Iran Seeking Major Financial Reforms: CBI Chief

Central Bank of Iran (CBI) Chief Valiollah Seif announced plans for a comprehensive reform of the country’s financial sector, including changes in laws and regulations of the banking sector and the Central Bank.

Addressing the 30th meeting of South East Asia, New Zealand, Australia (SEANZA) governors’ meeting in Nepal, Seif said the Central of Bank of Iran has plans to restructure the supervision section and supervise the individual institutions more closely through periodic and occasional inspections.

He also noted that the CBI is going to host the 31st governors’ symposium in Tehran in 2017 as part of plans to promote and support SEANZA.

SEANZA is one of the oldest and largest regional central bank groups, established after a 1956 meeting of central bank governors from the Asia-Oceanic region. The number of its members had grown from the original five to 20.

The following is the full text of Iranian official’s speech to the gathering:

In the name of God, the Beneficent, the Merciful

Your Excellency Governor Chiranjibi, dear governors, distinguished delegates, ladies and gentlemen,

First of all, allow me to express my deepest gratitude to our host for the excellent arrangements made and for the opportunity provided to attend this auspicious gathering. It is my great pleasure to join this cordial meeting of distinguished governors. SEANZA provides an excellent opportunity to share views and closely learn about developments in member countries. Quick changes of global and regional markets, especially after the financial crisis, highlight the necessity, the relevance and the value of this forum. Enhanced regional and global cooperation is necessary to counter the banking and financial crises in the face of the interconnected financial markets. It is also imperative to increase interactions and cooperation to ensure smooth handling of the regulations and supervision of the financial markets and institutions and prevent regulatory arbitrage in this fast and open global economy.

All the points mentioned, as well as the whole host of other issues relevant to central banking, make the future outlook for the SEANZA more apt to play a vital role in provision of an opportunity to address issues of interest among members and hopefully come up with initiatives to deal with them.

I will try to mention only one issue here as an example;

De-banking and closure of our banks’ correspondent bank accounts with its grave consequences and its potential impact on payment systems and regional trade is a very important issue that can be addressed in such forums as SEANZA.

There are many other issues of such nature that I suggest to be taken stock of and reviewed for further consideration by distinguished delegates.

In line with its deep desire to promote and support SEANZA, The Central Bank of the Islamic Republic of Iran (CBI) volunteered to host the 31st Governors’ Symposium in Tehran and it will be an honor for us to host the next forum for 2017.

Allow me to briefly advise that after the implementation of the Joint Comprehensive Plan of Action (JCPOA) between Iran and P5+1 in January 2016 and termination of all nuclear related sanctions, Iran is fully open for business including in banking, finance and foreign investment.

For your kind information, the Iranian banking system adopted the risk-based Basel I capital adequacy accord. Iran is trying to design a framework for comprehensive financial sector reforms including changing laws and regulations of the banking sector and the Central Bank. Many initiatives are underway to prepare for eventual migration to Basel II & III. We have taken on broad stress testing and asset reclassification. Provisioning requirement scenarios have been tightened to bring these in line with best practice standards. Transparency and disclosure requirements have been made more demanding by requiring banks and credit institutions to prepare their financial statements according to IFRS.

Because of prompt changes and complexities in financial and banking environment, it is necessary to improve our supervision accordingly. So we have restructured the supervision section and added some new departments with clear tasks and responsibilities. CBI has also placed emphasis on further strengthening supervision of individual institutions through periodic and occasional inspections.

For the past three years, the Iranian economy has managed to achieve many important goals. Inflation rate has been lowered to around 9% from above 40% in mid-2013. Foreign exchange market has been very calm and stable. It should be noted that oil-exporting countries faced a significant drop of oil prices in early 2013. However, Iran managed to safeguard its national currency and preserve its foreign exchange reserves.

By successful curbing of inflation expectations, CBI managed to complete the process of painless disinflation toward a single-digit rate while securing a positive economic growth rate. We anticipate a GDP growth of 5% for this Iranian year (i.e. 2016 and early 2017). Exchange rate unification is another priority to be realized this year. A calm and stable foreign exchange market together with better international banking correspondence after JCPOA have provided favorable conditions for successful implementation of exchange rate unification policy which will boost our export and GDP growth in future.

Once again, I would like to express my gratitude to the distinguished Governor of Nepal Rastra Bank and all his respectable colleagues for their kind hospitality in this beautiful city. I hope that we will be able to meet the high standard set in the next SEANZA meeting in Iran.

Thank you

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