Economy, Business And Markets

Seif Says Banking Overhaul Plan Ready

Seif Says Banking Overhaul Plan Ready  Seif Says Banking Overhaul Plan Ready

Reiterating the need and necessity to reform the banking sector and improve standards to meet global norms, the Governor of the Central Bank of Iran, Valiollah Seif, said Tuesday that the financial reform plan is being devised and the parts related to banks is finalized.

In two separate meetings he had with senior bankers, Seif discussed the overhaul plan, saying a debt market will be established soon through which the CBI will be armed with the ability to enforce its monetary policies.

"The government's debt will be collateralized through the issuance of bonds and which will finally take place in the capital market" said Seif, the CBI website reported.

Stressing that banks' financial statements will be based on a new format in the current fiscal year that started in March, the governor said: "The CBI has communicated the new financial methodology using the IFRS format."

Increased Transparency  

Noting that banks themselves stand to gain if transparency and openness is upheld in the money market, he expressed some relief that the shocks created by unregistered financial and credit institutions have now been controlled.

"However they are not completely thwarted and this matter needs to be pursued with more decisively."

Seif, who also heads the Money and Credit Council – a decision-making body of the CBI – complained of the weak presence of small and medium-sized enterprises (SMEs) in Iran saying there are less than 10,000 of them active in the country.

 "If only 10% of the new loans of the banking network, or 160 trillion rials ($5.24 billion) are allocated to these enterprises, they will be able to function and move forward, he said.  

"Banks need to provide the CBI with regular updates regarding this issue and I will attend workshops dedicated to granting loans to the SMEs."

Iran’s economy is in dire need of refinancing. Years of sanctions imposed over its nuclear program, combined with the populist policies of former president Mahmoud Ahmadi-Nejad, have left it with negative economic growth in most of the years since 2011.

Analysts say the banking sector — the main source of finance given the country’s weak capital and debt markets — is one of the biggest hurdles to economic recovery as they too need to recapitalize and upgrade their outdated system to meet international norms.