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CBI Gains Enhanced Regulatory, Disciplinary Role in Sixth Plan

EghtesadOnline: As part of the sixth five-year development plan (2016-21), the supervisory and disciplinary authority of the Central Bank of Iran over the money market, particularly financial and credit institutions, will be enhanced.

The plan allows the central bank to exercise a more efficient supervisory role in the market and better regulate the banks and credit institutions. The blueprint, which is still awaiting the parliamentary ratification, also gives the bank more leeway to take punitive measures against unruly banks and institutions, if necessary.
The bill, which includes 35 articles, has been published in its entirety by Eximnews.com and discusses the jurisdiction and duties of CBI. It exhorts the bank to ramp up transparency in the financial sector and reduce non-performing loans in the banking system, thereby granting inclusive supervisory powers for the regulator over banks, credit institutions and the informal money market.
In proportion to the degree and type of violations, the CBI can now impose cash penalty equal to a maximum of 1% of the latest registered capital for the rogue entity that could either be a bank or a non-bank credit institution.
The regulator can also punish unruly financial institutions by banning the distribution of profits to shareholders or stripping top executives of their perquisites, according to Financial Tribune.
To improve the health, stability and transparency of the banking network, the CBI is obligated to retool the regulations in line with international standards. Rules concerning capital adequacy ratio, asset classification, bad debt provision and liquidity ratios should all be brought into accordance with global standards and be approved by the Money and Credit Council–a decision-making body.  

Countering Illegal Institutions  
To further strengthen the supervisory power of CBI over the market and regularize the uncertified credit institutions, any kind of banking, leasing and currency exchange operations conducted by individuals and entities without the direct permission of CBI will be considered illegal, with implicit parties found guilty of one or several counts of felonies under the Islamic Penal Code.
The repayment of any debts incurred by these institutions will be the responsibility of their founders, board of trustees or shareholders.
Law enforcement forces are bound to counter the activities of unruly financial institutions, upon the request of CBI. Entities without operation license will be given a maximum of one month to clean up their act or face suspension and closure.
Any kind of advertisements for monetary and banking services should be in line with the rules set by the regulator. In case of violation of these rules, the offending party will be fined up to 10 times the cost of the advertisement, which will be deposited with the treasury.
    With the government of President Hassan Rouhani hoping to accelerate reforms and rescue the flagging economy after reaching the historic nuclear agreement with the world powers in July 2015, it faces huge resistance from uncertified credit institutions that are often linked to powerful organizations. Their exact number is unknown but is believed to range from 700 to 2,000.
Hamid Tehranfar, CBI's former deputy for supervisory affairs, told ISNA that there are 7,000 uncertified credit institutions in Iran.
Often operating from offices in the center of large cities, these institutions compete with Iran’s 30 commercial banks.
CBI Governor Valiollah Seif had earlier admitted that nearly 20% of the country’s liquidity are held by uncertified credit institutions, stressing that the regulator is determined to expand monitoring over the sector.

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