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Time Running Out for Illegal Financial Institutions
Economy, Business And Markets

Time Running Out for Illegal Financial Institutions

The central bank is “determined to crack down on unauthorized financial institutions,” Valiollah Seif, governor of the Central Bank of Iran, said on Saturday. He reaffirmed the CBI’s commitment to put a stop to their activities.
The governor added that the judiciary and the police are having “good cooperation” with the bank on the issue. But banks should stop providing them with their services to help the CBI succeed in countering these institutions.
The crackdown on illegal financial institutions is part of the central bank’s agenda to stabilize the banking system. The number of financial institutions grew considerably during the past ten years, as an influx of liquidity due to high oil revenues, coupled with corruption, made the banking business the one to be in. Now the central bank is cleaning the house.
The bank claims it’s determined to protect people’s deposits. “Depositors shouldn’t endanger their savings just because some illegal institutions offer higher interest rates,” Seif said.
There are roughly 7,000 unauthorized financial institutions working in Iran, according to Hamid Tehranfar, deputy governor of the central bank. These include one bank and many lenders, cooperatives, Qarz-ol-Hassaneh institutes – which pay no interest on deposits.
In the CBI’s latest listing of legal financial institutions, Ayandeh Bank – formerly known as Tat Bank before merging with another financial institution – was the only bank not listed as an authorized institution.
Ayandeh, along with many other intuitions, is offering higher deposit rates than the 22 percent annual deposit rate that is designated by the central bank.
Ayandeh Bank’s officials declined to comment on them not being listed by the CBI as an authorized financial institution.
But an Ayandeh Bank’s branch manager told the Financial Tribune, “We offer deposit rates based on central bank regulations but we cannot talk to you about what we offer to our special clients.”
Unauthorized institutions are being forced to close by the central bank. Their books are out of order and most have declined to provide for CBI oversight, sources close to the central bank governor told the Financial Tribune.
The sources did not want to be identified because of the sensitivity of the subject.
The CBI governor is expected to deliver a report on unauthorized institutions to the Money and Credit Council – a government-controlled body within the bank which makes monetary policy – on Tuesday, December 9.
The MCC is going to decide on revoking the permits of some banks after hearing the report, councilmember Mohammadreza Pour-Ebrahimi told the Bankdari News.
“Under present circumstances no bank is being named, because at the MCC’s next Tuesday session Seif will talk about the current condition and violations by some banks,” Pour-Ebrahimi said.
The MCC member added that the council will revoke the licenses of financial institutions that did not heed CBI’s warnings, failed to allow central bank oversight and could not be restructured. This way, “the nation’s interests will be protected.”

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