Banks Urged to Pursue Profitability, Transparency

In order to have a healthy bank, branch managers ought to ensure the bank's profitability while abiding by the law and observing transparency. Farshad Heydari, the Central Bank of Iran's deputy for supervisory affairs, made the announcement at a ceremony honoring successful bank and credit institution managers.

"Branch managers have two important roles. The first is to make their banking operations profitable in line with banking regulations and being transparent about their balance sheets," Heydari was quoted as saying by CBI's website. "The other is to act as the engine of the economy by providing appropriate services to the productive and efficient sectors of the economy," he added.

Heydari stressed that the first factor for a healthy bank is to determine whether or not it is profitable.

"If the bank's resources, allocated to the customers as loans, help foster production, employment and economic prosperity while the repayment of those loans is on schedule, we can call the bank healthy but if those loans turn into non-performing loans, the bank is considered unhealthy," he said. "If a business is not profitable, it will weaken over time and the continuation of its existence will be threatened, although profitability must be within the framework of the law."

The CBI official emphasized that the business activities of banks and credit institutions must be under legal limits and profitable. Heydari pointed out that another key factor of a bank's health is its asset quality.

"High quality assets include continued lending with appropriate guarantees and productive investments, while poor quality assets are non-productive and inefficient properties of the banks along with bad loans," he said.

The CBI has embarked on an intensive campaign to bring banks in line with international standards after years of sanctions cut them off from global finance and led them to engage in risky lending and investment, leading to a sharp increase in NPLs.