First Vice President Es’haq Jahangiri communicated new regulations to ease the payment process of membership fees in Iran Deposit Guarantee Fund.
The Cabinet approved the changes to facilitate the membership procedure for banks and credit institutions to increase the fund’s protection of deposits for customers, IRNA reported.
The IDGF was established in 2013 by the Central Bank of Iran to beef up its regulatory watch over monetary and banking operations. The fund’s assets are generated through the membership fees of banks and credit institutions plus 0.25% of bank deposits.
If its funds are not sufficient to repay the guaranteed deposits of a bankrupt credit institution, CBI will cover any shortfall after the Cabinet’s approval.
The fund was formed with the main goal of guaranteeing banks and credit institutions’ deposits in case of a banking crisis. It guarantees the deposits of each customer in every member bank or credit institution for up to 1 billion rials ($26,700) and if the bank or credit institution finds itself bankrupt, as per the regulations, the fund will reimburse depositors up to that ceiling.
Mohammad Talebi, the fund’s director, last week announced that IDGF has so far guaranteed the indemnity of 99.5% of the entire deposits of member banks and credit institutions in terms of number.
“Since the fund has been established, banks have welcomed it and paid their membership fees regularly, which is a good thing as it eases depositors’ concerns,” Talebi was also quoted as saying by Tasnim News Agency.
As per the law, all banks and credit institutions certified by CBI are obligated to become a member of IDGF and in line with that, 36 banks and credit institutions have so far joined the fund.
Talebi noted that Iranian people trust the banking system and believe it to be the best place to invest their money.
Furthermore, “since our economy is bank oriented, that counts as a big advantage for lenders,” he said.
“Iranian banks are improving at a good pace and CBI has increased its supervision over them, which is good news for the customers.”
CBI, under the governorship of Valiollah Seif, has been striving to kick-start major reforms in the banking system by introducing the Banking Reform Bill and the Central Bank Bill which, the International Monetary Fund believes, will be helpful, as they will provide the tools to deal with distressed lenders and enhance effective supervision over them.
The director of IDGF noted that established norms across the world require 1.5-2% of the assets of banks to be allocated to insurance funds or deposit guarantees.
With a two-year history of official activity in the Iranian banking system, IDGF has “received membership fees from banks and credit institutions, amassing significant assets in line with global levels”.
He added that the fund has registered a 25-30% progress in attracting assets, which is a good sign.
Talebi noted that unauthorized banks and credit institutions are outside the boundaries of law and, therefore, no guarantees will be extended to them.
