Central Bank’s six-month ultimatum to bad banks
According to Iran Economist, on Wednesday last week, the head of the central bank appeared in the group of bank managers and gave some tips about the monetary policy, liquidity growth, the state of the currency market and the conditions of the country’s banks. In this meeting, Mohammadreza Farzin, the head of the central bank, pointed out that the most important tasks of the central bank are to control the growth of liquidity and inflation, and announced that according to the monetary policies applied by this bank, the growth of liquidity in 1401 compared to 1400 faced a decrease of 9 percentage points. and decreased from 39% to 30%. By comparing the inflation rate and the growth rate of liquidity last year, this official stated that the real growth rate of liquidity in 2014 was negative and the amount of real liquidity of the country’s economy has decreased. Citing this, he has attributed last year’s inflation growth to inflationary expectations, mental atmosphere, exchange rate fluctuations and some factors affecting the increase in production costs of companies. He continued to talk about the banks’ overdrafts and informed these banks of a six-month deadline to correct their grievances.
Liquidity at the two-year floor
In a meeting of the central bank, the head of the central bank appeared among the country’s bank managers and announced the reduction of the country’s liquidity growth to 30%. According to Farzin’s words, inflation control is within the scope of the central bank’s duties, and to achieve this goal, this institution focuses on the strict implementation of monetary and currency policies. The head of the Money and Credit Council stressed the necessity of coordination of all institutions to control inflation and liquidity and further said that considering that last year’s inflation was 46.5% and liquidity growth was 30%, in fact the amount of real liquidity has decreased. Referring to this argument, he considered the country’s inflationary expectations, mental atmosphere, exchange rate fluctuations and some factors affecting the increase in the cost of production of the country to be the engine of last year’s inflation. He said that the target rate for liquidity growth this year is 25%, and he spoke about the feasibility of this goal. It seems that the use of the interest rate tool and other adopted policies have been able to slightly reduce the inflammation of liquidity growth and return it to its long-term level.
Deepening the currency and gold exchange center
Referring to the provision of 65 billion dollars in foreign exchange by the Central Bank last year, regarding the foreign exchange policies of the new year, the Governor General of the Central Bank said that in addition to the exchange rate stabilization program, this year there are specific plans for the expansion and deepening of the currency and gold exchange center. And in this regard, the central bank is planning to design and use all possible tools in this center, such as the currency stabilization fund, foreign exchange bonds, swaps, and the like. According to the head of the central bank, the currency stabilization fund with the mission of regulating and stabilizing the currency market will start its work after the approval of the money and credit council.
Referring to the effects and results of creating foreign currency accounts in banks for easier access of people to their foreign exchange needs and subsequently reducing foreign exchange brokerage and speculation activities, he said: by implementing the program of creating foreign currency accounts in the banking network and facilitating the process of transferring people’s foreign currency transactions in the form of bills in the platform banking system, as a result, we are witnessing a relative calm in the foreign exchange market and we hope that with the existing capacity and the plans being implemented by the banks to increase the acceptance of people and economic activists to deposit the banknotes in their hands with the banking network, the basis for increasing foreign currency deposits and mutual trust will be created. . The head of the central bank said about one of the policy measures under consideration to develop and increase the volume of foreign currency deposits with the country’s banking network: We are considering setting a specific interest rate with a reasonable appeal for foreign currency deposits. Farzin also stated that the new plan of the central bank regarding remittances will start from the first half of May this year; Because in the existing process, there are problems that need to be corrected.
A six-month deadline for non-performing banks
In the continuation of this meeting, the head of the Money and Credit Council emphasized the necessity of controlling the overdrafts of banks and said: “Without a doubt, the volume of overdrafts of some banks from the Central Bank is not acceptable, and the banks that fail in this regard will definitely be subject to the “rules and procedures” to determine the task. . Farzin added: As I have emphasized many times, this amount of overdraft is mainly caused by the situation and performance of a few specific banks, and naturally, in this situation, which is part of the country’s banking network, it is not possible to implement inflation control policies correctly and effectively in the country. did
The Governor General of the Central Bank further informed about the six-month opportunity of the Central Bank to correct their overdrafts and said: “The Banks of the Central Bank have until September to resolve their main problem which has an adverse effect on macroeconomic indicators.” Farzin pointed out: If a bank is always dissatisfied and at the same time wants to continue its activity, we must proceed towards determining the tasks and liquidation of that bank. Of course, most of these banks have suitable assets, such as real estate, etc., and therefore the board of directors of these banks should take the necessary measures to solve this problem immediately. The head of the Money and Credit Council pointed out the shareholding problems of some banks and said: “Several banks have shareholding problems and we are negotiating to solve them.” Of course, this problem includes a number of private and government banks.
The responsibility of the board of directors for the problems of banks
In this meeting, the head of the Central Bank addressed the CEOs of the banks and said: Regarding some banks, the main problem is related to the management of those banks and they should immediately solve these problems. Because of the 33.9% growth of the monetary base in the period of 11 months of 1401, about 32.7% of it was caused by the increase in the debt of the banking network to the Central Bank due to the increase in their overdrafts from the Central Bank. For this reason, this year we have to resolve this dissatisfaction and the main part of solving this problem is the responsibility of the board of directors and the general assembly of the banks. He further clarified: We are trying to make a decision this year about some government companies whose accounts have been transferred to the Central Bank; Because this issue has aggravated the monetary contraction of the banking network and has had an effect on the increase in the imbalance of some banks. Of course, this problem can be solved through some solutions that we found.
Special guest of the banking meeting
In addition to the Chief Justice, the head of the Judiciary yesterday also drew a line for bad banks. The head of the Judiciary said that this year, the Judiciary will pay more attention to the bank itself than to the bank’s customers in cases and discussions related to banks. the payment. The head of the judicial system added: A few days ago, an official said that we want to introduce the bank’s super debtors. I immediately contacted that person in charge and said that the introduction of bank debtors is the right thing and should be done; But also pay attention to who created these super-debtors, who gave them facilities and did not fulfill their supervisory duty in line with the use of these facilities.
Details of assignment of non-performing banks
Central Bank: Describing the plans of the Central Bank to correct the dissatisfaction of the banks, the deputy supervisor of the Central Bank said: The Central Bank is the protector and watcher of people’s deposits, and in this way, it will not be particularly concerned about people’s deposits. According to the public relations report of the Central Bank, Abuzar Soroush stated that Natraz banks are banks that have deviated from a series of bank regulatory indicators, and noted that there are a variety of regulatory indicators such as indicators related to liquidity risk, credit risk and other types of risks that Failure to comply with them usually shows its effects in overdrafts and insufficient capital of the bank.
He added: A bank that is insolvent has a negative impact on the economy in various dimensions, among which we can mention the increase in the monetary base and the growth of liquidity outside the norms, which ultimately leads to inflation in the economy. Soroush said: Considering that several indicators are involved in the insolvency of banks, it is not possible to announce exact numbers about the number of bankrupt banks. But the Central Bank’s current plan is to designate banks that are chronically insolvent in relation to specific indicators such as accumulated losses or chronic overdrafts.
The Deputy Supervisor of the Central Bank emphasized: The Central Bank has already entered into the issue of overdrafts and we tried to receive a specific plan from the banks, based on which the performance of the banks in various indicators such as collection of claims, transfer of property, increase in cash capital, on a monthly basis. It is monitored. He continued: In fact, we are not supposed to wait until the end of 6 months, but it is stipulated that the banks will be corrected on a monthly basis within a certain period, which is finally up to the next 6 months, and they will be able to rebuild themselves, and if this is not possible, they will enter into specific protocols that Based on that, assignments will be determined and the necessary information will be provided. The Deputy Supervisor of the Central Bank also emphasized: The Central Bank is the protector and watcher of people’s deposits, and in this direction, there will be no special concern for the people of the society. Therefore, the central bank’s focus is on organizing the banks according to the plan so that they can be restructured and return to the economic cycle. Therefore, there is no worry about people’s deposits in banks and people can change or move their deposits whenever they want.