Silver Lining for Shadow Banks

The Monetary and Banking Research Institute for Islamic Banking said troubled financial institutes may transition into legitimate banks. “By increasing their capital, these institutions can obtain permission from the Central Bank of Iran,” Kamran Nadri, the head of the institute, was quoted as saying by ILNA. According to Nadri, these institutions can also be merged with each other or be acquired by major banks. However, he said major banks seem to be reluctant to accept this. “Because, like buying and selling of goods, this must be mutually satisfactory and voluntary,” he added. Nadri noted that shadow banks should gradually reimburse their customers and leave the market altogether. Illegal credit and financial institutions and their hold over the informal money market and banking system gained momentum during the tenure of the former president, Mahmoud Ahmadinejad, which have proven to be extremely problematic for the current government that has been repeatedly forced to bail out the depositors.