More Transparency Measures for Banks, Gov’t Entities

Lawmakers passed a measure on Sunday, based on which all banks must conduct their business under the watchful eye of the Supreme Audit Court.

All government-run entities are also required to enlist their earnings and expenses with the treasury under the supervision of SAC.

As part of reviewing expenses in the 2017-18 budget, MPs approved Clause B of Article 21 of the law –which consists of three clauses–and replaced Clause A with Article 19 of the sixth five-year development plan, reports IBENA.

The clause included another subsection decreeing that licensed government and non-government banks were not allowed to pay interest or open a backup account.

Article 19 of the development plan asserts that excluding other legal commitments of banks and credits institutions in line with using their resources during the plan regarding the allocation of cheap loans, will depend “on the provision of the difference in the annual budget”.

In July, the Money and Credit Council approved a 15% interest rate previously agreed upon by CEOs of major banks.

Clause B of Article 21, which was approved by the parliament, states that all organizations subject to the first subsection of Clause A are “legally bound to engage in all activities regarding the receipt or payment of their income and expenses through the treasury under the supervision of the Supreme Audit Court.”

The collection of all resources and expenditure s must be based on legal decrees and any action to the contrary would be deemed expropriation of public assets, it notes, adding that “this provision does not cancel out the duties of Supreme Audit Court, which have been assigned to the council in other laws”.

Article 21 of the annual budget law contains a third provision that was left untouched, which states that all executive organizations outside the jurisdiction of the Public Audit Law that also have earnings “are bound to engage in and declare all their financial proceedings through the accounts opened in the treasury”.

The provision also obligates the Ministry of Economic Affairs and Finance to ensure the authenticity of adherence to regulations in the way these organizations, except for the private sector and cooperatives, have made their earnings and expenditure and “in case of any violations or infringements, report it to related bodies.”

The ministry is also bound by this provision to draft an annual report to the Budget and Planning Organization of Iran.

 Other Measures

Members of parliament also reviewed Article 20 of the annual budget law, approving one of its provisions that allows the government to attract and enact investment and collaboration deals with the public sector “to facilitate the plan’s financing to acquire capital with economic and fiscal justifications” with highest priority given to unfinished projects.

Furthermore, MPs obligated as part of the same article the creation of “an electronic market for construction projects and infrastructure investments” in one month from the time of the regulation’s approval.

The organization has also been mandated to introduce and publish details of 50 to 100 independent plans or projects in the aforementioned system within the same period.

Separately, Majlis Economic Commission convened under its chairman, Mohammad Reza Pour-Ebrahimi, and CBI Governor Valiollah Seif, and announced the scheme that completely waives late-payment penalties for loans under 1 billion rials ($30,840) on condition that defaulters repay the original amount.

In a talk with ICANA, the official news website of the Iranian Parliament, Seif said the penalty waiver plan faces “limitations” as banks do not possess enough assets to execute it, adding that a decision was made to prioritize forgiving penalties for loans of under 100 million rials ($3,084).

In February, the parliament voted to extend the penalty waiver for loans under 1 billion rials for the coming fiscal year, too. According to the measure, all fines and penalties pertaining to the interest on loans under 1 billion rials will be forgiven for debtors who return the principal amount of their loans to banks in the next fiscal year.

The interest on loans will be reimbursed to lenders from the revaluation of foreign exchange resources of CBI and the fines will be forgiven. The measure is in line with increasing the lenders’ capital, recapitalizing state-owned banks and settling government debts.