Economy, Business And Markets

Senior Bankers Speak Their Mind

Senior Bankers Speak Their MindSenior Bankers Speak Their Mind

The 26th conference on Monetary and Forex Policies will be held May 24-25 in Tehran. Senior bankers have outlined their opinion on the banking state of affairs ahead of the meeting, pointing to the problems and possible solutions.

The CEO of Bank Tejarat, Mohammad Ebrahim Moghaddam says that addressing the credit crunch is one of most urgent issues. To check this problem it is essential that Iranian banks establish strong ties with their European counterparts in the post-sanctions era, he noted.

“Relations with European banks can make it possible to use foreign banks’ resources and finance big projects in Iran. Therefore we have to upgrade ourselves to close the gap between our performance and international banking norms,” the website of the Monetary and Banking Research Institute quoted him as saying in an interview.

Moghadam stated that the outdated banking rules and lack of transparency in lenders’ balance sheets are big hurdles in the way of Iranian banks’ reconnection to the international banking.

The banker criticized the previous government and blamed it for creating a hyperinflation of 40% and the ensuing credit crunch that is still haunting the economy. The tenure of the former administration ended in 2013.

As a result of the credit crunch many production units are insolvent and unable to repay their loans to banks, he recalled.

Commending the Central Bank of Iran for its anti-inflationary policies, Moghaddam said “ending the current recession demands injecting money into the economy.”

  Focus on Real Sectors

Kuroush Parvizian, CEO of Parsian Bank and head of the Private Banks’ Association opined that financing the real sectors of the economy should be among the major goals of the domestic banking system.

On the crucial issue of transparency he stressed the importance of fighting and defeating corruption and closely supervising banks’ affairs. “Creating and sustaining transparency in banks’ affairs and moving along the lines of the CBI would be effective in curbing corruption.”

 Lower Rates Help  

Esmail Lallegani, the CEO of Bank Saderat pointed to lowering lending rates for production units as a major objective of the banking system in the fiscal year that started in March. He however stressed the importance of also lowering deposit rates as a prerequisite to lowering lending rates. “Participating in big projects and helping production units should be among the priorities of the banking sector.”

The senior banker also pointed to developing and expanding credit-based banking services saying increasing the number of LCs offered to manufacturers can help them sell their products in foreign markets.

 2 Pressing Issues

Mohammad Hashem Botshekan, CEO of Bank Maskan pointed to the mountain of  bad loans and the credit crunch as the two most urgent issues inhibiting the Iranian banking industry.

He pointed to a tripling of forex rates, a hyperinflation of 40% and crippling sanctions as some of the ills visiting the domestic economy over the past several years.

“The inflation accompanied by unprecedented recession resulted in the bankruptcy of many production industries and hurled the economy into negative territory,” during the former government, he recalled.

Botshekan pointed to the huge oil revenues flowing into the domestic economy during the previous government saying it had led to the Dutch disease in Iran’s economy.

“When oil revenues shot up liquidity rushed to the housing market. But when recession hit the real estate sector much of the banks’ resources (housing mortgages and credits) were stressed and became inaccessible.”

Pointing to soured assets and government debt to banks as serious constraints of the struggling banking sector that must be addressed soon, he called for the establishment of “asset management companies” to help settle the issue of bad loans and government debt to the banks.