The Banking Reform Bill calls, among other things, for creating a supreme board for monitoring the performance of banks, said the director of Association of Banking and Credit Investment Consultants (ABCIC).
“The bill aims to promote [efficient] supervision over the banking sector. The anticipated body will be founded to this end. Central Bank of Iran [therefore] will be one of the institutions closely watching lenders’ operations,” Siamak Samimi was quoted as saying by the ABCIC website during a press conference.
The Banking Reform Bill defines the duties of banks and non-bank credit institutions and decrees that they must obtain working license from the CBI. It explains all banking operations and services, sets regulations for the opening of branches pertaining to foreign banks and sets limits to their investments. It also obliges credit institutions to provide viable information, puts in place a professional set of criteria for appointing top-tier executives and board members and makes provision for setting up internal risk and auditing committees.
“Lenders claim that non-performing loans range between 800 trillion rials ($25.5 billion) and 1 quadrillion rials ($31.9 billion) ,” he said noting that industrial units alone account for 150 trillion of the amount.”
Samimi also thinks that CBI supervision so far was not efficient enough.“This compelled the government to start tightening oversight of the banking sector.”
Elaborating on the goals of the ABCIC, he said the association was formed in 2008 to help prevent the surge in non-performing loans and channel lending toward constructive production and projects.”
Low capital levels, the mountain of troubled credits, government debts to banks and non-banking businesses of lenders are currently the main challenges of the already struggling banking industry.
“The government tasked the CBI to come up with a proper mechanism to ensure loans are paid only for feasible projects,” he said, and added that the Economy Ministry and the CBI also allowed banks to get help from investment consultants.
“But banks started to establish their own consultancies, which is against CBI regulations,” Samimi said noting that a consultant is not allowed to be the beneficiary of a project.
Only 3% of banks’ lending is reviewed by [independent] investment consultants, he added.
“A total of 352 investment plans were sent to the ABCIC during the fiscal year ending in July 20, 79 of which were sent by non-bank entities worth of 2.3 quadrillion rials ($73.4 billion),” he said. “Islamic banking regulations also require banks to be careful and transparent as to where they invest,” he said. ABCIC currently has 280 member companies.
