Divesture of Banks Reaches $800m in Last Fiscal

EghtesadOnline: Banks divested over 120 trillion rials ($800 million) in surplus holdings in the last fiscal (March 2018-19), the deputy economy minister for banking, insurance and state-owned companies said.

News ID: ۷۸۴۶۵۲

11 May 2019

Abbas Memarnezhad said the divested companies belonged mainly to Bank Saderat, Tejarat Bank, and Bank Mellat, Fars News Agency reported.

The official pointed to issues pertaining to pricing mechanisms as an obstacle to divesture procedures, blaming disagreements over different pricing methods for the slow pace in selling the surplus assets.

Memarnezhad said the ministry is reviewing the rules governing the initiative and expressed hope that the divestures would be facilitated once adjustments are made to existing rules, Financial Tribune reported.

Pricing procedures for listed companies in the stock market are straight forward as it complies with regulations of the Securities and Exchange Organization, he said. Other companies are priced as per the provisions of Article 44 of the Constitution.

Article 44 compartmentalizes the economy into three parts, namely public, cooperative and the private sector. It obliges the government to transfer 80% of the shares of state-owned and affiliated companies to nongovernment bodies.

The excess properties of banks are largely due to impaired loans, bad debts, settlement of government debt to banks and bad investments by banks.

Economy Minister Farhad Dejpasand said earlier the value of banks' excess property holdings is estimated 1,000 trillion rials ($6.7 billion). In February he spoke about a one-year program based on which 10 government-owned banks (including the biggest lenders) are required to relinquish excess assets – mostly real estate – and increase the cash reserves.

Bank’s non-banking activities have long been rejected by economic experts and senior government officials on the grounds that such activities pose a major hurdle to healthy and transparent banking.