Bankers Want to Delay Reforms

EghtesadOnline: In a recent meeting with lawmakers, chief executives of banks expressed their opposition towards implementation of banking sector reforms.

News ID: ۷۴۸۶۶۸

09 October 2019

The current economic conditions plus shortcomings in the proposals, especially the inability to address the independence of the Central Bank of Iran, are said to be the main reasons behind lenders' opposition, Mohammad Reza Jamshidi, secretary of the Association of Private Banks and Credit Institutions said on Tuesday.

"Many plans were proposed by previous governments, but none of them were validated. However, the Majlis is determined to pass the proposed bills into law before the end of current administration," IBENA quoted Jamshidi as saying.

The bank reform plan consists of a bill to reform banking regulations, the Monetary and Banking Law of half a century ago and other proposals by the government to reinvent the CBI, according to Financial Tribune.

Major Challenges

The bill seeks to address key challenges of the sector such as poor balance sheets, capital inadequacy, large numbers of non-performing loans, cumbersome regulations and dubious operations of dysfunctional and unregulated credit institutions that have been punishing the economy for years.

It also aims to improve CBI’s independence, enhance monetary policy and further empower the CBI and oversight authority on the money market.

Contrary to the declared goals of the reform plan, Jamshidi said the bill negatively impacts the independence of the central bank.

"Bank CEOs say weakening of the CBI's independence would add to the problems in future," he said without elaboration.

The last amendments to the Usury-Free Banking Law were made in 1983 while the law itself specifies that upgrades should enacted every five years.

Earlier in August, CBI Governor Abdolnasser Hemmati said the bank is determined to implement reforms in the key sector. However, considering the resistance of some lenders to reforms, "the regulator is approaching the issue with extra caution to achieve the reform goals”.

Legislative Backing

The Majlis Research Center - a parliamentary think tank - and the Plan and Budget Organization had earlier expressed support for the long-delayed reforms.

Hamid Tehranfar, chief executive of Karafarin Bank and a former deputy for supervisory affairs at the CBI, provided some details about the meeting in a talk with IBENA.

"It was agreed that lawmakers and senior bankers form a joint committee to scrutinize the proposals."

He said bankers were not involved in writing the new measures. It is based largely on MRC and CBI studies. This was the first meeting in which the bankers were present.

Tehranfar revealed that the participants were mostly "not interested in publicizing the plans, as it has some deficiencies that may add to the existing problems."