CBI Rejects Role in Banks’ Stock Woes

The new type of financial statements adopted by the Central Bank of Iran has done nothing to cause Iranian banks’ profit woes, says the director of CBI’s Department for Supervising Banks and Credit Institutions.

“The financial statements considered by the CBI have not made the banks suffer losses because the standards are the same and the statements have created no change in profits and losses,” Abbas Kamarei was also quoted to have said by the official website of the central bank.

“The central bank strives to work on the basis of its mandate and in a way that the income generated by the banks will be real.”

Despite the mandate to adopt international financial reporting standards, Tehran Stock Exchange has suspended the trading of banks’ stocks. A few big lenders have posted losses and investors are angry because of the uncertainty.

Some have sent angry letters to the head of Securities and Exchange Organization demanding explanations and change. Yet the suspension is continuing without anyone taking responsibility.

With regard to non-performing loans, the official notes that guidelines regarding asset classifications must be adhered to. He added that if these guidelines are to be implemented fully, “banks must have tried to put aside bad debt provision in their financial statements way more than they do today”.

The central bank and its governor Valiollah Seif have repeatedly emphasized the importance of upgrading the financial statements of the Iranian banking system and bringing it up to date with international standards.

Seif himself puts added stress on sticking to IFRS.

  Transparency Boon

On criticisms and concerns that the implementation of CBI policies has stopped banks from trading their shares in the market and led to their symbols becoming frozen, the official chose to stick to positive aspects.

“In the past, the major portion of the banks’ income was generated through services and fees of international operations and these revenues were highly influential regarding financial statements,” he said.

“Therefore, if the greater transparency of financial statements leads to the expansion and development of ties between banks and goes on to bulk up their income from services and fees, their share prices will certainly increase.”

Kamarei noted that one of the major criteria of setting share prices–other than profitability–is transparency and the future of that industry.

“Therefore if the totality of measures undertaken lead to added transparency and bring about more income for the banks, their share prices in the exchange market will surely be influenced,” he said.

The official said he hopes documents and approvals regarding the government’s debts to the banking sector will be sent to the central bank.

As he awaits the results of negotiations with the Ministry of Economy and the Planning and Budget Organization of Iran, Kamarei said, “Its finalization is out of my hands.”

By the end of the sixth month of the current fiscal year (Sept. 20), the government’s debts to the banking sector jumped to 2.041 quadrillion rials ($64 billion).