Economy, Business And Markets

Money and Credit Council Approves Liquidity Risk Management Rules

Money and Credit Council Approves Liquidity Risk Management RulesMoney and Credit Council Approves Liquidity Risk Management Rules

Money and Credit Council, a top financial decision-making body with the Central Bank of Iran, has approved rules to manage liquidity risk in banks and credit institutions.

As liquidity risk is one of the most common challenges facing financial institutions, the central bank had earlier devised a set of regulations obligating banks to take measures to contain such risks.

According to CBI’s deputy for supervisory affairs, liquidity risk emanates from mismatched maturity periods for a credit institution’s assets and liabilities while the risk is so grave that it can push a bank or credit institution to bankruptcy.

“In recent years and especially after the international financial crisis, liquidity risk has been in the spotlight as banks’ supervisory officials are paying extra attention to it and devising higher standards and more strict obligations to manage this risk,” Farshad Heydari was also quoted as saying by CBI’s news website.

He noted that CBI has devised the new rules in line with the latest international banking supervisory standards.

Liquidity risk management regulations were approved during late Tuesday’s meeting of the Money and Credit Council presided by CBI Governor Valiollah Seif.

The CBI deputy hoped that the implementation of the new rules will increase the stability of Iranian banks and also bring them into more compliance with international standards.

Heydari further said during MCC’s latest meeting, another mandate to revise the regulation for bank guarantees has been approved.

 “The issues we had from implementing the previous regulations of bank guarantees, which are significantly important and useful tools for banking system, persuaded us to reform a part of the framework,” he said.

Heydari noted that the new rules are expected to facilitate the process of issuing bank guarantees for businesses while they should also eliminate the chances of abuse.

On the sidelines of the MCC meeting, Abdolrahman Nadimi Bushehri, the newly-appointed deputy minister of economy for banking and insurance affairs, was sworn in as as the new member of the decision-making council.

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