High number of bank branches in the spotlight once again

Financial Tribune- The controversy surrounding the high number of Iranian bank branches is still raging with the dominant theme being the extension of lenders’ sphere of influence far wider.

This, the critics say, become evident by a simple glance across most streets of Tehran where banks have a dominant presence.

Most recently, President Hassan Rouhani had used the opportunity at the 57th annual general meeting of CBI held earlier this month to renew his criticism of Iranian banks, saying they had too many physical branches which do not help in terms of efficiency.

However, an alternative notion emerged when the chief executive of banks–both private and public–gathered for their yearend shindig this week, the main theme of which was the number of banks’ physical branches.

After the meeting, Mohammad Reza Jamshidi, secretary of the Association of Banks and Credit Institutions, announced that a comparison with foreign lenders shows Iranian banks, contrary to the common perception, have fewer branches than their global peers.

On Friday, ISNA quoted Farshad Heydari, CBI’s deputy for supervision, as saying that the account of Iranian banks having excessive branches is not accurate.

Heydari said that there are two approaches regarding bank branches in the world: too many banks with few branches and few banks with a wide network of branches.

According to the CBI official, the latter scenario is prevalent in Iran where a handful of banks have tried to widen their influence.

The list of authorized banks shows 42 banks and credit institutions have been authorized, but not all of them are currently active.

Iran’s central bank has ceased issuing permits and licenses for new private banks or commercial lenders, after the collapse of several major institutions froze the savings of hundreds of thousands of depositors and helped fuel anti-government protests.

No New Permits

In January, President Rouhani announced that he had instructed the central bank not to issue any permits to any new private banks.

“We’re determined to solve the problem facing depositors at financial credit institutions, which has affected two to three million families,” he said at the time.

The momentum to reduce the number of banks gained more traction after the collapse of several major institutions froze the savings of hundreds of thousands of depositors.

Heydari, however, said that in the light of advances made in the field of electronic banking, banks should reconsider their policies about creating more physical branches.

He also announced this week that a new wave of consolidation is underway in the banking system, according to which two unlicensed banks and credit institutions, namely Mehr Eqtesad and Samen, will be acquired by Ansar Bank, a bigger licensed bank.

The CBI official announced that that the three remaining military banks and credit institutions, namely Hekmat Iranian, Ghavamin and Kowsar, are next in line to be merged in the next fiscal year (starting March 21).

Heydari also talked about the bigger vision of merging the two newly-created banks into a major and efficient bank that offers services to the country’s Armed Forces and their families.