28 Mar 2024
Wednesday 12 October 2016 - 23:27
Story Code : 235002

Why Irans central bank cant control money markets

TEHRAN, Iran On Sept. 28, the Central Bank of Iran (CBI) announced a plan that would urge commercial banks as well as credit and finance institutions to keep deposits under a specific level or face disciplinary measures. This is the second step taken by the monetary regulator in less than a year to ensure that financial resources are not blocked so that they can be used in the manufacturing sector and other business activities, which desperately need cash flow to survive.

In September 2015, banks and credit institutionsheld 83% of the money supply in short- and long-term savings accounts,Entekhabreported in February, citing CBI data. Since then, the regulator has come up with two parallel measures to help release these trapped financial resources. It first introduced a rating system which is expected to categorize banks and credit institutions into low-risk, medium-risk and high-risk tiers and now a new plan to determine a ceiling for deposits. Both plans are to be implemented by November.

The two measures, coupled with the policy of cutting the deposit interest rate ceiling from more than 22% in past years to 15% at present, are considered efforts to stop the ongoing transfer of financial resources from markets to banks and credit institutions, a majority of which have not even been authorized to operate by the CBI. Indeed, the thousands of credit institutions received their licenses from ministries and other influential bodies under former President Mahmoud Ahmadinejad. At present, the number of "unlicensed" credit and finance institutions exceeds 7,000, according to Tehran-based economistFarshad Momeni.
Read more here

This article was written by Alireza Ramezani for Al-Monitor on Oct. 10, 2016. Alireza Ramezani earned his master's degree in journalism from Cardiff University, United Kingdom. He has worked for various media organizations and businesses in Iran since 1999.
https://theiranproject.com/vdcbgsb55rhbfgp.4eur.html
Your Name
Your Email Address