Increasing dealings with non-performing and unregulated banks in the new law of the central bank
Company news: Mohammad Sheikh Hosseini, the CEO of Tehseh Cooperative Bank, wrote in a note: After several decades passed after the approval of the monetary and banking law in 1351, the plan of the Central Bank of the Islamic Republic of Iran, which was discussed between the government and the parliament since the 80s, is on the agenda. This plan was approved in 67 articles last year before the review of the budget bill, and after the approval of the disputed clauses by the Expediency Council, it was notified to the government by the speaker of the parliament.
To review and evaluate the new law, we must look at the law of 1351. In the previous law, like the laws of other central banks, which were inspired and influenced by the Bretton Woods agreement, gold was used as the basis for issuing money.
The relationship and interaction of the central bank with the head of government and the ministries of finance in the law of 1351 also shows that the monetary institution has been considered a subordinate or a second-rate device in most cases in these relations.
Clause “C” of Article 1 of the Monetary and Banking Law of the country stated that “changing the parity of the Rial with respect to gold will be possible upon the proposal of the Central Bank and the approval of the Minister of Finance and the approval of the Cabinet of Ministers and the approval of the finance commissions of the parliaments.”
In paragraph “f” of article two of the monetary and financial law of the country, it is stated that “the nominal amount, shape, material, color, size, map and other characteristics of the country’s common metal bills and coins are determined by the proposal of the head of the central bank and the approval of the minister of finance in compliance with the provisions of this law.” will be.” It seems that the role of the Minister of Finance in regulating affairs and guiding the country’s monetary policy has been much greater than that of the head of the Central Bank.
Another issue in the monetary and financial law of the country is given a seal of approval, and for years it played a prominent role in the formation of the impression that Mercury Bank is a government bank and has continued until now, Article 10 of this law. According to this clause, the capital of the Central Bank is completely owned by the government and its changes are subject to the approval of the Cabinet of Ministers. The common banking experience of that decade proves that central banks had defined such a role for themselves in almost all countries of the world.
Another issue that existed in the previous law and was based on the economic governance requirements of the 50s in the monetary and financial law was the central bank’s policy and supervision. had.
A review of other clauses and articles of the monetary and financial law of the country shows that this law was approved and implemented in accordance with the requirements and governance model of that decade, but it is worth considering that this law has governed the central bank and its relations until now.
Thinkers in the field of constitutional rights believe that a good law should be comprehensive and respond to existing needs, problems and challenges.
From the 1990s onwards, paradigmatic changes occurred in the duties and functions of the world’s central banks. Based on this, the central banks were required to control and curb inflation. This requirement came from the fact that inflation in most countries acts as a destructive factor in the economy. Since that date, with the independence given to the central banks in the field of legislation, this matter was operationalized in the best way, and the vast majority of countries in the world experienced single-digit inflation. Many economic crises, such as the 2007 crisis In Asia, the 2008 crisis or the Corona crisis showed the role of central banks well. These monetary institutions were able to shorten and manage the crisis periods.
In Iran, since the beginning of the 80s, issues such as the independence of the central bank, the role of the monetary policy maker in determining macro indicators, the relationship between the government and the central bank, etc., were raised at the level of the elites and the media, and the necessity of drafting and approving the new law was made public.
After years of pen and media controversies, finally the understanding of the change in the macro levels of policymaking was felt and led to the presentation of the plan by the members of parliament.
In a relatively long process, this plan has now become a law. Examining the new law of the central bank shows that this institution is slowly getting closer to being in its real position.
In the 10th chapter of the new law of the Central Bank, the idea that this institution is a government has been challenged and removed, and the government’s interference in the financial statements of the Central Bank has reached its minimum.
On the other hand, in the new law, efforts have been made to bring the Money and Credit Council closer to its legal status. According to the new law, the central bank can be expected to pursue its main goal of “maintaining price stability” with strength and seriousness. In the new law, “instead of the Money and Credit Council, the Supreme Board has replaced it, and the composition of the members of the Supreme Board is such that the Central Bank has an absolute majority of votes.”
In other words, out of 10 voting rights holders in the Supreme Board of the Central Bank, seven votes belong to the employees of the Central Bank.
In the new law, the country’s monetary policy maker can have proper control and influence on financial policies. Clauses “B” and “T” of Article 52 have provided the central bank with a good authority to use it to express its independent opinions regarding Criticize the inflationary effects of the bills presented by the government or the plans and proposals of the members of the parliament and send the result to the Islamic Council.
Another important task of the central banks of the world is to supervise monetary and banking institutions and deal seriously with undisciplined and law-abiding banks. The Central Bank of Iran has few powers to deal with such institutions until the new Central Bank Law is approved, but fortunately, in the law The authority of the central bank has increased in dealing with unregulated and unregulated banks.
In the end, it should be emphasized that the approval and implementation of this law is the first step in the direction of reforming and improving the monetary policy and modern banking process.
At a time when we are talking about cryptocurrency, NFT, decentralized financial system, it is no longer possible to write a 50-year-old law and regulate and monitor with the same tool.
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