Gov’t Raises Bank Melli Capital by $2.4b

In the latest plan to increase the capital of Iranian public-sector banks, Bank Melli Iran will receive almost half the total amount considered for the plan, the bank’s CEO revealed.

“The Cabinet approved the allocation of 200 trillion rials to increase the core capital of public-sector banks, 93 trillion rials ($2.4 billion) of which will be allocated to increase the capital of Bank Melli,” Mohammad Reza Hossein-Zadeh was quoted as saying by Banker.ir.

The decision obligating the Ministry of Economic Affairs and Finance to make the allocation was taken in the Cabinet meeting chaired by President Hassan Rouhani last week.

Hossein-Zadeh, who was addressing a staff gathering of Bank Melli Iran in the northern province of Mazandaran, said such a measure has been unprecedented after the Islamic Revolution in 1979.

“With this capital increase, the capital adequacy ratio of Bank Melli will reach 6%, which is a very good improvement compared with the past,” he said.

Hossein-Zadeh’s comments come after an analytical report by the research arm of the Iranian Parliament revealed this week that the capital adequacy ratio of the bank is currently negative.

The think tank published a report on the plan to increase the capital of public-sector banks, pinpointing faults while stressing the necessity of the scheme. It also disclosed the capital adequacy ratio for seven public-sector banks, showing that the CAR of only two of them are above the “8% minimum standard” while Bank Melli is the only state-run bank with a negative capital adequacy ratio. 

According to the official directive by President Rouhani approved by the Cabinet, after Bank Melli, Bank Sepah (with CAR at 2.46%) and Agriculture Bank (CAR at 5.47%) will be injected with the highest amount of capital, with each bank receiving 38 trillion rials ($984.9 million) . 

Bank of Industry and Mine (with CAR at 11.90%) and the Export Development Bank of Iran (CAR at 30.86%) will have their capital cushions plumped up by 20 trillion rials ($518.4 million) and 10 trillion rials ($259.2 million) respectively. Finally, Tose’e Ta’avon Bank will receive 1 trillion rials ($25.9 million) to help increase its capital buffer.

Bank Melli Iran is the largest commercial bank of Iran and the Middle East with over 3,300 domestic branches and 43,000 employees. Since 1933, BMI has grown into a large retail bank with several domestic and international branches. Currently, the bank has 18 international branches and services in 11 countries.

The bank is also the top Iranian firm in terms of total assets.