 

Financialtribune.com