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lawmakers devised their own reform plan with the intent of finding a middle road to overhaul the country’s financial sector.
lawmakers devised their own reform plan with the intent of finding a middle road to overhaul the country’s financial sector.

Officials, Pundits Review Majlis Banking Reform Plan

The findings of the research center indicate that responders welcomed the fact that the blueprint aims to review and reform current regulations and pays due attention to corporate governance, supervision, financial reporting standards and bankruptcy rules
The research center identified the lack of an exact timeline based on which a number of proposed changes are to be implemented as another drawback of the plan

Officials, Pundits Review Majlis Banking Reform Plan

Majlis Research Center, the investigative and analytical arm of the parliament, has published the results of a yearlong survey covering the views of top banking officials and pundits about a major parliamentary motion to implement banking reforms.
To reform the beleaguered banking sector, the administration of President Hassan Rouhani has drafted the Banking Reform Bill and the Central Bank Bill through the Ministry of Economic Affairs and Finance and the Central Bank of Iran respectively.
However, as the bills have undergone many revisions and are yet to find their way to the parliament, lawmakers devised their own reform plan with the intent of finding a middle road to overhaul the country’s financial sector after nearly three decades, MRC’s website reported.
The parliament’s vision was published a year ago and soon after, the research center asked the CEOs of all banks and institutions, along with many high-ranking officials, university professors and pundits, to give their views about the plan.
The findings of the research center indicate that responders welcomed the fact that the blueprint aims to review and reform current regulations and pays due attention to corporate governance, supervision, financial reporting standards, bankruptcy rules and international procedures regarding bankruptcy.
Responders referred to electronic banking development as positive, expressed satisfaction with the number of articles included in the plan, commended the plan’s endeavor to address various dimensions of the banking system and lauded it for including the elements of Central Bank Bill and Banking Reform Bill.

 Drawbacks
However, as MRC reports, responders stated that the plan “does not adequately address the informal money market that requires special attention” because of the direct impact of regulating that sector on the improvement of financial market and business environment.
The research center identified the lack of an exact timeline based on which a number of proposed changes are to be implemented as another drawback of the plan. If “a logical transition period” is not signified, it could entail potential shocks for lenders and subsequently the production sector, in light of the fact that banks are currently responsible for 90% of the production sector’s financing.
Responders also noted that the plan’s approach toward the interbank market, management of state-owned banks and the way banks are connected to other financial institutions in the capital and insurance markets fails to impress.
Experts pointed out that the plan advocates the formation of a specialized supervisory entity while keeping in place the Money and Credit Council. This could interfere with the mandates of the new supervisory entity and MCC.
As MRC notes, the report is aimed at “reflecting the views of banks, credit institutions, affiliated entities and experts” and does not necessarily represent the views held by the research center, which will publish its own take at a later date after collating all the data.
At the beginning of the current Iranian month on July 23, the Cabinet approved the final draft of the twin bills devised by the administration, but they have not apparently been sent to the parliament yet. According to Mohammad Hashem Botshekan, CEO of Bank Maskan, who wrote in Financial Tribune’s sister publication Donya-e-Eqtesad, about 85% of all the articles of the reform bills deal with supervisory and disciplinary measures, Deposit Guarantee Fund and bankruptcy of banks.
According to Botshekan, the reinforced disciplinary approach is a result of the “shadow cast by [the struggle for organizing] illegal credit institutions during the past year” whose activities had created many problems for the banking system and whose imminent demise was officially announced by the central bank last week.  

 

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