Financial Tribune- The Iranian banking system is not bankrupt contrary to some reports and the Central Bank of Iran is in control, the vice governor of CBI said.
“I do not agree with the use of the term bankruptcy for banks,” Akbar Komijani also told IRNA, though conceding that “a number of banks are facing problems such as a shortage of capital and non-performing loans higher than international standards”.
Referring to measures undertaken to address banking woes worsened by years of sanctions and isolation from the international community, Komijani said CBI has studied challenges facing lenders in the past two years with the help of President Hassan Rouhani’s administration and the parliament to come up with “reformative policies”.
The CBI official stressed that bankruptcy of banks is different from that of companies and businesses, and CBI has considered a number of approaches to prevent them from going bankrupt such as structural reforms and mergers.
He added that by conducting expert analyses, the central bank has “complete knowledge” of the condition of Iranian banks and has taken measures to reform them, namely articles 35 and 36 of the amendments to the annual Budget Law for the current fiscal year (started March 20, 2016).
“These two articles allow the government to act in line with recapitalizing state-run banks and a number of private banks from the revaluation of the foreign assets of CBI,” he said.
Komijani noted that this measure will significantly improve the capital adequacy ratio of banks.
Eight state-owned banks, including Bank Keshavarzi and the Export Development Bank of Iran, have already seen or will see their capital increase as part of government actions.
“The Budget Law for the next fiscal year will add Bank Melli, Bank Sepah and Bank Maskan (the agent bank of housing sector) to the list of banks that will experience a rise in their capital,” Komijani said.
Reports that the Iranian banking system is bankrupt has been circulating intermittently for some time, especially during the past few weeks, which could be due to the greater emphasis placed by CBI and the government on banks to conform to International Financial Reporting Standards.