“Ranking banks is underway but the CBI is not allowed to publicize it,” the unnamed official told Mehr News Agency.
As part of the process, lenders have submitted their performance reports to the CBI and the issue is being pursued by the CBI governor, Abdolnasser Hemmati, the unnamed official said.
As per the roadmap, there is no universal procedure for ranking banks and the regulator decides the health of a lender on a case-by-case basis, according to Financial Tribune.
In doing so, the CBI takes into account particular conditions of lenders with due consideration of the mandate and mission of each bank and the problems they grapple with.
Apart from pushing banks to restructure internally, the rating allows depositors and shareholders to have a better grasp of risks pertaining to the lenders’ ability to meet their financial obligations.
As a shared concern of officials and independent experts of various stripes, rating banks has been highly touted as it should help promote much-awaited transparency, openness and healthy competition among lenders to enhance their performance.
The Minister of Economy Farhad Dejpasand predicted the rating process will be completed by the end of current fiscal year (March 19, 2020).
Internal and External Factors
In general terms, corporate governance is the system of rules, practices and processes by which a company is directed and controlled.
“A bank’s corporate governance reveals the extent of its problems rooted in external and internal factors, for example productivity levels,” ISNA quoted him as saying.
The obligation on some banks to lend for purposes designated by the government, known in Iran’s banking jargon as “obligatory loans”, is a typical example of external interference.
Although little is known about the initiative, banks are expected to be rated based also on loan allocations, foreign exchange activities and financing.
The idea to rate banks is not new. It has been floated several times in the past but never fully realized due to a variety of reasons.
However, banks and credit institutions are currently rated by non-official and private rating agencies based on a range of indicators such as performance in the stock market and deposits.
Despite several attempts in the past, lenders have not been rated by an official state organization.