Economy, Business And Markets

New Central Bank Controller Sends Stronger Message

New Central Bank Controller Sends Stronger Message New Central Bank Controller Sends Stronger Message

The newly-appointed deputy for supervisory affairs at the central bank says that “regaining people’s trust” in the banking sector is the first priority in his new job.

Farshad Heydari, who officially took the helms of the CBI’s regulatory office, said at his inauguration ceremony that he will draw on the services of independent certified accountants to promote transparency in the banking industry that has often come under criticism for poor oversight and lending practices.

“We want to expand CBI supervision over the banks, making use of  banks’ internal auditors  as well as external ones and shift the focus on risk management in the banking sector,” the CBI website quoted him as saying on Saturday.

Earlier this month, governor of the Central Bank of Iran, Valiollah Seif, appointed Heydari as his deputy for supervisory affairs, a position formerly held by Hamid Tehranfar.

“We should also plug the remaining legal loopholes to improve CBI supervision,” Heydari added.

Seif reiterated the need for the banking system to upgrade in accordance with international norms.  “The CBI supervision department has put much effort in enhancing the banking sector,” he said at the ceremony.

  Demanding Task

Accounting, audit and oversight norms at Iranian banks are far behind what prevails in most western countries, as the former still use Basel I rules for risk-management and capital requirements — while US and European lenders are shifting to highly advanced, transparent and open mechanisms.

“Supervisory affairs are one the most demanding tasks at the central bank,” Seif said. “CBI’s creditability among the people in fact depends on CBI supervisory performance.”

He thanked Tehranfar and hoped that Heydari would “employ new policies and practices in creating a positive impact.”

According to the website, Heydari is a former managing director of Bank Melli Iran and a board member of Tejarat Bank and Bank Mell.

Tehranfar elaborated on the challenges in supervision of banks saying “misconceptions about the CBI’s scope of responsibilities and false expectations from the regulator tend to create difficulties.”  

Tehranfar in an interview with ISNA earlier this week said that lawmakers sometimes push the central bank to force banks into risky ventures. “Everybody tries to pull the CBI supervisory wing toward their own side…This body is not supposed to be under any external pressure.”

He went on to say that “CBI’s supervisory role is rather imprecise. It is unable to keep a close watch on the operations of all 21,000 bank branches across the country.” Branches of both state and private lenders have spread like wild mushrooms across the country in recent years and the performance of most, especially state-owned banks, have been poor, to say the least.