Page 28 - IRANRptNov18

rial crisis
Iran pushes towards Basel II banking standards with new diktat
named governor of the regulator, replacing Valiollah Seif, who was in the post for five years. Hemmati, 61, previously headed Central Insurance of Iran and was managing director of Bank Meli and Sina Bank.
Seif and the central bank have been heavily criticised for Iran’s handling of the currency crisis sparked by the US move to reimpose heavy sanctions on the Islamic Republic following the unilateral withdrawal of Washington from the multilateral nuclear deal in early May. Amid fast-moving events, Seif—who himself is under US sanctions on the basis of claims that he assisted the Islamic Revolutionary Guard Corps (IRGC) in channelling funds to Lebanon's Hezbollah—struggled to explain to traders and investors the central bank strategy for dealing with the severe rial devaluation.
Despite the new CBI boss being in place for the past few weeks, the all-important unofficial dollar rate stood at IRR133,000 in early trading on September 10, according to foreign currency website Bonbast. It was trading at 42,900 at the start of this year.
The official rate is only available to selected businesses and entities, meaning swathes of Iran’s economy are exposed to the painful unofficial rate while the Iranian authorities attempt to protect the country’s hard currency reserves. Seif faced claims of ineptitude for failing to curb the slide of the rial, while shutting down the unofficial market, banning hard currency trading at bureaux de change.
The president Rouhani called for further reform of the banking system and financial and monetary policies, as well as the further enhancement of banking relations with other countries.
The Central Bank of Iran (CBI) announced on April 28 that it will instruct banks to increase their capital adequacy ratio to 12% from 8% to meet Basel III banking regulations. It is expected that several Iranian banks will be merged in coming months as their capital adequacy ratios are lower than the current required amount of 8%. Non-bank credit lending facilities have merged in recent years to meet ratio guidelines.
According to the CBI, updated guidelines are based on the latest international standards requested by the Swiss Basel Committee while also meeting requirements of the Islamic Financial Services Board and global Islamic banking rules.
The new move will see a further convergence of existing banks which have been ordered in recent months to find suitable partners to merge with as Iran cracks down on bad banking practices. Some non-bank credit institutions will be merged with local banks.
8.1.1 Liquidity
Iran’s liquidity volume exceeds IRR14.6 quadrillion at end of 10th Persian month
The total volume of liquidity in Iran stood at more than IRR14.63 quadrillion($325.62bn)bytheendofthe10t h Persiancalendarmonth (ended January 20), according to the Central Bank of Iran (CBI), Mehr News Agency reported on March 12.
The Central Bank of Iran (CBO) is presently aiming to keep as much liquidity in
28 IRAN Country Report November 2018 www.intellinews.com