Iran's CB Sets 3-Month Deadline for State Account Transfer

To finalize the process of transferring the bank accounts of state-owned enterprises to the Central Bank of Iran to boost transparency, the regulator has issued a directive setting a deadline of three months for all the accounts to be moved.

“All the entities subject to the law [of transferring state-owned accounts to the central bank] who have not integrated their accounts in the central bank are hereby obliged to do so within a maximum three months based on a directive approved by the Money and Credit Council at the joint proposal of the Ministry of Economic Affairs and Finance, the Planning and Budget Organization and the Central Bank of Iran,” reads CBI’s latest statement published on its official website.

“All banks and non-bank credit institutions in coordination with the Economy Ministry are obligated to cooperate with the central bank in implementing this directive,” the policymaker emphasized.

The government’s decision to move its accounts from agent banks to CBI was announced on August 2016 at the behest of President Hassan Rouhani, in line with its policies to promote transparency and avoid dodgy practices related to expenditure.

In late September, Masoud Rahimi, director of CBI’s Office for Banknote Issuance, announced that a total of 4,200 state accounts have so far been moved to the central bank.

However, even after the number of accounts registered by state-owned companies was drastically reduced to 70,000 from its previous 220,000, it means that a meager percentage of the accounts have been moved so far and that is why the central bank is upping the ante.

  Rules and Exceptions

The three-month deadline, which lasts until the end of the current Iranian fiscal year on March 20, has been notified to the banking system as part of an article of the Sixth Five-Year Development Plan (2017-22), which also includes other details.

For one, it stresses that “all bank accounts–including rial and foreign exchange accounts–belonging to ministries, government institutions, companies, organizations, universities and public non-government entities that employ funds from the annual budget” must be opened strictly through the Treasury i.e. the Economy Ministry’s Department of Financial Supervision and Treasury Affairs and with the central bank.

This is aimed at increasing the speed and efficiency of the flow of revenues and expenses of the government, boosting transparency by creating the ability to exert online supervision over the accounts and reduce the adverse effects of the government’s financial operations on the banking system.

“Credit institutions” i.e. banks, non-bank credit institutions, Qarzol-Hassaneh (interest-free) funds and credit cooperatives under the direct supervision of the central bank, in addition to state-owned insurance companies, are currently exempt from transferring their accounts until further notice.

“Other public non-government entities” i.e. municipalities and their affiliated institutions and companies whose majority (+50%) shares are owned by municipalities are also obligated to open their accounts through the Treasury and CBI, while banks have been strictly prohibited from opening any more accounts for any of the state-related entities mentioned in the directive.

The central bank has been considered as the sole entity in charge of providing the infrastructure for transferring the accounts and exerting active online supervision over them while all state-related entities have been legally bound to conduct their banking transactions through accounts opened with the central bank and Nasim–CBI’s core banking system.

The aforementioned entities are allowed to conduct banking services not offered by the central bank without opening any account and through regulations such as those dealing with the rates and fees approved only by the Money and Credit Council.

The country’s Armed Forces, including the army, the Islamic Revolutionary Guards Corps and the police are not obliged to move their accounts to the central bank and are allowed to keep their accounts with “agent banks” i.e. banks that have clinched agency deals with the central bank.

CBI has been designated as the supervisory entity for banks and credit institutions while the Treasury does the same for all state-related entities mentioned in the directive.

As part of an earlier directive notified by the central bank about three months ago, any and all similar directives communicated by the policymaker are to be implemented within a maximum of seven days, unless a different timeline is mentioned in the directive.