CBI Puts Risky Banks on Notice

EghtesadOnline: The Central Bank of Iran will ramp up its supervision over risky lenders to prevent their precarious activities from impacting other banks, said an official with the Central Bank of Iran.

News ID: ۷۷۳۷۴۲

06 February 2017

"As per the new rating system for Iranian banks, each bank will be given a rank, which is important for supervisory authorities. If a bank gets low ratings, it will be considered as troubled and that will influence interbank interactions and that bank’s interactions with the CBI," said Amir Abbas Hashemi-Nejad, an official in charge of bank performance, Mehr News Agency reported.

He noted that the central bank has rated banks and credit institutions, implementing corrective measures on them based on CAMELS rating system since 2010.

Hashemi-Nejad, however, added that bank ratings are going to follow IFRS standards, hence banks and credit institutions will frame their financial statements in line with newer standards, which is taking a longer time for some but the issue is being pursued, Financial Tribune reported.

"In our current rating system, which is premised on CAMELS rating system, the focus is on quantitative factors and using the main indices to evaluate the banks with the minimum number of variables and reflect their financial state in the best way possible," Hashemi-Nejad concluded.

CAMELS is a recognized international rating system that bank supervisory authorities use to rate financial institutions, according to six factors represented by the acronym CAMELS. Supervisory authorities assign each bank a score on a scale and a rating of one is considered the best and the rating of five is considered the worst for each factor.

In late September, Farshad Heidari, the Central Bank of Iran’s deputy for supervisory affairs, announced that banks will be classified under four categories, namely without visible risk, low risk, average risk and high risk.

The International Financial Reporting Standards is a single set of accounting standards developed and maintained by the International Accounting Standards Board with the intention of those standards being capable of being applied on a globally consistent basis—by developed, emerging and developing economies. This will provide investors and other users of financial statements with the ability to compare the financial performance of publicly listed companies on a like-for-like basis with their international peers.

"All Iranian banks will be rated on the basis of a single scheme and private- or public-sector banks would be treated equally but there is no need to publicize the ratings," Heidari said.