Hemmati, 61, is the former head of Central Insurance of Iran (Bimeh Markazi) who was recently tipped to become Iran’s next ambassador to China.
A number of names had been circulating in the media to replace Valiollah Seif whose five-year term has ended, including Ali Tayyebnia , the former economy minister, and Ali Divandari , the head of Monetary and Banking Research Institute.
Hemmati is a veteran banker who holds a PhD in Economics. He has formerly served as chief executive of state-run Bank Melli Iran, the county’s largest bank and the private Sina Bank affiliated to Mostazafan Foundation, according to Financial Tribune.
His name, however, is mostly associated with the insurance industry. He was the president of CII between 1994-2006, which is the sole regulator of the insurance industry.
Due to the privatization initiative launched during his tenure as CII chief, Hemmati became known as the “father of private insurance”.
As with other central bank governors, Hemmati was proposed by Economy Minister Masoud Karbasian. The governor has to be approved by CBI’s General Assembly and the Cabinet.
Rouhani on Wednesday described Hemmati as “educated and knowledgeable with valuable experience in banking and insurance”.
The president advised Hemmati to pursue the reform of banking, fiscal and monetary policies, and improve banking relations with the outside world and protect the central bank’s reserves.
Rouhani also thanked Seif for his service, calling him a “very upright” official who seriously pursued government policies.
The president considered Seif’s clampdown on illegal financial institutions, which led to the regularization of these entities, as a notable service of his tenure.
Bankruptcies at several unlicensed lenders, which had offered high interest rates and cheap loans with little capital to back them up, wiped out the savings of millions of depositors and led to widespread protests.
At the height of an executive salary scandal in 2014, which led to the resignation of Mohammad Ebrahim Amin, the ex-president of CII, Hemmati had to leave Bank Melli and again serve at Bimeh Markazi for another two years.
Market Response
Markets responded positively to the news, as the bullish foreign exchange market saw a reverse in the recent resurgence.
According to reports from the unofficial market, every US dollar was being traded at 92,500 rials–still above the psychological threshold of 90,000 rials but lower than Tuesday’s 96,000 rials.
The gold coin –another bullish asset in the midst of an intense rally–also saw a decline in price. According to Tehran Gold and Jewelry Union’s website, the benchmark Bahar Azadi coin dropped by around 2% and was traded for 34.20 million rials ($790).
Mohammad Reza Pour-Ebrahimi, chairman of Majlis Economic Commission and a critic of CBI’s policies under Seif, welcomed Hemmati’s appointment, saying it carried a positive message to the country’s fiscal, monetary and foreign exchange markets.
“The CBI governor should not repeat the mistakes and wrongful policies by obeying the Cabinet’s decisions,” he said.
Pour-Ebrahimi pointed to the foreign exchange unification, which fixed the US dollar’s exchange rate at 42,000 rials, as the “most illogical” policy of Seif’s tenure.
Other observers said on Wednesday that a Cabinet reshuffle is useless unless there is a major shift in the work of economic institutions and their policies.
The attempt in April to enforce a fixed rate for the rial sparked a boom in the forex black market, forcing the central bank to backtrack and allow a secondary market, as the currency’s street value crashed to record lows in June.
The crisis coincided with Washington’s announcement in May that it was pulling out of the 2015 nuclear deal and reimposing full sanctions on Tehran, exacerbating the run on the rial.