No Passage of Banking Bills Before Summer 2017

“The government’s propositions regarding the revision of Banking Reform Bill and the Central Bank Bill will most likely not be communicated to the parliament by the end of the current government’s tenure,” Mohammad Reza Pour-Ebrahimi also said in a talk with Exim News website.

The lawmaker, however, assured that “we will follow up on the bills regardless”.

Pour-Ebrahimi had announced in late October that the longstanding reform bills would be finalized in the parliament before the end of the current fiscal year in March, Financial Tribune reported.

The lawmaker had also threatened that the Majlis will come up with its own version of the much-disputed Banking Reform Bill if the government fails to deliver them on time.

What is now referred to as the Banking Reform Bill first became law more than three decades ago under the moniker of Usury-Free Banking Law.

Noting that 33 years have passed since the original law came into effect, the head of the commission stressed that past governments and parliaments had failed to reform it. That is “in spite of the fact that the previous and current governments were reminded by the parliament to update the law to match the state of the economy”.

Pour-Ebrahimi stressed that “with the constant monitoring of businesses by Majlis Research Center, which focused on resolving the problems of the banking sector as a major economic priority”, the bill’s general outlines were approved in early fall.

“Now, the specifics of the bill are being reviewed,” he added.

Banking Reform Bill defines the duties of banks and non-bank credit institutions, and decrees that they must obtain a license from CBI. It explains all banking operations and services, as well as regulations for the establishment of branches of foreign banks, and sets limits to their investments.

The bill also obliges credit institutions to provide information, sets up a professional set of criteria for selecting new chief executives and board members, and makes provision for setting up internal risk and auditing committees.

On the other hand, the Central Bank Bill, whose law was first passed in 1972, aims to modernize banking regulations. Improving the independence of CBI, enhancing monetary policymaking and the CBI’s supervision over the money market are among its key goals.

As part of the bill, CBI would have more authority for setting policies and supervising banks and credit institutions.

  Currency Market

Pour-Ebrahimi referred to a recent parliamentary meeting held earlier this week between Economy Minister Ali Tayyebnia and Central Bank of Iran Governor Valiollah Seif on fluctuations in the Iranian currency market.

“The establishment of a currency futures market was proposed as one of the necessities of the country’s economy, but now the central bank has announced that the measure requires more forex transactions and engaged bureaux de change and banks in the unofficial foreign exchange market,” he said.

The lawmaker stressed that the gap between the official and unofficial exchange rates in the Iranian market must not be allowed to widen.

Besides the free market exchange rate, Iran uses an official rate for state transactions. The widening gap between the official and free rates has sucked hard currency out of the formal banking system. In an effort to counteract this, the government has authorized some banks to trade at market exchange rates.

Pointing to regulations concerning transparency of information to prevent corruption, Pour-Ebrahimi referred to Note 6 of the Iranian Constitution’s Article 44 that obligates all public service entities, including municipalities and the Social Security Organization of Iran, to make their financial statements public.