President Hassan Rouhani announced on Wednesday he has signed the much-anticipated Banking Overhaul Plan into law, which is seen as a milestone in initiating reforms in the beleaguered banking sector.
The reforms will be followed by the government sending a separate bill to Parliament, which would further enhance the banking sector, the official website of the president reported.
"Our plans should be centered on economic revival and growth. The overhaul of the banking system is geared toward those goals," he said at a fast breaking gathering in Tehran.
The economy is in dire need of refinancing. However, years of international economic sanctions imposed over Tehran's nuclear program, combined with the populist policies of the past government, have harmed the banking sector. Most banks say they are unable to lend to companies in dire need of credit.
Iran’s lenders have long operated with low capital adequacy requirements and inadequate regulatory and supervisory mechanisms. With the country keen on foreign investment and joint ventures, it is now ready to resuscitate the banking industry and help revive economic growth.
"The government needs to curb the bureaucracy so there would be more space for the creation of new jobs,” the president said in his meeting with university students.
The Banking Overhaul Plan, which had been in the making for a year, seeks to tackle the most pressing issues facing sick banks. Among other things, it seeks to get financing for short and medium-term projects back on track, provide a cash cushion to tackle bad loans, promote competition, reorder the money market by regulating the army of uncertified credit and financial institutions, and increase banks' lending power by raising their capital.
