Economy, Business And Markets

New Push for Enhancing Banking Sector

New Push for Enhancing Banking SectorNew Push for Enhancing Banking Sector

The government is planning to push again for increasing banks’ capital, the government spokesman, Mohammad Baqer Nowbakht, told state-TV.

“Large amounts of non-performing loans and lack of sufficient capital are key challenges faced the banking sector at the moment but as the government was trying to clear some of its debts to banks through the country’s forex resources, that was rejected by the parliament,” he said.

The government had proposed using forex resources for the recapitalization of banks as part of the annual budget and to help the banking sector meet its international requirements. However, the previous parliament rejected the proposal and said it wanted to prevent government(s) getting accustomed to using forex resources for such or other purposes.

Increasing banks’ capital is a critical need for lenders, especially now that they are expected to help improve growth rates. The government and the Central Bank of Iran have promised to help banks saddled with billions of dollars of soured assets and restructured loans.

The Majlis Research Center had earlier published a report about the proposal, claiming that “approving the proposal would set a bad precedent for the government to make similar moves in the future, which would have negative impacts on the economy.”