The central bank’s relationship with the government and the banks needs to be improved
Ali Salehabadi, Governor of the Central Bank, said in the Soraya program that one of the most important axes in reforming the economic system is the reform of the banking system. The government is with the banks, the central bank is with the banks, and the banks are with the customers.
Salehabadi stressed the importance of reforming the central bank’s relationship with the government: “One of the roots of monetary base growth and the creation of liquidity is the increase in the net foreign assets of the central bank, since the central bank is the government banker and buys oil currencies and its equivalent in rials.” Prints and distributes to the government.
He continued: “This action will increase the monetary base and create liquidity, which from 560 thousand billion tomans of the country’s monetary base 503 thousand billion tomans will return to this issue.”
The head of the Monetary and Credit Council, stating that the government and the central bank have other relations, said: At the beginning of the year, the central bank will provide the government with a salary according to the budget law, from which the government has borrowed 55,000 billion tomans from the central bank. This is the source of increasing the monetary base and creating liquidity.
Salehabadi reminded: “On the other hand, it is the accounts of the government and state-owned companies with the central bank that affect the way money enters and leaves the accounts. The relationship between the government and the central bank, and therefore It is considered as reforming the banking system.
The head of the Monetary and Credit Council mentioned the reform of the government’s relationship with the banks as another axis of reforming the banking system and added: Lead to banks borrowing from the central bank.
Referring to the third axis, the central bank’s relationship with banks, he said: “Issues such as non-compliance with capital adequacy, imbalance in assets and liabilities, freezing of bank assets in non-liquid sectors and increasing bank arrears also cause banks to be unbalanced.” It must be reduced and the functioning of the banking system must be transparent.
Salehabadi, stating that 170,000 billion tomans of monetary base items arise from banks’s debt to the central bank, said: out of 4,500,000 billion tomans, the volume of liquidity is about 1,500,000 billion tomans, the share of banks.
Referring to the need to improve the relationship between banks and customers, Salehabadi said: “Legal customers and manufacturing companies are also a class of customers of the banking system that in discussions such as providing facilities and services, we need to improve the relationship between the bank and the customer.”
“All government and non-government agencies should cooperate in this regard, and our expectation from the parliament at this time when the budget is being approved is that the budget,” he said. Do not close next year.
Ali Salehabadi, Governor of the Central Bank, continued Soraya’s program: “Since the beginning of 1400, about 55,000 billion tomans of salary was at the disposal of the Treasury, so part of this was actually due to the increase in government borrowing from the Central Bank.” At the beginning, I argued that if we are looking to reform the banking system, it has several components, some of which, of course, include banks, and they must be disciplined and the banks must be prevented from creating undisciplined money.
He added: “The goal is not for the banks to build towers; Indeed, the liquidity created by the whole set, rightly or wrongly, must go to production and be commensurate with economic growth. Therefore, all the correctional axes must be done. If we do one part and neglect the other part, we may have minimal success as much as we have done, but if we want to complete our success in reforming the banking system, the part of reforming the government-bank relationship And improving the central bank’s relationship with banks, for which there is a plan.
He emphasized: the central bank buys some 4,200 currencies and sells 4,200, buys some currencies halfway and sells half. So according to the net of these, where we bring the deficit is the part that we buy half and sell for 4200 Tomans, the difference between these is also very clear; 4200 Tomans is for the basic product that we sell 4200 but we buy half. As a result, the monetary base, which is 560,000 billion tomans, is approximately 503,000 billion tomans due to the increase in net foreign assets of the Central Bank, which has increased in the past year in such a way that even having a claim from a person as part of assets it counts; Thus, the $ 6 billion requested by the central bank from the government has been recorded in foreign currency.
The Governor of the Central Bank further stated: The fact that the Central Bank actually has a 47% share of the monetary base volume is again indirectly related to the government because it is the banker of the government. When the central bank buys government currency and gives it in rials instead, it is indirectly connected to the government, which means that it seems that the central bank is strengthening foreign exchange reserves, but in practice it is pumping by buying rials. Slowly
The Governor of the Central Bank added: “The behavior of both banks and the behavior of people who have financial resources must change.” In the world, one of the things that is done is through the tax system. The tax system in the world has two roles, one is to provide sources of income for governments and the other is to allocate large debts in the economy. Therefore, when unproductive activities are tax-exempt, it is natural that financial resources go to non-productive sources, so the law on capital gains tax introduced in the parliament is the intelligent tax system, which makes the intelligent banking system meaningful.
Salehabadi clarified: the growth ceiling of banks’ balance sheets has been determined, the central bank also controls and supervises, but it needs to be reformed, it has been seen in the same way for all banks, which cannot be considered the same for everyone. .
“There is a debate about bank reform that is a thing of the past,” he said. That a bank sells its property, the mechanism of which is also considered, but it is possible that a bank may not sell its property. So we have a past reform that the mechanism of selling the banks’ surplus property has been considered in the government, which will be approved soon, and another is what we should do in the future so that we do not get stuck in this hole again, so with intelligent and control systems. What we do based on technology, we will try to fill this hole.
The Governor of the Central Bank emphasized: Mr. President, the government, the Supreme Leader have said many times and recently in a meeting they mentioned liquidity again, this is a demand of the people and we are serious in our work. The capital market we were in was an attempt to fundamentally reform the structure; We are really making the desired reforms in the field of money and banking network, the banking plan is also progressing, God willing, this plan will be made public early next year; This plan can help the central bank’s oversight capacity.
Salehabadi, emphasizing that banks should definitely reform their capital adequacy ratios, said: “Liquidity creation in the world is done by banks in a standard and specific framework.” It is very important to emphasize in the world that the capital adequacy ratio of banks should be improved; Because the bank should not create money with low or even negative capital adequacy and it is not accepted. One of the axes of reform in the banking system is related to increasing quality capital in banks, not necessarily with revaluations, which is not complete.
He continued: the bank should not derail banking. But in some cases, the bank has become an entrepreneur, contractor or owner instead of a banker and financial intermediary. Another axis of reform in the banking system is for banks to transfer their surplus assets.
The Governor of the Central Bank emphasized: The bank is an intermediary of funds and has no right to do business. While risk management in the banking network is also very important; It is difficult for a bank to trap its liquidity in one or more specific projects, and if that project does not have the necessary liquidity, it will eventually borrow from the central bank. The governor of the central bank said: “Therefore, banks should keep part of their assets in cash or quasi-cash, in the meantime, government bonds have been raised for the past year.” He added: “All over the world, government bonds are among the quasi-cash bonds that central banks can repo in open market operations so that banks do not suffer from liquidity problems.”
Salehabadi further said: in next year’s budget, about 1,200 mandatory facilities have been seen, including Note 16 and other additional clauses. He emphasized: The total obligation facilities that the banking network has paid since the beginning of this year has been about 2300 billion tomans, 67% of which has been used for working capital of manufacturing companies. This 1,200 efforts of mandatory facilities will cause imbalance, so we ask the esteemed parliament to correct this issue. The Governor of the Central Bank continued: It was decided that the Central Bank, the Program Organization and the Ministry of Economy, in coordination with each other and in proportion to inflation and liquidity, should act in such a way that there is no pressure on the banking network.
“We should not allow banks to create liquidity without regulation,” he said. At the same time, banks are different based on their characteristics, parameters and conditions. He said: “Law, tools and serious determination in the category of banking system reform and liquidity control are important factors that fortunately there is a serious determination in the government and the government.” Its tools are the same systems and manpower. Salehabadi, stating that the law on the central bank is old, clarified: The amendment of the law on the central bank is a very important issue that we hope will be resolved in the parliament soon.
Referring to the growth statistics of liquidity in recent months, the Governor of the Central Bank said that the growth of liquidity was 42.8% in October, 42% in November, 41.4% in December and 39.8% in January. Of course, 2.6% of it is related to the statistical coverage of one of the merger banks, but in general, the trend of liquidity growth has decreased in recent months.
He expressed hope that with the cooperation of all pillars of the government as well as the Islamic Consultative Assembly, this trend can be changed and our goal is to reduce the growth of liquidity. Salehabadi said: “We are currently monitoring the growth of banks’ balance sheets so that a bank can not pay heavy figures to a specific customer regardless of the unit beneficiary and its basic capital, all of which will be controlled.”
He reminded: “In the past, there was a Samat system in the Central Bank, which was not used well, but now we use it properly.” Accordingly, if a facility is to be paid, a code must be received from this system, so our control over the banking system lending has also increased. Also in this regard, the issue of directing credits to the productive sectors, which is one of the concerns of the Supreme Leader of the Revolution, will definitely be considered.
The Governor of the Central Bank further stated: One of the axes of reform intended by the Central Bank goes back to online and intelligent supervision. For example, the system system used to be a backend system, that is, after a facility was paid, its statistics were entered into the system, while this system has the potential to become a control system, in such a way that rules must be defined and Enter this system so that control can be exercised within the framework of these rules. For example, just a few days ago, the payment facility code in a specific bank and for a specific customer for which items such as unit beneficiary and basic capital were not observed, was blocked in this system and it became impossible to pay the facility to the said collection. Therefore, this system has the ability to receive control rules, but the work operations department, which is related to our area of supervision, must define the rules and provide the technology department with these rules to be included in the system.
Regarding the diversion of bank credit to unproductive activities and entrepreneurship, Salehabadi said: “We have started to deal with this issue and, as the leadership has rightly said, it needs to work around the clock.” I believe that visual monitoring using human resources alone is not enough, and monitoring should be both system-based and intelligent, as well as preventive and controlling.
He continued: “Some systems that have to do this have existed in the central bank that need to be completed, and there are some systems that need to be created, all of which are being done.”
According to the Governor of the Central Bank, these actions are carried out exactly according to the plan, and since I myself have worked in the bank for seven years and I know the disadvantages, problems and solutions, with a competent and thoughtful team. Let’s move forward.
Salehabadi stated: The Central Bank is seriously seeking to reform part of the liquidity creation that is related to the banking network. Of course, there have been some problems in the banking network from the past that need to be corrected, and some are related to the future so that we can work to prevent these problems from happening again in the future.