Interbank Market Over a Decade
EghtesadOnline: A survey of Iran’s interbank market in the past 10 years shows that it was steady from 2008 to 2014 in terms of both volume and value of deals before rising sharply from 2015 onwards.
The value of trade on average was 120 trillion rials ($680 million) a year during 2008-2014 with the number of deals ranging from 200 in 2009 to 3,500 in 2011, 2,100 deals in 2012 and 5,900 in 2013, according to Central Bank of Iran data compiled by the Tehran Chamber of Commerce, Industries, Mines and Agriculture.
Interbank deals experienced a steep rise in 2014 with the number reaching 17,400. The ascending order continued to 2018 when 40,700 deals were conducted before dropping slightly to 40,300 in 2019.
Likewise, the value of trade climbed to 107,150 trillion rials ($605 billion) in 2018 and to 186,888 trillion ($1 trillion) in 2019, up 74% on year-on-year basis.
Interest rates in the interbank market were, however, not consistent over the past ten years. Interest on interbank lending reached a record high of 27% in 2014, rising from 15.5% in 2009.
From 2009 the rates were on an upward trajectory to reach near 19.7% in 2018.
Interest rates again dropped to 3.9% in fiscal 2019-2020 compared to the year before. The lending rate fell from an average 19.72% in fiscal 2018-19 to an average 18.95% in the previous year with rates ranging from 16%-23% during the year.
Rates jumped to 19.81% in the first month of last year (March-April 2019) and 18.34% in the last month (ending March 19).
Founded in 2008
Iran’s interbank market was established in July 2008 with the aim of strengthening the management of liquidity held by banks, facilitating short-term lending among banks, maintaining monetary discipline and facilitating implementation of monetary policies announced by the regulator.
The government has stepped up efforts in recent months to boost financial discipline of banks and credit institutions by announcing revised monetary policies that involves higher reliance of banks on interbank market.
Central Bank of Iran Governor Abdolnasser Hemmati said recently that banks have significantly cut borrowing from the CBI and turned to interbank sources to meet their funding needs.
As a key step toward regulating the interbank market and reducing lenders’ dependence on the CBI, the regulator launched an open market operation in January.
OMO is in line with CBI moves to reduce banks’ dependence on the central bank and help curb inflation by regulating rates in the huge interbank market. It also enables lenders to better manage their liquidity needs and offer surplus liquidity on the interbank market.