21.7 thousand billion tomans of facilities announced by a state bank out of the allowed limit
According to Iran Economist, having the power to create money from nothing is a tempting power and can lead anyone to abuse it. forcedthe lack of supervision of this power will also become a factor to further provoke the holders of this power, in the meantime, banks, as the most important institutions of money creation in the country, are not exempted from this rule.
It is clear that banks can use this powerful tool against the benefit of the general society and despite creating unfavorable conditions for the majority of the society, they can gain the maximum benefit from this possibility; Because banks, as a type of business, seek to provide services and receive profits.
It is clear that no company seeks to provide services for free or to provide services that lead to losses. Therefore, according to rational behavior, every company seeks to trade with low riskthe most are people
The most important services offered by the companies include providing facilities either through attracting small deposits, aggregating and providing these collected deposits to its applicants or through the mechanism of creating money from scratch. In any case, banks are forced to evaluate the applicant in order to ensure the profit of their service, i.e. providing facilities, and to avoid losses in transactions, they do not provide facilities to risky and unqualified people.
In order to prevent banks from creating too much money and taking risks, the Central Bank approved a regulation under the title of Regulations on Facilities and Large Obligations, in which Article 7 states that banks can grant facilities up to 8 times their regulatory capital in the previous year.
Banks can also grant facilities to persons related to them. In 2014, the Central Bank has prepared regulations on facilities and obligations of related persons to prevent banks from becoming a source of financing for persons related to them.
Despite the rules that the central bank had to control the lending of banks, according to the recent report of the central bank in relation to the request of the Ministry of Economy to provide statistics on lending, it can be seen that some of these banks violated the rules of the central bank and gave loans outside the specified frameworks. .
Banks have not followed the central bank’s lending rules
The Central Bank’s report on a state-owned bank shows that this bank has been careless in providing facilities because the regulatory capital of the bank in question in 2019 was equal to 0.55 thousand billion Tomans and finally this bank was allowed to borrow 8 times this amount in 2014. It means to provide facilities to the amount of 4.4 thousand billion tomans. However, in 1400, this bank provided 22 thousand billion tomans of facilities; It means 5 times the maximum allowed amount.
Also, according to Article 6 of the regulations on macro-facilities, banks are allowed to provide facilities up to 20% of their regulatory capital to each person applying for a facility, therefore, the bank in question must provide a maximum of 20% of its regulatory capital, i.e. 0.11 thousand billion tomans, to each applicant. granted
However, the Central Bank’s report shows that in 21 cases of its announced granting facilities, in proportion to 98% of the total facilities granted and worth 21.7 thousand billion Tomans, this state bank did not comply with the legal limit and provided facilities outside the limits announced by the Central Bank. .
Why doesn’t the central bank prevent lending outside the framework of banks?
The question that may come to mind now is why the Central Bank, while it has approved regulations to facilitate the banks and specified limits for the banks, but does not supervise the proper implementation of these legal cases by the banks? Why has the Central Bank not been able to supervise the process of providing facilities outside the legal framework of banks and prevent such facilities from being granted?
The need to increase the supervision of the central bank on bank lending
Experience shows that the lack of supervision is a factor in increasing adverse performance, especially when it comes to money, as banks can prevent business closures and recessions on the one hand, and can start the country’s economic flow, on the other hand. They can lead to many problems, including rampant inflation and corruption, the smoke of which will be visible to everyone.
In order to prevent the destructive effects of the bad performance of banks, the central bank should have more supervision over the bank lending process and prevent the increase of liquidity for the benefit of certain people and to the detriment of all people.
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