Bank Maskan Boosts CAR to 18%

Bank Maskan has joined the ranks of top international lenders by boosting its capital adequacy ratio significantly, announced the director of the bank's Department of Planning.

"CAR of Bank Maskan has been boosted to 18% from the previous 6.45%. This growth meets not only Basel I requirements, but also fulfills Basel II standards," Mohammad Hassan Moradi was also quoted as saying by Bank Maskan's official website.

This official noted that this achievement came through the injection of 50 trillion rials ($1.33 billion) making the total capital of the bank surpass 80 trillion rials ($2.13 billion).  He added that Bank Maskan might even proceed to increase its capital to 130 trillion rials ($3.46 billion) in the foreseeable future in line with the directives of the Central Bank of Iran and Majlis.

Minimum capital requirement–8% under Basel II–obligates banks to maintain the minimum capital ratios of regulatory capital over risk-weighted assets. Basel II is a set of international banking regulations put forth by the Basel Committee on Bank Supervision.

Another important part in Basel II is refining the definition of risk-weighted assets. The riskier the asset, the bigger its weight.

The notion of risk-weighted assets is intended to punish banks for holding risky assets, which significantly lower regulatory capital ratios. The main innovation of Basel II compared to Basel I is that it takes into account the credit rating of assets in determining risk weights. The higher the credit rating, the lower its risk weight.

Moradi emphasized that CAR improvement is not the only requirement for reintegrating into the global banking system.

Besides that, anti-money laundering measures, financial ratios, risk compliance and the adoption of International Financial Reporting Standards are other essential elements.

"Another important fact is that one of the most important prerequisite for Bank Maskan to transform into a development bank is to boost its CAR," he said.

Moradi said that from the perspective of CAR, Maskan is one of the safest banks for opening deposit accounts, especially in the wake of many unlicensed institutions going bankrupt recently.

It also helps it fund small- and medium-sized enterprises and issue bank guarantees.

Bank Maskan was formed in 1979 through a merger of several banks such as Iran Mortgage Bank, Construction Bank and 13 savings and loans associations. It started a new era of activities by financing housing construction.