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September 2017, No. 85


Most Important Points for Removing Problems

Ali Ashraf Afkhami, Chairman of the Board of Directors and Managing Director of Bank of Industry and Mine (BIM) has emphasized the need for developing discipline in financial enterprises. He said the question of transparency, accountability of economic enterprises, risk management, paying attention to validation and most importantly observation of financial discipline are among the most important macro policies of the banking system in the country which should be taken into consideration and finally direct the banking system towards capital adequacy.

The two-day 27th annual conference on monetary and foreign exchange policies with orientation on financial stability, background for sustainable economic growth, was held on July 1 at the International Convention Center of the IRIB. The BIM chief participated in the gathering and delivered a speech on analysis of the behavior of balance sheet of the banking system in creating liquidity and its impact on the macro economy.

Stating that problems existing in our economy and the banking system also exist in other countries, Afkhami noted that the imbalance that is referred to in the banking system is not merely confined to Iran but that other countries too are basically encountered with such an imbalance.

He added that in other countries such as Italy, Greece, etc. we are witnessing a similar situation. In all countries, the legislators and the central banks make their regulatory rules stricter. By the same token in other countries the issue of Basel III has been discussed and the banks have been given a deadline up to 2019 to comply with the framework. While implementation of Basel III has not been completed yet, the draft Basel IV is getting prepared and all these cases show that the situation of the banking system is not favorable on the whole.

Afkhami reminded that apparently the most important question mark today is management of frozen assets, an issue which is widespread in the banking system. He said it should be checked why this phenomenon takes place and grows day by day.

He further remarked that banks’ failure to observe reasonable interest rates and their competition to attract more deposits are among the obstacles that exist on the way of financial discipline of the banking system and creation of frozen assets.

On the other hand, he said, the important point is that we should improve the capacity of financial and economic enterprises of the country in international arena and also create appropriate capacities for the presence in international markets rather than restricting activities of the Iranian banks to 80 million Iranians.

As for the condition of non-oil exports, Afkhami said the value of non-oil exports last year stood at about $44 billion while countries with much smaller span and less populated had five to six times more than our non-oil exports. Therefore, through increasing exports and growing non-oil exports we should increase the volume of our banking transactions.

The BIM chief while stressing that failure in loan repayment is one of the obstacles on the way of the banking system, noted that unfortunately when facilities are offered no appropriate validation is made and in case of finding the roots we can realize that those who are not capable of paying back the loans were not qualified for receiving the facilities at that juncture.

In conclusion, he said that discussion of transparency, accountability of economic enterprises, risk management, paying attention to validation and most importantly observation of financial discipline are among the most important macro policies of the banking system of the country which should be taken into account and direct the banking system towards capital adequacy.


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  September 2017
No. 85