Economy, Business And Markets

Banking Corruption Under Investigation

Banking Corruption Under InvestigationBanking Corruption Under Investigation

The governor of the Central Bank of Iran revealed the details of a 120-trillion-rial ($4.4 billion) corruption case in the banking network, recently announced by Economy Minister Ali Tayebnia.

The corruption, Valiollah Seif said on TV, started in 2006 and lasted till 2012, when the previous government was in office.

“Since it was discovered at the end of the previous year, it has been under investigation by the supervisory board of the central bank, who has delivered a detailed report on the case to the judiciary,” asserted the governor.  

However, Seif specified that the 120-trillion-rial figure did not indicate the amount of the money withdrawn through violation of the banking regulations, saying that “it signifies the turnover of an original 700 billion rials ($26 million), which in the course of over five years has led to an overall turnover of 120 trillion rials.”

Seif said that those involved in the large scale corruption case have been identified by the judiciary and are being investigated.

The total amount of the money is being returned to the banking system in six installments with a 34 percent penalty rate, Seif explained.

“So far, four of the installments of the 120-trillion-rial amount of debt have been paid and the two remaining ones will be deposited by January,” Seif asserted.  

 No Closure  

The central bank has no plan to dissolve any private bank, said the governor on the live TV program, rejecting recent reports that a commercial bank might be closed for violating regulations.

“However, the CBI has instructed all commercial banks and financial institutions to preserve the capital they raise from people’s deposits,” Seif said.

The central bank has no intention of distorting the trust of the people who have invested their money in commercial banks and financial institutions, “but the CBI has always warned people to be careful about the institutions they put their deposits in.”

Warning the investment depositors against depositing their money in unauthorized credit institutions, he said that “although these institutions offer higher interest rates, there is no guarantee that the deposits are safe with them.”

He went on to say that the CBI carefully supervises commercial banks and other financial institutions. “In case any bank or financial institution violates the CBI’s rules and does not comply with the regulations, the CBI will take charge and a final action might even be to dissolve the institution entirely.”


Regarding the non-performing loans paid by the banking system, Seif said the central bank has instructed the banks to provide it with a list of their main debtors.

As a result, a total of 575 debt cases were submitted to the CBI, he said.

“The biggest debt amounts to 250 trillion rials, which makes up regarding one third of the overall 880 trillion rials of the NPLs,” he noted.

When asked about what he anticipates for the status of NPLs for the next year, the governor said he hopes that the ratio of NPLs to the total amount of loans granted by the banking system decreases from the current 14.5 percent to the standard international level which is below 5.5 percent.

 Forex Fluctuations  

The central bank governor attributed the recent fluctuations in the foreign exchange market to wrong analyses in the media, saying that it has a negative impact on the forex market, as it was the case in the past few weeks.

Rejecting the possibility that setting the price of 28,500 rials for the dollar in next year’s budget could have caused the recent fluctuations in the forex market, he said that this could not be the reason as it has been practiced by the CBI in previous years and it does not send any wrong signals to the forex market.

 Single Currency Regime

It is not a proper time to implement a unified currency regime, Seif said.

“Although the central bank is determined to perform the unified currency regime in the future, it still has to wait for the pre-requisites to be fulfilled,” he added.

If the banking system wants to get involved in international banking interactions, first of all it will need to use a single currency regime, said the governor, adding that at the present level of interaction between the brokers and international banks, implementing such a regime does not seem necessary.

 Bilateral Investment Treaties

Seif said the CBI is considering signing bilateral investment treaties with other countries in its agenda; however, it is often criticized for not appearing to involve itself in these kinds of contracts.

Describing bilateral treaties as favorable methods of investment, he said to do so, first of all the trade volume of the two countries that sign the treaty needs to be comparable, which is why the CBI is careful about choosing its partners.

 Unauthorized Institutions

Pointing to the measures taken by the bank in organizing unauthorized banks and financial institutions, Seif said that most of these institutions were established upon some agreements reached between the previous government and certain entities, which were totally out of the central bank’s control.

Some of these institutions were credit cooperatives established upon getting certificates from the ministry of cooperatives, said Seif, “without the nature of their activities being known in advance.”

The number of branches of unauthorized institutes notably increased under the former government, said Seif.

As a solution, the CBI has started identifying and categorizing the credit cooperatives in 14 categories, asking them to adopt themselves with CBI regulations.

Out of the total 14 identified groups by the CBI, 5 categories have now been authorized by the bank and the rest have received letters from the CBI to comply with the regulations, said Seif, adding that “otherwise they will be dissolved by the central bank.”