All board members of Mizan financial and credit institution were detained by the police in Mashhad, Khorasan Razavi Province, after a judge ordered the arrests on Sunday.
Board members of the uncertified institution were apprehended after they missed a court deadline to settle their debts with their customers, Eghtesad News reported on Monday.
The court’s decision could be a sign that the judiciary is taking a tougher line in cracking down on unauthorized banks and financial institutions. In recent weeks the central bank governor, Valiollah Seif, and the minister of economy, Ali Tayebnia, along with other officials have railed against such institutions, labeling them as a “major disturbance” to the economic growth and stability.
Gholam Ali Sadeghi, prosecutor of Mashhad, where Mizan’s headquarters is located – warned in a statement after the verdict was handed down that “the financial institutions – working as cooperatives – which have not obtained operation permits from the central bank should be merged with a commercial bank so as to prevent financial problems for their depositors”, Khorasan newspaper reported on Monday.
A judge had granted Mizan officials a two-week respite to reimburse their depositors, the report said without identifying the judge.
It is said that some of the customers’ debts are being paid through the funds the institution had deposited with the CBI.
Abdolreza Azizi, chairman of the parliamentary social committee, weighed in on the issue on Sunday saying, “If Mizan fails to meet its commitments to its depositors, then as a last resort the property of the institute would be sold to repay depositors.”
Quoted by ICANA, the parliament’s news agency, Azizi said the institution’s assets would be enough to cover its debts.
Mizan was an unauthorized financial institution which had lured investors as a credible firm, but it faced a crisis when its investment in a grand project incurred heavy losses.
Earlier this year, the CBI announced that the Mizan institution may be merged with Bank Saderat, in an attempt to help end the crisis. On March 19 Bourse Press quoted Hamid Tehranfar, deputy CBI governor for supervision, as saying that such a takeover had already taken pace. But later, reports said that the board of directors of the institution were not interested in a merger and wanted to handle the crisis themselves.
Parliament Motion
The parliament recently reacted to the issue. Last week a motion asking for further clarification on an article of the Monetary and Banking Act was approved in the parliament. The proposal sought to legally enable the central bank to supervise not only the banks but all the 7,000 financial institutions operating in the country.
However, the lawmakers seem to have not been satisfied by that approval. They are now taking a step further to push for a motion to tighten the supervision over the unauthorized firms.
“It was decided that a separate law is needed to bring financial institutions under the supervision of the CBI and this double-urgency motion is intended to achieve this objective”, said Iraj Nadimi, a member of the economic committee in an interview with ISNA on Monday.
