Economy, Business And Markets

No More Firm-Holding for Banks

No More Firm-Holding for BanksNo More Firm-Holding for Banks

The Central Bank of Iran (CBI) is closely monitoring lenders non-banking activities, said Governor Valiollah Seif.

Many commercial banks have invested heavily in the ownership and management of commercial entities outside the banking sector, for sake of profiteering.

The central bank is pushing lenders to offload their non-banking assets in order to both free cash that could be lent and also reduce the risk on bank balance sheets.

The move by the central bank is designed to push the banks to lend to the moribund industries, which have been hit by a combination of populist policies under the previous president Mahmoud Ahmadinejad and the tightening of sanctions put to curb Tehran’s nuclear activities.

The central bank has given clear time tables for offloading non-banking assets to banks. The regulator will be monitoring developments in three-month intervals.

In line with plans and instructions issued by the central bank, commercial lenders will have to adhere to schedules given to them, in order to realign their policies according to CBI requirements, the official stated adding that the schedules encompass a three year period.  

Plans are monitored every three months, and eventually within three years, the ultimate goals of the plan will come about, ICANA reported Seif as saying.

So far, the CBI has held several meetings with the banks and the issue has been addressed. Banks have submitted plans by which firm-holding can be eradicated from their activities, and agreements have been arrived at, the official clarified.

Iran’s banking sector has also been squeezed. Not only is it undercapitalized and poorly regulated, but it has been hit by international banking sanctions and by populist policies, such as being forced to give loans to the poor at half the inflation rate.