CBI: Struggling Banks Could Merge

The Central Bank of Iran considers merger as a solution for low-profit banks, “but it will be used only when other options fail to solve the problem”, said the director of CBI’s Office for Supervising Banks and Credit Institutions.

“The merger of banks is helpful only when two struggling banks merge with a strong one, otherwise the problem would not be solved … [but] it will compound previous woes,” Fars News Agency also quoted Abbas Kamarei as saying on Wednesday.

He noted that there would be no need for mergers, if lenders manage to boost their efficiency by cutting costs and reforming their structures.

“Reforms in the banks’ financial statements reveal the depth of the problems in the banking sector. Lenders understood the importance of reforms,” he said.

The central bank is holding regular meeting with lenders to discuss their progress in conducting reforms. 

“CBI’s main goal is to promote transparency of banking operations as well as the lenders’ compliance with regulations,” he said.

“The problem is not limited to small private banks. The whole industry is affected.” 

Kamarei also said CBI wants lenders to focus on raising their profit through alternative methods, including the payment of transaction fees and the sale of unwanted assets.

“CBI has come up with a plan for boosting banks’ earnings through fees. Lenders would be able to receive fees on rial transactions, international operations and electronic services,” he said.

The Central Bank of Iran’s new oversight plan for the banking system has employed the latest in international banking experiences and practices. 

The main component of the plan, called the New Model of Supervision Over Banks and initiated by CBI in 2013, was presented to the Money and Credit Council for approval on Feb. 1. 

The model seeks to tighten oversight on banks and curb their speculative activities.