Government Map for Banks – Financial Monetary News
The fate of surplus property of state banks was investigated in 1402
According to the financial news, banks are also allowed to invest in important projects of the country with the approval of the Cabinet of Ministers. The research arm of the parliament has analyzed this budget item in a report. This report has announced the amount of sales of this asset in state-owned and privatized banks from 2014 to 2011 at about 67 thousand billion tomans. Based on this, factors such as high uncertainty due to inflation, greater economic efficiency of speculation, high production risk in the economy and low risk of non-productive activities have not only caused the diversion of banking resources, but also had negative consequences for other asset markets. The present report, with an expert critique of this budget clause, emphasizes that in this policy, the criterion for identifying strategic plans has not been specified, and it is possible that banks will be forced to accept plans with the support aspect overriding the economic aspect due to the pressure of the government.
According to one of the clauses of Note 2 of the budget bill of 1402, state banks are required to sell their surplus assets upon the approval of the president of the General Assembly, and these banks are also allowed to invest in important and strategic projects of the country with the approval of the Cabinet of Ministers. In a report, the Center for Researches of the Islamic Council of the Islamic Council has examined paragraph “G” of the second note of the next year’s budget bill. This clause, which includes two important rulings regarding “sale of surplus property of state banks” and “investment of state banks in important and strategic projects”, can cause serious changes in the cash flow situation and the situation of net fixed capital formation. This report examines this clause of Note 2 of next year’s budget bill, which has been approved by the Budget Consolidation Commission without any changes. It seems that with the approval of this section of next year’s budget bill by the Parliament’s Consolidation Commission, the amount of government’s financial dominance over the banks will increase and the government’s hand will be more open to intervene in the balance sheets of state-owned banks.
Accumulation of excess assets in the balance sheet of banks
The necessity of selling surplus assets of banks and investing them in important and strategic projects is not hidden from anyone. The financial statements of the banks show that most of them do not have much capacity to provide facilities according to the instructions of the central bank, but the same banks have many frozen properties and assets that can be removed from this situation if they succeed in selling them. The high rate of inflation and the growth of property and asset prices in the country encourages property owners to delay or resist selling their surplus properties and assets; Because they believe that maintaining it is more profitable for them in the long run. Similarly, banks also believe that despite the costs related to the maintenance of real estate, the profit due to changes in the price of bank real estate is still much higher than the profit due to the granting of facilities at a mandated rate and lower than inflation.
Another reason that reduces banks’ desire to sell surplus property is the commonality of income from the sale of investments. In the note of Article 3 of the Law on Banking Operations without Usury approved in September 1362, the legal and financial relationship between banks and depositors is explained as follows: “Term investment deposits, which the bank is a lawyer in using, in matters of partnership, mudarabah, rent to The condition of acquisition, installment transactions, farming, contracts, direct investment, advance transactions and Ja’ala transactions are used. Therefore, the law of interest-free banking operations considers the facilities received from banks to be the result of the combination of deposits and resources belonging to bank shareholders, and accordingly, the profit from banking operations is not the exclusive income of banks, but is the common income of depositors and shareholders, which should be To be divided between the shareholders and depositors of the banks according to the duration and amount of the deposit and the share of the resources belonging to the bank in banking operations.
On the other hand, part of the surplus immovable assets of the banks is also due to the collaterals that the bank forcibly acquired, and since its origin was the payment of facilities and led to the acquisition of the asset, the income from its sale can also be considered common. . The mechanism of capital increase from the place of revaluation of assets is also a mechanism that finally turns the profit from property maintenance into the shareholder’s capital after paying the relevant tax and passing the required legal years and stabilizes it for him. The Central Bank’s lack of strict monitoring of liquidity ratios and capital increase from the revaluation of fixed assets by the country’s banking network, and of course the concern of bank officials for possible complaints after the handover, added to all the above reasons, so that the banks’ balance sheets turned into a set of non-liquid assets.
Surplus property transfer status
Until now, official statistics have not been published by the Central Bank or the Ministry of Economic Affairs and Finance regarding the amount of excess assets by banks. However, during an interview, the deputy minister of economic affairs and finance stated that the amount of surplus property, including real estate and shares of state and privatized banks, is more than 200 thousand billion tomans. Regarding the transfer of these properties, there is no comprehensive report regarding the amount of surplus assets of banks, but according to the report of the Minister of Economic Affairs and Finance, the sale of surplus assets of state-owned and privatized banks from 2014 to before 1401 was about 67 thousand billion Tomans; 33 thousand billion tomans of non-bank shares and 33 thousand billion tomans of surplus properties have been sold.
Government pressure to accept non-economic plans
In the text of the budget bill of 1402, it is mentioned that “state banks are allowed to invest in important and strategic projects of the country with the approval of the Cabinet of Ministers”. In this ruling, the guarantee of the implementation and realization of the goal of completely limiting speculative activities with no added economic value has been provided due to the approval of the important and strategic plans of the country by the Council of Ministers. Nevertheless, due to the fact that it does not give certain indicators regarding the selection of strategic plans from non-strategic ones, it seems incomplete and has practically left it to the discretion of the Board of Ministers. Also, this ruling can lead to the selection of plans and projects that are not profitable and their economic justification for the bank is ambiguous; Because the addressees of this ruling are state-owned banks, and the members of the board of directors of these banks cannot resist the decision of the cabinet, and they may be forced to accept some projects under the pressure of the government, the support side of which is more important than the economic side.
In fact, by approving this clause of the 1402 budget bill without change, a very important issue is being ignored. The important issue that lies in this paragraph is that with the implementation of this plan, the way is paved for the government’s intervention and control over the properties of banks; Because the discussed investment plans must be approved by the Cabinet of Ministers and then by selling the excess assets of the state-owned banks, the liquidity available to the banks and their lending power will increase.
Green light for financial domination?
On the other hand, in order to amend this section of next year’s budget bill, the Research Center has proposed that “if the surplus property of state banks is not handed over within six months after the promulgation of this law, the responsibility for handing over said property (including price determination and sales agency) will be transferred to The mechanism of handing over the surplus property of the government is transferred and the government is obliged to deposit the proceeds to the bank account immediately after the sale of the above property. “Also, state banks are allowed to invest in export projects and drivers with income flow approved by the Council of Ministers and within the framework approved by the Council of Money and Credit in charge of bank risk management.”
It should be noted that even with this amendment, the main problem of this budget item, i.e. the government’s intervention in the banks’ balance sheets, is ignored and the focus is only on the sale of surplus assets of the banks. In fact, this kind of government’s financial dominance over banks will increase even more. This is despite the fact that banks, both private and public, should be able to independently choose the way to use resources and expenses based on their goals, and the supervisory body should only monitor the indicators of risk and banking health. However, direct intervention on banks’ balance sheets will create adverse effects such as resource deficits and overdrafts for banks.
Source: World Economy