CBI’s New Oversight Plan Near Completion

The Central Bank of Iran’s grand plan to overhaul its financial oversight regime is almost complete and will be unveiled soon, announced the bank’s governor.

“The plan to overhaul CBI’s financial regulation practices will be completed by the end of the current month (December 20),” Valiollah Seif was also quoted as saying by the official website of CBI.

Seif was speaking at the Monetary Supervision and Discipline Conference organized by the Iranian Accounting Association on the occasion of National Accounting Day on Tuesday.

“This comprehensive plan, which kicked off in 2013 with a pragmatic approach, is currently being wrapped up and will be officially introduced and become operational by Dec. 20,” he said, adding that a group of experts and academics have worked on it non-stop.

The main achievement of the plan is the “new operational model of supervision over the banks”, the official said, which has been devised by employing the latest in international experience while completely localizing its components.

“With the plan finding its place by the end of the year [March 20], we will be witnessing an improvement in the effectiveness of supervision over banks and a serious change in setting financial regulations,” he added.

Iranian lenders, isolated by years of sanctions from international engagement, have been far behind in regulatory and accounting standards, prompting the central bank and the government to launch a comprehensive reform plan to upgrade the key banking sector.   

Seif called the complete execution of international standards one of the main concerns of the central bank, saying there is currently a broad censensus that Iran’s banking system is in dire need of closing the huge gap created during the years of sanctions in terms of conforming to the global standards.

“As a result, CBI is pursuing the complete implementation of IFRS and other international banking requirements such as Basel guidelines,” he said.

A set of accounting standards, International Financial Reporting Standards have been developed by an independent, not-for-profit organization called the International Accounting Standards Board.

The Basel Accords, including Basel I, Basel II and Basel III, are recommendations on banking capital adequacy requirements issued by the Basel Committee on Banking Supervision.

  New Balance Sheets

The CBI governor also referred to a set of balance sheet templates issued earlier this year, saying they have been working toward the initial goal of increasing transparency in the country’s banking system.

With a precise new design, Seif said, the old profit and loss statement of the banks, which mixed the operations of loss and profit and the sharing of dividends and rendered it hard to decipher, have now “attained a new suitable look and provide transparent information”.

The balance sheets templates were first released by the central bank in February to improve the financial transparency and international operations of Iranian banks.

While the CBI had promised law-abiding banks it would cut their reserve requirements by up to 3% in October of last year as part of a government stimulus package, it said that the quality of financial statements will be the criteria for assessing banks’ performance and the cut in their reserve requirements.

The templates are developed based on IFRS and in accordance with usury-free banking regulations.