Press TV – Governor of the Central Bank of Iran (CBI) Abdolnaser Hemmati says the much-anticipated merger of military-linked banks will complete around late December.
The central bank first announced in March its plan to merge four military-lined banks and another financial institution with Bank Sepah to boost efficiency in the face of US sanctions.
“The process of merging military banks and financial institutions is on track according to plan and will be finalized by the end of Azar,” Hemmati told reporters in Tehran Wednesday, referring to the Persian month which ends on December 21.
“The majority of their shares have been overtaken by Bank Sepah and a small portion which remains is being processed,” he added.
Under the plan, Hekmat, Ansar, Ghavamin and Mehr Eqtesad banks, along with the Kosar Credit Institution, will merge with Bank Sepah, Iran’s oldest bank.
The merger, the CBI has said, will create “a stable and more efficient single bank to provide better services to the families of the armed forces and the general public.”
“This plan will be one of the most successful and lasting achievements in the banking system. This is a complex and important task which has to be done in a specific period of time,” Hemmati said.
Iranian banks are under pressure from US sanctions which have cut off the country’s financial system from the outside world. The embargo has touched every sector of the economy, including health care, where the lives of so many patients are at risk.
Some of the problems are related to mismanagement, however, with many Iranian banks reportedly saddled with outstanding and non-performing loans.
Critics say the government is oblivious to a bloated financial sector which has been thriving for years as banks and financial institutions have mushroomed and engaged more in speculative activities than finance.
Over the years, manufacturing corporations, pension funds, charity foundations as well as civil, military and state organizations have established their own banks.
These financial institutions have extended loans to some “bigwig” clients who are mostly engaged in speculative activities and refusing to repay their debts.
Borrowings of Iranian banks from the CBI have led to an overflow of money supply, which is blamed for galloping inflation and liquidity crisis.
“The reform of the banking system is a very important issue that cannot be done in the short term,” Hemmati said.
“The problems facing the banking system in terms of financial and asset imbalances, arrears and unsettled claims are important issues that are gradually being resolved.”