EghtesadOnline: Establishing a supervisory body within the Central Bank of Iran is a significant aspect of the new banking reform bill, says the head of the Majlis Economic Commission.
Mohammad Reza Pour-Ebrahimi said the CBI had lacked effective supervisory leverage and was not authorized to oversee monetary and foreign exchange markets in their entirety.
In the new bill, the CBI is given expanded supervisory clout over financial and monetary affairs -- a move which the MP says is drawn on the experience of developed nations.
In addition, he said, CBI relations with government bodies are outlined in the bill which should help CBI function independent of the government, Financial Tribune reported.
According to Pour-Ebrahimi, the bill reformed the structure of the CBI and new bodies including a high policymaking board, jurisprudence council, and an organization for overseeing credit institutions have been incorporated.
Pour-Ebrahimi earlier said the bill has been finalized in the commission and will be debated in the chamber this week.
Gholamali Jafar Zadeh, a member of Majlis Planning and Budget Commission, emphasized that revising CBI law will overhaul the top regulatory body.” The new bill increases CBI authority and independence and promotes modern banking standards.”
Jafar Zadeh believes that government meddling in CBI affairs and monetary system is a challenge for the economy saying that the monetary system in advanced countries deals with issues like money printing, liquidity deficit compensation and regulating the currency market, none of which are under direct government supervision.
“It is usual for governments [in Iran] struggling with crisis to use CBI resources to temporarily solve their problems and leave the pending crisis for future administrations.”
The lawmaker noted that liquidity increase by 10 trillion rial ($100 million) per day is a net result of financial crises left behind by preceding governments and their intervention in CBI affairs.
“Whenever governments in the past faced a crisis, they ordered CBI printing machines to work overtime … a factor that pushed up liquidity” to unprecedented levels.
He referred to the government initiative to sell export currency earnings in the free market as another example of unhelpful government intervention. “Currency earnings deposited in CBI accounts are given to governments which in turn sell it in the free market to plug their budget deficits.”
“Decision-making in the CBI as the main financial and monetary regulator should be based on economic realities and decisions should be implemented without government intervention,” he said.
Iran's banking laws, which have remained unchanged for more than three decades, are apparently being rewritten after a longstanding disagreements between the Rouhani administration and lawmakers.