Banking System Moving Toward Basel III

The Central Bank of Iran has played a significant and effective role in implementing Basel II and III standards in the banking system, a board member of Bank Maskan said.

“When the banks reach the required standards, they would be able to benefit from the international financial services and establish correspondent relations with foreign banks,” Alireza Bolgouri was also quoted as saying by IBENA.

Basel III (or the Third Basel Accord) is a global, voluntary regulatory framework on bank capital adequacy, stress testing and market liquidity risk. The third installment of the Basel Accords was developed in response to the deficiencies in financial regulation revealed by the financial crisis of 2007–08 to strengthen bank capital requirements by increasing bank liquidity and decreasing bank leverage.

Bolgouri noted that CBI is supporting Iranian banks in implementing the regulations, therefore the banking system will soon be able to reach those standards and increase foreign investments and financing.

“The financial system of our country is bank based and banks shoulder most of the financing but they are also able to use the opportunities in global market,” he added.

This is while CBI Governor Valliolah Seif had earlier announced that the Iranian banking system has already adopted the risk-based Basel I capital adequacy accord and is making the move to adopt more advanced and up-to-date banking rules.   

Quick changes in global and regional markets, especially after the financial crisis, highlight the necessity, relevance and value of these accords. Enhanced regional and global cooperation is necessary to counter banking and financial crises in the face of the interconnected financial markets. It is also imperative to increase interactions and cooperation to ensure the smooth handling of regulations and the supervision of financial markets and institutions, and prevent regulatory arbitrage in this fast and open global economy.