The big surgery of Iran’s economy is to reform the banking system

In an interview with the Iran Economist, Hossein Mirzaei, a senior banking expert, said that the banking system needs to be reformed. According to some economic experts, the banking system is the heart of any country’s economic system. Since in most economies today, almost all activities are directly or indirectly related to “money”, the part that manages funds, how to allocate funds to various activities and create money, has a virtually undeniable impact on the economic dimension. , Will have social and even political countries, and this sector is nowhere but the bank.

The destructive banking system hinders any kind of economic policy

He added: “As long as there is a sick and sometimes destructive banking system in the country’s economic system, the implementation of almost any kind of economic policy by governments will fail.” In fact, although governments can improve the economy in the short term by implementing some policies, but after a while, the country’s economy will return to a bad state, which, according to several years of research, is one of the most important and fundamental causes of this situation. The country’s banking system is inadequate.

The banking expert further added about the failure of governments to correct the wrong economic practices of the country: it is enough to note that in almost all governments, policymakers had some development and growth goals, but at the same time, the banking system is a separate path. Took another that was commensurate with the interests of the original owners of the banks, and because it was these banks that created the money and how to allocate the money to economic activities, the demands and plans of the original owners of the banks were finally realized and the country’s economy and National interests hit. That is why it is observed that important plans in the field of housing, improving the situation of subsidies, etc. are formulated and implemented, but after a while, the effects of such policies disappear, because no more priority steps have been taken to reform the banking system, one of the most important These policies will be the great surgery of Iran’s economy.

Banking reform is not advisable

Mirzaei called the banking reforms in the previous governments unwise and said: “When we look at the field of banking system reform, we see that mainly during the various governments, only as a recommendation to reform the banking system and strong and decisive steps to advance the issue have not been taken.” This situation has led to the emergence of banks as privacy and autonomous institutions that prefer the individual interests of their owners to the national interests and the economy of the country. This situation is especially visible during the last decade.

The previous government abandoned the banks

The banking expert spoke of the severe deviation of the banking system in the Rouhani government and added: “During the last decade, not only was the banking system not seriously monitored and reformed, but under the liquidity recovery package at the beginning of the 11th government, the abandonment of banks became legal.” Some theorists of the 11th government in 1392 and 1393 claimed that by freeing the banks, the situation of the banking system will improve, but not only that, but it did not get worse. Widespread taxation, speculative interference in the housing and real estate market, housing hoarding, speculation in the foreign exchange sector and the devaluation of the national currency, more than 1,000 percent increase in liquidity and bank spraying for the benefit of their owners are just some of the destructive behaviors of banks. The figures were hundreds of thousands of billions of tomans and imposed massive and miserable inflation on the Iranian economy, while the people and the manufacturing sector need small amounts of money to grow their business.

The previous government gave the biggest economic rents to the banks

Mirzaei added: “In the field of facility allocation, most of the facilities were granted to some people who were favored by the main owners of the banks and were delayed. In fact, it should be said that the facility grant and money creation privilege was the biggest rent in the economy.” Iran was given to some banks. Today, while the productive sectors need facilities and the country’s economic growth depends on this issue, banks give between 55 and 60 percent of their facilities to the trade and services sector, and in practice, contrary to the country’s macro policies in the field of sustainable growth. It is noteworthy that most of the non-current facilities, which are more than 50%, are related to the trade and services sector, but the banks pretend that these arrears are for the production sector, in fact, they are pumping the wrong address to the society. Unfortunately, some banks also entered into corporations extensively and broke the back of production as much as they could. In the end, the central bank creates powerful money to cover the financial indiscipline of the banks and the budget deficit of the banks, and inflation and its expenses are given by the same people who had no share of the facilities and this situation.

In response to the question whether, with these conditions, we do not need a rigid policy package for banks? “A package that guarantees implementation by specifying the actions that banks must take to exit the corporation, sell real estate and reduce borrowing from the central bank,” he said. “Stopping such a complicated situation requires a coherent policy package and a roadmap.” . Today, the country needs to develop an operational roadmap for reforming the banking system. The roadmap should be developed by people who, firstly, have a thorough knowledge of the functioning of the banking system and its problems, secondly, play a role in this field for many years and do not have conflicts of interest, thirdly develop a policy package tailored to the domestic economy Or the current parliamentary banking plan does not necessarily use the borrowed copies of some international institutions.

Guarantee the implementation of the banking system reform

Mirzaei further mentioned that the mentioned roadmap for implementation needs some strategic components and listed them as follows:

1- Serious support of the authorities: Historical experience shows that not only the formulation of a policy package and roadmap is not enough, but also its executive guarantee. Given the great power that banks have found in the country, it is necessary for the package to be developed, supported by the President himself, and for him to get involved personally. Unless there is serious support from the president for reforming the banking system, the government’s economic team will not be able to take firm steps.

2- Accuracy: In this roadmap, it is necessary to define the steps of reforming the banking system accurately and to formulate the necessary criteria for measuring the level of progress.

3- Integration: Due to the complexity of communication within the banking system as well as its relations with other economic systems, it is necessary for the developed roadmap to be integrated and to look comprehensively at the internal and external components of the banking system.

4- Proportion: It is necessary that the roadmap is in line with the institutional and operational requirements of the country’s economic system.

5. In this case, one can be optimistic about the implementation of the roadmap, but a sufficient condition is the frequent follow-up of the media that can accurately monitor the progress of the issue and demand.

This banking expert said that the last policy package for the banking network dates back to 1390 and since then no policy package has been announced for the banks and they have been working on a daily basis. So how useful will the implementation of enforceable policies be ?, he said: In any case, any move from the current situation to a favorable situation, requires policy-making and the development of a roadmap. Otherwise the movement will not be coherent and will go astray. Even today in the economic literature, the importance of regulation and the institutional and legal environment on economic performance is fully emphasized, this issue has been emphasized even by the Nobel laureates in economics. Therefore, policies will hit the target if they have the appropriate characteristics and have the listed components. Let us not forget that the current situation was the result of the releases, lack of supervision and lack of appropriate policies that were prescribed in the Iranian economy during the last decade. Changing the status quo requires a reverse process, namely: proper regulation, monitoring and policy-making.

He added: “However, in order for these policies to reach the desired point, it is necessary to seriously resolve the issue of conflict of interest in the banking system, especially the central bank.” There are people who go from banks to the central bank or from the central bank to non-governmental banks after a while and get positions. Until these kinds of conflicts of interest are resolved, the implementation of policies is in a haze.

The new government’s approach is useful

Mirzaei in response to the question that given the new government’s approach to the banking system, which is under pressure to publish the names of large debtors, the publication of financial statements, the removal of guarantors for micro loans, in your opinion now is the best opportunity for such a change in the banking system. Has not been provided ?, he said: ‌ Currently, some actions have been initiated by the government in the banking system that you mentioned. These measures, if accompanied by media support, will also provide the basis for social support and public demand to improve the situation in the banks. On the other hand, the government is at the beginning of the road, and usually the first few months are the best opportunity to plan for fundamental reforms, because other achievements will depend on such reforms. In the current situation, it seems that a suitable situation is provided for the reform of the banking system, which is a major surgery of the Iranian economy.