EghtesadOnline: The Central Bank of Iran’s Exports Department has sought to provide more details on the online gateway recently established for allowing members of the banking system to better trade in foreign currencies, stressing on its importance for unifying the dual foreign exchange rates.
“The establishment of this system facilitates the process of unifying forex rates and is considered a platform for realizing this goal,” Samad Karimi, the head of the department, also told ILNA.
In the system first launched in Sept. 2016 and made operational on Oct. 29, 2017, which is officially referred to as the Electronic Trade System, members of the interbank market can engage in forex deals at higher speeds and with greater efficiency.
According to Karimi, the project is one of the many measures taken in line with establishing a managed floating foreign exchange system, Financial Tribune reported.
CBI’s promise of unifying the rates by the end of the previous fiscal year (March 20, 2017) has remained unfulfilled, prompting CBI Governor Valiollah Seif to promise that the goal will be realized soon in the new administration that took office in the summer.
Another important step, the official notes, was CBI’s mid-summer directive that allowed banks to engage in trading foreign currencies at free market rates, as opposed to being limited to the official rates that are considerably lower.
“The ETS is aimed at increasing the depth of cash deals in the interbank market and directing forex transactions to the banking system [and away from moneychangers] to act as one of the major tools of realizing the rate unification goal,” he said.
“Banks can move to make up for their forex resource deficits in the market within the system with a positive open net position and quickly balance their position and manage their forex market risk.”
Referring to another function of ETS as providing better liquidity risk management, he elaborated that exporters, foreign investors and natural and legal persons active in the economy with forex assets will be able to sell their assets in the interbank market at open market rates and convert them into rial.
As to other functions of the system, Karimi said it closely follows forex transactions while supporting the sale and purchase of currency by and from non-oil exporters, investors and foreign companies.
“Although as part of the next phases and if the rate unification plan is implemented, currency forward, currency option and currency swap transactions will be handled by the system, cash transactions must first find their place in the system,” he added.
The central bank official noted that hard currency will be supplied more efficiently to members of the interbank system with the added benefit being the correspondent role it bestows on banks to purchase forex from exporters, foreign investors and companies.
“Banks will introduce their official correspondent accounts to exporters, whereby they deposit their foreign currency to the accounts and banks will sell them in the interbank market,” he elaborated, adding that if the banks do not possess the rial resources to purchase the hard currency, they will be able to sell it to the central bank.
In other words, the system eases the process of getting finance for local businesses and directs forex transactions of exporters to the banking system while incentivizing businesses to conduct their work through the system, as it entails risks lower than those of exchange shops.
“Increasing the presence of banks in the market provided by this system enhances its credibility and will cause the foreign currency resources and expenses of the country to be managed better, clearer and at higher speed,” Karimi concluded.