Valiollah Seif: Financial Constraints Have Intensified the Poor Condition of Iran's Banking System

The Governor of the Central Bank of the Islamic Republic of Iran states that "the banking system of Iran is currently not in a very good condition, and financial constraints have intensified this situation." According to Mehr News Agency, Valiollah Seif said on Tuesday, October 17, at the first joint meeting of the head and members of the Economic Commission of the Parliament and senior managers of the Central Bank: "Nearly 45% of the banks' resources and assets are frozen and unusable and without appropriate returns." He refrained from providing details about what the "frozen and unusable" assets include. However, experts believe that considering the volume of banking debts, which at the end of the year 1394 (2015) was about 90 trillion tomans according to the Central Bank Governor, one of the reasons for the financial constraints of the banking system is these banking debts and collateral that, according to the banks themselves, are in many cases "worthless." According to the July 4 issue of the Arman newspaper this year, experts even estimate the volume of banking debts to be up to 125 trillion tomans, of which, according to banking and economic managers, 80% belongs to 500 debtors. In his remarks on Tuesday, the head of the Central Bank of Iran referred to the necessity of supervision over the financial market and stated: "The banking network and operations must be under effective supervision." He mentioned that effective supervision requires cooperation from all governing bodies, including the legislative and judicial branches and other executive agencies. According to Seif, the Central Bank must have the necessary legal powers to exercise effective oversight over banking activities. Regarding the unification of the exchange rate, he said: "The plan for unifying the exchange rate was supposed to be implemented a few months after the implementation of the JCPOA, one of the main prerequisites of which is the normalization of international banking relations, which we hope will accelerate." With the implementation of the nuclear agreement and the lifting of sanctions, the path for Iran's banking system to rejoin the global banking system has been paved, but so far, due to Iran's non-joining of the FATF (Financial Action Task Force), this effort has not yielded the desired results. In this context, Seif stated: "Banking relations with the West are still not satisfactory; we hope they will improve."