• Samba 65 00% 56.65%
    Joga2002 635.254 50% 63.63%
    Bra52 69 23.145% -63.25%
    Joga2002 635.254 50% 63.63%
  • HangSang20 370 400% -20%
    NasDaq4 33 00% 36%
    S&P5002 60 50% 10%
    HangSang20 370 400% -20%
    Dow17 56.23 41.89% -2.635%

EghtesadOnline: Reforming the ailing banking sector is one of the main concerns of the incoming government of President Ebrahim Raisi.

In a speech to lawmakers on Saturday, Raisi said his administration has “comprehensive plans” to fix the near broken banking industry.

“The government needs to reform the banking system in collaboration with the Majlis and banking experts,” he was quoted as saying by the parliamentary news website ICANA.

Measures to overhaul the inefficient banks is seemingly high on the priority list of Ehsan Khandouzi, a lawmaker nominated for the Economy Ministry portfolio.

Khandouzi has said that the lenders, as the main financiers of the production sector, are not up to the mark. “Financing economic sectors depends on the banks. If anything undermines their ability to lend to manufactures it will undermine economic growth.”  

In his view, inefficient banking rules, poor supervision, ineffective corporate governance and failure to dispense bank resources (loans and credits) fairly across the country and among productive sectors are among serious concerns.

The Economy Ministry nominee in particular underscored the unequal access of households and businesses to loans and financial support offered by and solicited from the National Development Fund of Iran, the country’s sovereign wealth fund.

Pointing to the doubling of growth in loans in the last fiscal year that ended in March, he has said the surge in lending notwithstanding, it did little in terms of decent economic growth “because funds were inappropriately distributed by the regulator” and used largely by players in speculative markets.     

Data released by the Central Bank of Iran indicate banks injected more than 18,989.2 trillion rials ($73 billion) into the economy in the last calendar year -- up 9,239.3 trillion rials ($35.5b) or 94.8% compared to the year before.  

Weak balance sheets is another major issue for the lenders. Decline in lending power, deepening economic recession and galloping inflation are seen as by-products of the questionable balance sheets of banks, both private and state-owned saddled with billions in bad loans and failed investments.

CBI Supervisory Purview  

In his address to the legislature, Raisi said the CBI “must put an end to recommendations and stick to its mission as regulator”.

In response to his statements, former CBI governor Abdolnasser Hemmati welcomed boosting the supervisory power of the CBI but argued that this cannot be achieved due to the government’s role and influence in the banking sector.

“If we were to perform based on accepted international norms, most of our banks, especially state-run, would have to down shutters due to capital inadequacy,” he wrote in a note in his social media account on Saturday.

Hemmati said the CBI does not have authority to decide the fate of malfunctioning banks without recourse to arduous legal and procedural requirements.

The former banker pointed to the need to “rewrite the financial interaction between the CBI and the government” as crucial to foster the CBI’s independence.

He ascribed the long years of banking incompetence to orders and obligations imposed by the government and Majlis to lend (big amounts) without proper collateral and proper investigation into the financial solvency of major borrowers.     

Earlier he criticized the Majlis for repackaging the 2021-22 budget to include clauses that overburden the ailing banking system, saying figures in the budget include orders to the CBI which ultimately would result in high-powered money and money supply growth.

The budget has been conceived by the chamber in a way that demands colossal infusion of money from the banking system.

Banks have come under renewed pressure as they have to both realize budget targets and comply with the regulator’s mounting restrictions and transparency rules.


banking Ebrahim Raisi