Economy, Business And Markets

Call for Revising Banking Article

Call for Revising Banking Article
Call for Revising Banking Article

Lawmakers have introduced a motion which would add seven new clauses and a note to Article 34 of Monetary and Banking Law, but it has already been criticized by experts who believe it lacks proper assessment and research.  

Mohammadreza Pourebrahimi, a member of the parliamentary Economic Committee evaluated the whole idea of the proposal as positive. But, he told FNA that “it needs major revisions,” which he said would be made by the special economic committee.”

According to FNA, the first clause requires that all banks and monetary, financial, and credit institutes are forbidden from owning investment companies, factories, firms, and enterprises of any kind, except for firms existence of which is required for correct implementation of exchange, partnership, and unilateral contracts. Banks must only conduct banking activities. They are assigned to transfer equities of investment companies and factories they own to other entities in a one year course under the central bank’s supervision.

The second clause suggests that all financial institutes should be banned from buying and selling gold coins, foreign currencies, land, apartments, shops, and shares in the stock market unless for their internal consumption as specified by the Money and Credit Council. The Central Bank of Iran and the Money and Credit Council are assigned to prevent any arbitrage activities.

The third clause of the motion presented by MPs would assign banks to allocate a significant percentage of their financial resources to industrial, agricultural, and construction units. According to the clause, the council should determine that percentage every year before the new fiscal year starts.

The forth clause requires the Money and Credit Council to cooperate with the CBI in preparing appropriate charters and instructions for restricting the number of banks and their branches in a given city, keep it in tune with the city’s population, and formulated transparent standards for that.

According to the fifth clause, to urge transparency and efficiency and avoid money laundering activities, the CBI would be assigned to set up electronic information databases for banks in six months upon the approval of this proposal; so that all functions and transactions in banks are recorded and constantly available for supervision.

The sixth clause would assign financial institutes in the towns with up to 200,000 population should allocate all the capital they have for projects in that town only.

According to the seventh clause, financial institutions have to separate all of their non-interest bearing credits and facilities from other banking credits in three years and lead them to interest-free bank activities or funds. The implementation charter of this clause would be formulated in cooperation with the ministry of economic affairs and finance up to four months after the central bank announces the new regulations.

Finally, the only note proposed by the parliament states that all banking services including interbank fund transfers, current accounts, cheques, and other services that make no commitment in using the resources of the bank must be concentrated in interest-free banks, and these banks take charges for providing such services.