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Tuesday, May 23, 2017

ICCIMA Reviews Banking Bill 

 

The Banking Reform Bill, which is expected to reach the parliament in two months, was reviewed by the members of the Money and Capital Market Commission of the Iran Chamber of Commerce, Industries, Mines and Agriculture. They referred to the high cost of funds as one of the issues that will need further assessment and something that the bill fails to address, Banker.ir reported. The commission’s members stressed the simplification of processes in the banking system to combat corruption and said a logical distribution of resources is lacking in the bill. Kourosh Parvizian, the head of the commission and director of the Association of Private Banks and Institutions, emphasized that regulations prohibiting the banks from owning more than 1% of other banks and financial institutions must be revised.   

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First Vice President Es’haq Jahangiri has tasked the Ministry of Economic Affairs and Finance with implementing 14 priority projects in the current Iranian year (March 2017-18).

Most of these projects were ratified by the Headquarters of Resistance Economy and initiated during the first tenure of President Hassan Rouhani, but need to be completed.

Resistance Economy refers to a set of principles outlined by the Leader of Islamic Revolution Ayatollah Seyyed Ali Khamenei aimed at bolstering domestic production, curbing dependence on oil exports, improving productivity and encouraging Iranians to buy domestically-manufactured products.

> Improving Business Environment  

Iran is ranked 120 among 190 economies in the ease of doing business index, according to the latest World Bank annual ratings.

On average, Iran’s rankings have improved by eight spots annually since 2013, when the country stood at 152nd place.

Jahangiri has urged the Economy Ministry to direct its efforts toward improving the index by 10 spots this year.

> Establishment of e-Treasury System

Last year, the government announced measures to transfer its accounts from agent banks to the Central Bank of Iran in cooperation with the Treasury. The measures make up the Electronic Treasury scheme that aims to return the accounts from government and private-owned agent banks to the Treasury.  

In February, Tayyebnia called on deputy economy minister for financial supervision and treasury affairs, Seyyed Rahmatollah Akrami, to pursue the establishment of an electronic treasury management system as well as productive management of government assets, referring to them as two key projects on the ministry’s agenda.

Once again, Jahangiri has referred to the establishment of e-treasury as one of the main priorities of the government.

> Completion of Privatization Process

The privatization of public economic entities includes three stages: pricing the entities, transferring them to real private sector and readying the remaining entities for transfer.

The first vice president has called for the completion of the privatization process.

> Wider Execution of VAT

According to Iran National Tax Administration, value added tax accounts for 50% or 1,700 trillion rials ($45.04 billion) of government revenues and the administration pays over 600 trillion rials of VAT revenues to municipalities and 50 trillion rials to the Health Ministry for the Healthcare Reform Plan.

The VAT Law, which took effect in the Iranian year to March 2009, is being extended every year. VAT currently stands at 9% in Iran.

Jahangiri wants a wider implementation of VAT in economic sectors.

> Integrated Taxation System

The government piloted its newly-drafted Integrated Taxation System in Tehran, Isfahan and Kermanshah last year and plans to implement the system in other provinces. The new code overhauls tax exemptions, adds new taxpayers and controls evasions.

According to Tayyebnia, in the new tax code, manufacturing activities get new exemptions to boost investment in the real economy and help economic recovery.

“Tax breaks given to many companies have been cut in the new code and, more importantly, even state-owned institutions that were not under government control will become liable for taxation,” he added.

Government officials have stated on various occasions that over 60% of the Iranian economy are not being taxed, which figure includes estimates of gray market activities.

Tayyebnia is expected to accomplish the integration of the taxation system to make it more equitable and effective.

> Asset Management

The government is intent on identifying its assets across the country to make the most of them. To this end, as many as 270,000 immovable properties were recorded in the fiscal 2015-16.

The number of government vehicles saw a 70% decline to stand at 120,000. Currently, 38,588 estates have been identified, of which 6,672 belong to national organizations, 24,909 to provincial organizations and 7,007 are at the disposal of state companies.

One of the government's priorities is to complete the evaluation of all assets in order to sell off the unused assets and make the productive use of others.

> Improving Competitiveness Index

One of the main achievements of the government of President Hassan Rouhani so far was a nine-point rise in Iran’s Competitiveness Index in the fiscal 2015-16 to rank 74th.

The World Economic Forum reports on competitiveness index every year and Jahangiri has urged the Economy Ministry to prioritize the improvement of this index.

> Downsizing the Government

The Rouhani administration has put in a convincing performance in privatizing public entities.

According to Mir Ali Ashraf Abdollah Pouri-Hosseini, the head of Iranian Privatization Organization, the remaining 323 out of the 1,713 enterprises on the privatization list will be ceded in the current Iranian year.

Figures show that since 2001 (the year IPO was founded), over 1,400 trillion rials ($37.33 billion) of public assets were handed over to private owners, 40% of which were transferred during the Rouhani administration's first tenure.

As underscored by Jahangiri, this process needs to continue to streamline governance and have an effective state apparatus in place.

> Reducing Gov’t Debts

In January, Tayyebnia revealed that the current level of government and public-sector companies' debts held by contractors and other entities stand at a whopping 6-7 quadrillion rials ($152-177 billion). These debts started to pile up in the early 2010s during Iran’s financial crisis and have been a chief instigator of the economic slowdown.

One of the priorities is to pay off the government's debts completely.

> Fight Against Corruption, Money Laundering

The intergovernmental Financial Action Task Force, which monitors money laundering and terrorism financing worldwide, decided last June to keep Iran on its blacklist of high-risk countries, but welcomed Iranian promises to improve and "suspend counter-measures for 12 months in order to monitor Iran’s progress in implementing the Action Plan”.

Jahangir’s edict is the latest indication of Iran’s determination to quit the blacklist of high-risk countries maintained by FATF.

> Redirecting Cash Subsidies Plan

As part of the so-called “Subsidy Reform Plan”, the administration of former president Mahmoud Ahmadinejad removed subsidies on food and energy in 2010 and instead paid 455,000 rials ($11.9) to all Iranians on a monthly basis.

The Rouhani administration has continued to implement the plan it inherited from the previous government, albeit reluctantly, amid financial constraints exacerbated by plummeting oil revenues.

Nonetheless, the incumbent government has moved to restrict the number of cash subsidy recipients, slowly but steadily.

According to Government Spokesman Mohammad Baqer Nobakht, 4,853,386 people have been removed from the list of cash subsidy recipients as of January 20, 2017.

Jahangiri has now called on the Economy Ministry to design and draft the redistribution of revenues to the needy through the “Subsidy Reform Plan”.

> Introduction of Investment Opportunities

Investment, be it domestic or foreign, and gross domestic product of a country are positively correlated.

The sixth five-year development plan (2017-22) has envisioned an average annual economic growth of 8% throughout the period, through attraction of $250 billion in investment, of which $50 billion should be financed by foreign resources.  

Foreign direct investment creates economic growth via know-how transfer, adoption of new technologies and a rise in exports.

The Economy Ministry is now tasked with introducing new policies to increase Iran's GDP by making investment in the country more attractive.

> Empowering Insurance Industry

According to the president of the Central Insurance of Iran, Abdolnasser Hemmati, Iran's insurance industry grew 22% during the year to March 20, 2017, with insurance penetration rate having improved by 0.4% to reach 2.1%.

"Although our insurance penetration rate stands higher than the average in the Middle East and North Africa, it is still below global standards," he added.

Elaborating on the objectives of CII for the current year, Hemmati said they include ratification of corporate governance rules in the first meeting of the High Council of Insurance, the gradual implementation of International Financial Reporting Standards and obligating insurance companies to present their financial statements in the first half of the year in line with the new standards.

Other goals include establishment of the Natural Disaster Insurance Fund, accelerating growth in life insurance, absorbing foreign investment and strengthening the IT sector.

> Full Implementation of Sanhab

Jahangiri has also stressed the full implementation of Iran’s electronic insurance supervision platform "Sanhab" (CII's database) and the reinforcement of its infrastructure in the current year.

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egotiations with the Central Bank of the Republic of Turkey as well as a number of countries from Latin America and Asia to sign currency swap arrangements are underway with a handful of proposals also being sent to African countries, the deputy governor for foreign exchange affairs at the Central Bank of Iran said.

"A payment arrangement with the Turkish Halk Bank to pay for trades in national currencies was almost thorough to the point where CBI issued the related directive to Iran's banking system, but unfortunately the deal did not reach the implementation stage. However, CBI is negotiating with CBRT to sign a currency swap deal and hopefully negotiations will lead to an agreement," Gholamali Kamyab was also quoted as saying by IBENA.

He noted that CBI has also signed a Banking and Payment Arrangement with the State Bank of Pakistan in April, which will be implemented in the foreseeable future.      

“However, the agreement with Pakistan is our most serious deal but both central banks need to invite banks in their respective jurisdictions to act as authorized entities for undertaking trade transactions under BPA,” he added.

Kamyab added that CBI will shortly inform Iran’s banking system of the new directive while SBP will do the same for Pakistani banks.

According to the statement, the objective of BPA is to provide a settlement mechanism to promote trade between Pakistan and Iran.  This mechanism will be used for trade payments conducted via letter of credit and in accordance with international laws and regulations.

State Bank of Pakistan has announced that it will issue more details of the mechanism in due course. SBP expects this agreement to help strengthen trade links between the two countries.

The official noted that currency swap deals have always been on the agenda of CBI, but now that it is a legal obligation, the matter will be followed diligently.

CBI announced in January 2017 that Iran will stop using the US dollar as its currency of choice in financial and foreign exchange reports from the new fiscal year that started in March.

Earlier, it was decided to suspend the use of US dollar in foreign transactions and work on bilateral currency swap deals, which was followed by Moscow and Tehran’s announcement that they were going to set up a joint bank account for transactions in national currencies, such as in food trade. However, the deal did not materialize.

The CBI deputy governor referred to similar deals with the Chinese, the number of which is 30-40, noting that these deals are a kind of currency swap.

“For instance, if there is need for yuan, dollar and euro are given and yuan is received, which will eventually be returned with interest when the period comes to maturity. But our problem is not resolving these issues, but clearing the payments,” he said.

Kamyab further said these deals face no obstacles vis-à-vis correspondent relations, sanctions or banking ties but “our goal is to ease the process for exporters and importers”.

Currency swap deals have also been introduced in the country’s sixth five-year development plan (2017-22) as a major economic policy. The plan envisions Iran becoming a trade hub with strong ties to regional and Southeast Asian countries.

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Just now, screwball said:

For instance, if there is need for yuan, dollar and euro are given and yuan is received, which will eventually be returned with interest when the period comes to maturity. But our problem is not resolving these issues, but clearing the payments,” he said.

 

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saeed%20Jalili.jpg?itok=kl8nlhvx
Domestic Economy Desk

Iran Air hopes to earn $1-1.2 billion per year from ticket sales once all the planes it has ordered over the past few months from major planemakers are delivered.

The revenues will help the carrier cover its costs and pay back the loans it takes out for the aircraft that are scheduled to arrive over the next decade.

“With this amount, Iran Air will be able to repay the installments for the 200 planes it has bought,” says deputy minister of roads and urban development, Asghar Fakhrieh-Kashan.

The flag carrier’s massive orders include 100 Airbus, 80 Boeing and 20 ATR passenger planes, with an aggregate value of between $20-30 billion, based on Iranian estimates. The list prices top $30 billion.

Iran has so far been delivered seven aircraft. The three Airbus and four ATR planes have all been financed by their manufacturers. Airbus and ATR have agreed to finance a few more.

The prospects of financing the rest of the planes are still murky, as major European banks and big financial institutions are still hesitant to engage with Iran fearing US penalties, even though Iran’s nuclear-related sanctions were lifted in January 2016 as part of a deal Tehran signed with six worked powers a year earlier.

According to Fakhrieh-Kashan, Iran hopes to resolve the financing issues by putting out a tender in a few weeks, in which 10 companies from Japan, Norway, Denmark, China, Ireland and Britain have already expressed readiness.

As part of the plane deals, 32 aircraft are scheduled to land in Iran by the end of 2018. Those include 16 turboprop ATR planes, five of them are to be delivered by the end of December and the rest in 2018.

The Iranian carrier is scheduled to receive four Airbus A320s by the yearend, five of the European planemaker’s A321s and four A330s next year. Three Boeing 737 deliveries are also planned in 2018.

But even when the financing deals are finalized, there are other major steps Iran Air should take to optimize its revenues from the new jets.

“While they [Iran Air] have inducted a handful of new jets, this now needs to be matched with new routes and greater connectivity and codeshare pacts so that travelers have more options beyond Iran Air's current network,” Saj Ahmad, chief analyst of the Dubai-based Strategic Aero Research, told Financial Tribune.

“Without new routes, deploying the planned 200 new airplanes will be difficult. It would hamper earnings and lead to greater costs,” he added.

> Restructuring With an Eye on Selling Shares

Iran Air is fully owned by the state. Alongside attempts to renew its aging fleet, officials are considering listing the company on both Tehran Stock Exchange and international equity markets.

But an outdated and uneconomical structure is tying their hands for the time being.

Minister of Roads and Urban Development Abbas Akhoundi said in February that the airline plans to meet international standards through enhanced management and training to pave the way for its privatization.

Asked by Financial Tribune in a press conference on Wednesday about the current status of Iran Air’s privatization plans, CEO Farhad Parvaresh said the airline still awaits “structural reforms” as part of a legislation passed by the government about two years ago.

Parvaresh referred to a major hurdle pertaining to Iran Air’s pension fund, which accounts for a sizable portion of the carrier’s costs, saying the government is working to resolve this issue within six months.

The government hopes the restructuring of Iran Air, along with its major fleet renovation plan, will help the airline increase the share of air transportation it has been losing to its foreign rivals in the region, which, according to Akhoundi, are earning $4-5 billion in revenues every year.

“Privatization of Iran Air is far removed at this stage,” said Ahmad. “Iran Air is smart enough to know it cannot take on big rivals like Emirates. However, they need to partner up with as many big players as it can. This reduces the threat of direct competition and allows for a greater buildup of traffic.”

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The Central Bank of Iran has called on banks and credit institutions to cease any involvement in investment funds as well as the purchase of any kind of securities and bonds, which the regulator has deemed as "non-banking activity".

As per the CBI directive, the banking system's previous investments in areas now regarded prohibited should end by 2020.

The full text of the spreadsheet, published on CBI's website, states that banks and credit institutions must implement the regulations within a month of its issuance.

CBI has noted that the measures are meant to limit the risks and increase supervision over credit institutions' investment practices, leading them toward their original task of functioning as "financial intermediaries".

Back in 2015, Money and Credit Council– a decision-making body– had approved regulations for removing hurdles in the way of competitive production and promoting the financial system, obligating banks and their affiliate companies to quit non-banking activities (except incomplete projects that must be ceded within three years of launch).  

CBI is charged with determining if the activities of banks, credit institutions and their affiliate companies are considered standard banking ventures.

Affiliated companies are defined by CBI as companies whose over 50% of shares belong to a bank or a credit institution or those whose majority of board members is selected by a bank.

According to the directive, if a bank or credit institution takes measures to give up their non-banking activities but as a result of unexpected developments, the process does not succeed and is confirmed by the CBI, the directive's regulations won't apply.

Investment Limits

The directive also limited credit institutions' investments in banking areas as follows:

* Bank and credit institutions are allowed to invest by up to 20% of their base capital.

* The maximum limit of investment in other legal entities cannot exceed 5% of the bank or credit institutions' base capital.

* Banks and credit institutions are not allowed to own more than 1% of the shares of another credit institution.

* Credit institutions registered in free trade zones are not bound by the regulations of the directive.

* Investment in bonds issued or guaranteed by the government is excluded from this directive and will follow further CBI notifications.

As cited in CBI's directive, the auditing process of the credit institution's investments will be in line with Iran Audit Organization's standards and CBI regulations.

It is noted that all investments concerning this directive must be approved by the board of the credit institutions.

Banks, credit institutions and their affiliated companies are allowed to participate in establishing new companies or buy the shares of existing ones, if these entities only engage in banking activities.    

The directive allows banks and credit institutions to invest in foreign credit institutions and to own more than 50% of the shares of a domestic company, after obtaining the CBI authorizations and in line with aforementioned investment limits.

Penalties

* If a credit institution does not abide by these regulations, an amount equal to their level of over-investment will be reduced from their base capital as a precautionary measure.

* If a credit institution seizes stocks or bonds as compensation due to a breach of contract in defiance of the directive's regulations, it is obligated to comply with the rules within a year and report the reasons to CBI in a month.

* Further details of penalties will be in line with monetary and banking regulations.

As the directive dictates, all credit institutions that engage in investments related to this directive's regulations need to report their investments on a monthly basis in compliance with the CBI framework.

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The Vice Presidency for Information Technology says all financial transactions and payments with the government will soon be digitized as part of the wider e-government project focused on improving transparency and accountability.

Reza Bagheri-Asl, director of the Executive Council of Information Technology, in a talk with Mehr News Agency, referred to the details of a related government bill and said, “All e-government transactions related to ‘e-health’, tax and ‘payment procedures’ will be digitized.”

Government transactions make up 30% of Iran’s GDP according to Bagheri-Asl, and the move to digitize should streamline all payment systems.  He added that procurement procedures with government departments will also move to digital-only transactions to increase openness and speed up payments.

The government has instructed public entities that the new program has been launched by the office of e-commerce at the Ministry of Industries Mining and Trade, which will implement it. The Executive Council of Information Technology will function as an overseer.

Earlier in November, the head of Iran’s Information Technology Organization Nasrollah Jahangard, was quoted as saying by ISNA that the launch of new services “will help ease public dealings” with the huge bureaucracy and help in downsizing the government and reduce its deep and unwanted involvement in the economy.

Nearly 50% of government organizations are set to be connected to the network, he added.

Meanwhile, as part of a public-private partnership deal to digitize payments with government bodies, Mobile Telecommunications Company of Iran (MCI) became the official partner of the e-government program at the end of 2016.

The services include secure digital signature, encrypted data storage on SIM, e-wallet and near field communication payment services for minor purchases and several other mobile financial solutions.

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Bank Melli Iran and Bank Saderat Iran will resume their operations in the Omani capital Muscat which had halted during the sanctions that cut off Iran from the international financial network. 

Based on an agreement reached during a visit by the governor of the Central Bank of Iran Valiollah Seif to the Persian Gulf state, the two sides agreed that the two Iranian lenders restart their business there, Central Bank of Iran website reported.

Bank Melli has one branch and Bank Saderat has two branches in Muscat. The operations of all the branches had come to a halt during the sanctions. The two banks would be the first Iranian lenders to resume operations in an Arab country after the lifting of the sanctions in the wake of the 2015 nuclear deal signed between Iran and the six world powers.  

Both BMI and BSI have other inactive branches throughout the Persian Gulf region, including the UAE, Qatar, and Bahrain.

Seif and his Omani counterpart Hamood bin Sangour bin Hashim Al Zadjali also agreed to integrate the national payment systems of the their countries, allowing citizens of both nations to get services from each other's ATMs and payment gateways.

Omani lenders and specifically Bank Muscat were among the first foreign banks to start working with their Iranian peers after the sanctions ended in January last year. Bank Muscat has reportedly obtained primary permission for opening a branch in Tehran.

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Chief executives of state-run banks have pledged their support for President Hassan Rouhani and his economic vision for the country, as he is basking in a landslide reelection victory on May 19.  

In a letter to Rouhani signed by members of the Coordination Council of Banks, the CEOs congratulated him on his triumph and emphasized the importance of services provided by the banking system, particularly state-owned lenders.

"[Public-sector] banks carry the main weight of financing the production and housing sectors and fund industrial, mining and infrastructure projects," the letter was cited as saying by Banker.ir.

In their letter, the bankers also refer to "non-stop work" of bank executives and staff to ensure the continuity of production and generating jobs.

The missive refers to the participation of the banking system in providing working capital for production units and pulling them out of stagnancy caused by years of financial drought.

As confirmed by the Central Bank of Iran Governor Valiollah Seif two weeks ago, 25,000 small- and medium-sized enterprises have received175 trillion rials ($4.6 billion) worth of loans which, according to him, "not only protected the current jobs, but also generated new employment".

Supporting the ailing SMEs was one of the few areas in which the CBI not only fulfilled its promises, but exceeded them as it had initially earmarked 160 trillion rials ($4.2 billion) in loans for them.

The CEOs' letter celebrated the "great achievement of the government's diplomacy" that led to the signing and implementation of the nuclear deal, or the Joint Comprehensive Plan of Action, which allowed the Iranian banks to renew their dealings and transactions with their international counterparts after years of isolation.

Nuclear Deal's Benefits

The nuclear deal allowed the banks to "conform their operating systems to global standards and make up for lost time during the sanctions" and helped Iranian banks establish more than 500 correspondent relations with their international peers.

It also enabled them to engage in "opening letters of credit for businesses through SWIFT with a least amount of cost".

The Society for Worldwide Interbank Financial Telecommunications code is an internationally-recognized identification code for banks engaging in international wire transfers, the lack of which during the sanctions had significantly increased the costs of doing business for Iranian banks.

The chief executives concluded their letter by wishing success to the Rouahni administration while stressing the necessity of increasing the capital of banks and strengthening their loan allocation capacity.

"We pledge the full readiness of the banking system for a more effective collaboration in line with continued services and a successful implementation of the government's economic plans for years to come," the letter said.

Officials and pundits have noted that the Iranian economy is heavily reliant on banks, hence supporting state-owned lenders through capital increase has been a flagship agenda of the administration.

In a Cabinet meeting in early January, ministers obliged the Ministry of Economic Affairs and Finance to allocate 200 trillion rials ($5.2 billion) of excess funds to increase the government's capital in state-owned banks, which policy has already been implemented by eight lenders.

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he government plans to allocate 200 trillion rials ($5.3 billion) to prop up 10,000 enterprises in the current Fiscal year (March 2017-18), the chairman of Iran’s Small Industries and Industrial Parks Organization said. The plan is in line with the Ministry of Industries, Mining and Trade’s policy of helping industries emerge out of a recession by boosting  manufacturing capacity.

Ali Yazdani was also quoted as saying by IRNA that as part of a comprehensive plan, the government is planning to help complete unfinished industrial projects with more than 60% progress and renovate 5,000 industrial firms as well. Last year, the government granted $4.5 billion in loans to 24,000 small- and medium-sized enterprises. By definition, enterprises run by under 50 workers and under 100 workers are considered small- and medium-sized respectively, according to ISIPO.

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EGFI, Slovakia’s EXIM Bank Sign Agreement
 
 
EconomyBusiness And Markets
Thursday, May 25, 2017

EGFI, Slovakia’s EXIM Bank Sign Agreement

 

The CEO of Export Guarantee Fund of Iran, Seyed Kamal Seyed Ali, and Dusan Keketi, the head of Slovakia’s EXIM Bank, have signed a banking and insurance agreement on the sidelines of Berne Union Spring meeting.

The chief executives also agreed on sharing their trade database and facilitate cooperation to help improve bilateral ties.

Seyed Ali expressed satisfaction over expansion of Iran’s business ties with European countries after the implementation of the Joint Comprehensive Plan of Action (the formal name of Iran’s nuclear deal with world powers) noting that “agreements with other countries, especially European ones, could help improve Iran’s credit risk rating”.

EGFI had also signed a cooperation agreement with Finnish export guarantee insurance–Finnvera–on May 16 during the Berne Union Spring Meeting. 

Back in 2015, Iran and Slovakia signed two memorandums of understanding to boost investment and scrap extra taxes for trade between the two countries.

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Iran’s Saman Bank has opened an office in Italy’s Rome – its first ever office in Europe. Iran’s Saman Bank has opened an office in Italy’s Rome – its first ever office in Europe. 

One of Iran’s leading private banks says it has opened an office in Europe – what could be a sign of fresh openings in the country’s international banking relations after the removal of sanctions.  

Saman Bank in a statement announced that it had opened a representation office in Rome after obtaining the required authorizations from the central banks of Iran and Italy. 

The bank added in its statement that the move was meant to provide funding and investment consulting services to European clients interested in the Iranian market.

It also said the office was meant to introduce Iran’s investment opportunities to European businesses particularly those based in Italy, Iran’s state news agency IRNA reported.

Saman Bank further announced that it had signed an exclusive credit provision agreement with Italy’s SACHE export credit agency in 2015 based on which it could provide funding to European as well as Iranian producers for mutual exports.

Over the past few decades, Iran has been subject to a series of primary sanctions imposed by the US that include tough restrictions on banking activities and the Islamic Republic’s access to the dollar.

Those restrictions were intensified after a series of bans were approved against Iran as a result of disputes over the country's nuclear energy activities.  The nuclear-related sanctions were lifted in early 2016 after Iran reached a deal with the five permanent members of the Security Council plus Germany.  However, US primary sanctions still remain.

To the same effect, most European banks and businesses are still reluctant, for fear of falling afoul of US sanctions against Iran.

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ank Melli Iran is planning to overhaul its European branches after clearing the procedures both inside the country and abroad, the director of BMI's Department for Foreign Exchange said.

Noting that BMI has held negotiations with European officials to enhance its presence in that continent, Gholamreza Panahi added that the bank's Najaf branch (in neighboring Iraq) is also ready to launch and expand the bank's network in East Asia.

"The Hamburg branch is now BMI's major correspondent in Europe through which the bank can offer services to other parts of the world as well," Panahi was also quoted as saying by IBENA.

Mir Business Bank, BMI’s subsidiary in Russia also started offering services to businesses back in summer. However, the service was reportedly only offered to major businesses, including petrochemical exporters.

BMI's branch in Germany and Melli Bank Plc located in London are also connected to Target 2 (an interbank payment system for the real-time processing of cross-border transfers throughout the European Union), but presently they only offer a limited number of services.

"After the lifting of sanctions and following intensive meetings with foreign banks, we managed to fully establish correspondent relations with 25 of them," Panahi added.

Panahi, who is also BMI's board member, said establishing correspondent relations with each new bank means connecting to a banking network that makes it possible to benefit from their wide range of services.

"BMI is ready to deepen its correspondent relations and guarantee foreign investments in Iran," he added.

The official also said BMI was the first Iranian bank to be reconnected to Swift, the international interbank messaging network, after the sanctions were lifted in January last year.  

Panahi emphasized the conformity of the bank's financial statement with International Financial Reporting Standards, as it is the common language of global banking system.

IFRS are a single set of accounting standards, developed and maintained by the International Accounting Standards Board for application on a globally consistent basis by developed, emerging and developing economies.

These standards help provide investors and other users of financial statements with the ability to compare the financial performance of publicly-listed companies on a like-for-like basis with their international peers.

After the lifting of sanctions imposed on Iran’s banking system, the necessity of conforming to IFRS was crucial to ease and speed up the process of absorbing foreign capital.

IFRS standards are now mandated for use by more than 120 countries, including the European Union and by more than two-thirds of G20 states.

Since the removal of international banking restrictions in January, Tehran has secured links with only a limited number of banks as US sanctions remain in force and large foreign institutions still fear potential fines.

Banks remain nervous after US penalties including a $9 billion fine on France's BNP Paribas in 2014, partly for violating financial sanctions imposed in 2012.

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Bank Sepah to Guarantee Foreign Investors
 
 
EconomyBusiness And Markets
Monday, May 29, 2017

Bank Sepah to Guarantee Foreign Investors 

 

Bank Sepah is ready to review foreign investment projects in Iran and guarantee them, a board member of the state-run bank announced.”Foreign investors need to be confident that they can have their principal capital and interest whenever they claim it,” Mostafa Parto-Afkanan was also quoted as saying by IBENA.

According to the official, financial guarantees aim to facilitate financing, particularly in the case of a project’s failure, as the bank pledges to compensate any loss or breach of contract to the investor.

“Foreign exchange operations of Bank Sepah before the sanctions era stood at approximately $7 billion.

One of the most important concerns of banks during the sanctions era was fulfillment of the obligations imposed on Iranian banks in order to preserve the bank’s standing throughout the world,” he said.

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EconomyBusiness And Markets
Monday, May 29, 2017

Remaining Frozen Assets Insignificant

 

Only an insignificant volume of Iranian assets frozen overseas remain inaccessible, the Central Bank of Iran’s deputy for foreign exchange affairs said.

“Problems related to the blockage of Iranian assets are mostly rooted in banking correspondent relations. For instance, it is possible that we have deposits in a country where our correspondent relations have yet to be established,” Gholamali Kamyab also told IBENA.

According to the official, the main reason for Iranian assets remaining blocked overseas is a lack of political ties. He, however, reminded that the country has nevertheless been able to free a significant volume of its assets.

“Assets remaining in a particular country, not yet released as a result of sanctions, are not many. In other words, we have blocked assets, but their number is not very big,” he said.

According to CBI, $9.9 billion of its frozen oil money were released and repatriated from the UAE, Britain, India, Greece, Italy and Norway following the implementation of the nuclear accord, apart from the release of $12 billion from Japan, South Korea and India.

As part of the Geneva interim agreement, which was signed in November 2013 and its two subsequent extensions, a total of $11.2 billion of Iranian assets were freed and the amount reached $30 billion since the agreement’s implementation.

CBI Governor Valiollah Seif has denied the presence of any obstacles for bringing the freed money to Iran, saying that the country prefers to keep those assets abroad.

Noting that only $1.5 billion worth of bonds are left in western countries, Kamyab noted that the total amount stood at $3.7 billion, only $1.5 of which are inaccessible.

“We also have assets in a neighboring country,” he added, without elaborating.

  Second-Country Transfer

According to the official, a number of correspondent banks have the ability to transfer funds, but other banks are unable to do so.

Therefore, in a number of countries where Iran had blocked assets, the country was able to transfer the funds through banks and did so.

“The funds were transferred from the source country to another country and from there, they would be transferred to other countries,” meaning that the blocked assets were transferred to Iran through a second country.

This was done because “a major bank with various branches” existed in the second country, but with regard to a number of countries, the funds could not be transferred this way “and when the issue of freeing blocked Iranian assets is brought forward, we must pay attention to this [obstacle]”.

Iran has currently $2 billion of its assets frozen by the US. In a decision that was also green lit by the US Supreme Court last year, Iran was held financially responsible for a 1983 bombing in Beirut that killed 241 US Marines.

However, Iran has not relinquished its claim on those assets and lodged a complaint at the International Court of Justice last summer to clarify the issue.

In another case, $1.6 billion of assets belonging to the Central Bank of Iran were also frozen by a judge in Luxembourg. A group of victims of the Sept. 11 attacks in the US have brought the first-of-its-kind case against Iran that led to the freezing of assets. Iranian officials have expressed confidence that the case will eventually end in Iran’s favor and the judge will rule that the victims have no right to use that money as compensation.

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After the lifting of some of Iran's sanctions following the nuclear accord, the country's banking system connected with small Malaysian banks though there are still no ties with major lenders, the head of Iran's Chamber of Commerce, Industries, Mines and Agriculture said in a meeting with Malaysia's ambassador to Iran on Wednesday.

"Banking issues pose major obstacles to bilateral trade since we are facing problems of transferring money or opening letters of credit," Gholamhossein Shafei was also quoted as saying by ICCIMA's website.

He noted that both countries' officials and central bankers had constructive negotiations during President Hassan Rouhani's trip to Malaysia and it is hoped that major Malaysian banks resolve their issues as soon as possible to boost bilateral trade.

Prior to this, CBI's official website had reported that Malaysian central bank deputy governor, Encik Abdul Rasheed, welcomed the prospects of improving bilateral banking cooperation, saying Iranian banks will certainly have more room to operate in Malaysia following the signing of the agreement between their central banks.

The two countries drafted the first agreement on banking collaboration in April, which will be signed by the governors of their respective central banks.

This is while an Iranian banking delegation visited Kuala Lumpur, the capital of Malaysia, in February and met with senior managers of Malaysian commercial banks and officials of central bank (Bank Negara Malaysia).

Malaysian Ambassador to Iran Rustam Bin Yahaya announced that Malaysian Prime Minister Najib Razak will visit Iran in a month to assess banking issues, expand cooperation in information technology and communications sector and sign a preferential trade agreement between the two countries.

"Despite the fact that sanctions on Iran affected the level of our relations, they did not completely stop it and Malaysia is eager to engage in joint investment projects and mutual trade with Iran," he added.

Bin Yahaya said Iran's capacities in various sectors are unknown to Malaysian society.

"I suggest promotional programs be launched to introduce your country in Malaysia properly since people are the final consumers and they need to have a proper vision about Iran, as it is so important to increase mutual trade," he said.

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Rouhani Expected to Make Economic Reforms a Priority
 
 
EconomyDomestic Economy
Wednesday, May 31, 2017

Rouhani Expected to Make Economic Reforms a Priority 

 

Having won a reelection in a landslide, Iran’s President Hassan Rouhani is expected to prioritize economic reforms.

If the nuclear agreement reached with six world powers in 2015 was the prize achievement of his first term as president, the challenge of the next four years is to convert the lifting of international sanctions into jobs, investment and growth, reads an FT article. Excerpts follow:

Since the nuclear deal came into effect, Iran has raised its oil exports and lowered inflation. But one of the laments from Tehran is the reluctance of foreign banks to follow international oil companies, aircraft makers and car manufacturers, which have begun to dip their toes in Iranian waters.

This, Iranian officials maintain, is out of fear of Washington. Some US sanctions remain in place and its authorities have determinedly pursued violations to the tune of billions of dollars.

“The United States, instead of encouraging these financial institutions, use multi-pronged words that are actually bringing fear to the hearts of these banks,” Rouhani told an American interviewer last autumn.

But putting the blame for Tehran’s banking problems on US enforcement fails to tell the whole story. International banks have their own reasons to be cautious and Iran’s institutions have many problems, although these are being recognized and slowly redressed.

Iran hopes to shed its place on the Financial Action Task Force’s blacklist, designating the country as parlous territory.

Last June, the Paris-based watchdog acknowledged that Tehran was taking sufficient steps to have counter-measures suspended for a year. Iranian officials are keen to win over FATF and are bullish about their chances of getting a clean bill of health when the taskforce convenes next month.

That, however, could trigger internal pushback by hardliners opposed to having the books on their considerable business interests scrutinized.

International observers and Iranian officials alike acknowledge that the state of Iran’s banks leaves much to be desired. In February, the executive board of the International Monetary Fund noted “an urgent need for financial sector reforms”.

Proposals for a banking reform bill are under consideration by both the Cabinet and Iran’s Parliament, with the hope of introducing it this summer. Even so, there will be no quick fix.

President Rouhani has acknowledged that for Iran’s economy to flourish, his country needs “constructive interaction with the world”. Strengthening Iran’s banking at home and taking steps to make the country a less risky proposition abroad is a necessity.

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Iran’s New Era of Economic Expectations
 
 
EconomyDomestic Economy
Monday, May 30, 2016

Iran’s New Era of Economic Expectations

 

While the lifting of sanctions gave rise to many potential benefits for Iran’s economy, the country’s leaders face new fiscal challenges.

An article recently published in UK news website Public Finance International surveys the Iranian economy, excerpts of which are as follows:

In January, as most of the world settled in to a new year, Iran was preparing for what could potentially mark a whole new era. Implementation Day, as it became known, was approaching, and with it the possible removal of some of the most painful parts of a 33-year regime of sanctions.

When 16 January did come around, the International Atomic Energy Agency confirmed, as expected, that Iran had adequately curbed its nuclear program.

A deal brokered between Tehran and five world powers, including the US, Germany and Russia, could now swing into action. A host of crippling sanctions was lifted; Iran could come in from the cold. Its exile from the international community was over–sort of.

It was a landmark moment for Iran. Sanctions had some serious consequences for the country’s economy and, in turn, its people. As a result of one 2012 sanction alone—an EU ban on the import of Iranian oil–inflation raged at more than 30%, the currency went into a tailspin and up to 40% were knocked off the volume of exports, leaving a serious dent in the public purse.

In 2013, Iran’s oil minister acknowledged just how much the country was losing—as much as $8 billion every month.

  Tangible Gains, Failed Expectations

Three years on, Martin Cerisola, the International Monetary Fund’s mission chief for Iran, estimates the country’s public accounts will be lucky to see $8 billion per year in oil revenues until 2019, even if it scales up production to pre-sanctions levels of 4 million barrels a day.

Tanking oil prices have dashed any hopes that free oil trade will return anywhere near as much to the economy, explains Djavad Salehi-Isfahani, a professor of economics at Virginia Tech University and an authority on Middle Eastern economics.

A few months on from Implementation Day, it has become clear that the removal of sanctions will not return the economic buoyancy that their imposition once took away. Iran’s leadership will have to accept much more far-reaching change if the full benefits of sanctions relief are ever to materialize.

That’s not to say there will not be some tangible gains. Before January 2016 was out, the Iranian state airline’s aging passenger plane fleet got a much-needed $25 billion upgrade.

The country regained access to more than $100 billion in frozen overseas assets, some $30 billion of that immediately.

While around half of this is already tied up in various debts and deals, the rest can be used to shore up the economy or finally complete a host of infrastructure projects, abandoned when sanctions took hold. The cost of trade and transactions will come down and foreign direct investment is already flooding into the economy, rekindling once-thriving industries such as car manufacturing–and industry means jobs.

But some benefits that were supposed to be realized immediately have fallen short of expectations—Iranian banks’ reconnection to the Swift system, which enables international transactions, for example. This should have paved the way for Iran’s financial sector–once a key driver of growth but now outdated and ailed by non-performing loans–to reap the benefits of reengagement with the international system.

However, in March this year, Iran’s Leader Ayatollah Seyyed Ali Khamenei, complained: “Our banking trade, our efforts to return wealth from various banks, various kinds of businesses that require financial services, all of these are facing problems.”

  Problems Within

One major source of problems is that most US sanctions remain in place.

The country is barred from using the American financial system or its dollars, and even the big, non-American banks that are permitted to do business with Iran still decline to do so for fear of falling foul of US sanctions.

Yet many difficulties in Iran stem from within, and not outside the country. Its economy is plagued by undercapitalized markets, a 13.7% inflation rate and, as World Bank chief economist, Eric Le Borgne, points out a “very weak” labor market for even the Middle East and North Africa region.

According to World Bank data, labor force participation stood at just 45% in 2014. The opportunity for some of Iran’s labor-intensive industries to rebuild is expected to alleviate widespread unemployment somewhat, but Le Borgne highlights that sanctions only added to this problem.

“The causes of Iran’s labor market issues are structural, just as they are in its product and credit markets,” adds Cerisola.

For example, rigid labor laws make it very difficult for private sector employers to lay off workers, preventing Iran’s burgeoning youth population from competing for jobs held by those already employed.

  Need for Reforms

“To maximize the full potential from the lifting of sanctions, Iran really needs to advance with reforms,” Cerisola said, one being greater operational independence for the central bank.

This has already improved since former president Mahmoud Ahmadinejad was replaced by Hassan Rouhani, Iran’s leading reformist figure, in 2013. Rouhani separated monetary and fiscal policy, leaving the former fully under central bank control. Inflation fell from the highs of 40% to 15% as a result. In contrast, under the Ahmadinejad government, intervention in credit allocation drove non-performing loans to 23% of all credit in 2010.

Similarly, Rouhani reestablished a number of critical economic and budget management bodies disbanded by Ahmadinejad and pursued much-needed tax increases and stronger administration despite tough economic conditions.

But the mismanagement of the Ahmadinejad years has left damaging legacies: an inability to implement countercyclical fiscal policy worsened the impact of sanctions and a bungled subsidy reform program remains a significant drain on Iran’s resources, to name a couple.

The private sector, too, presents problems. Since an addition to Iran’s Constitution in 2006, the government has been obliged to reduce the size of the bloated public sector by selling off state assets, in the hope of bringing about growth.

But, as Alireza Nader, a senior international policy analyst for the Rand Corporation who specializes in Iran, explains, it’s still “pretty hard to tell” the difference between the two spheres and most major companies still have ties to the public sector.

What has happened in the past decade, Nader says, is that public companies have been sold off to entities associated with powerful state bodies that have much political influence and a tight grip on the economy, controlling most major industries–meaning they are likely to be one of the biggest benefactors of the foreign cash now flooding the country.

Charitable trusts known as foundations also play a major role in the economy. For Nader, this is the greatest force working against Iran’s ability to capitalize on sanctions relief.

“There is potential but Iran’s political economy is really problematic.”

At the IMF, Cerisola agrees that strengthening the privatization process will be essential, as will easing the business environment, tackling unemployment and strengthening fiscal policy. He is hopeful this can be achieved, despite what he admits is a complex political economy.

Le Borgne agrees that there seems to be strong support for reform in the country, but notes implementing this will require “strong and sustained political will”.

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Government Spokesman Mohammad Baqer Nobakht believes it is possible to triple cash subsidies paid to the poor.

Noting that the government has raised cash payments to the less-privileged from an average of 710,000 rials ($19) to 2.4 million rials ($64) since the Iranian month of Farvardin (March 21-April 20), Nobakht added that revenues generated by the “Subsidy Reform Plan” are enough to pay for another increase next year without increasing energy prices, Bourse Press reported.

According to the official, currently there are up to 15 million individuals covered by State Welfare Organization and Imam Khomeini Relief Committee while the government pays 75 million Iranians cash handouts.

As part of the “Subsidy Reform Plan”, the administration of former president, Mahmoud Ahmadinejad, removed subsidies on food and energy, and instead paid 450,000 rials ($11.9) to almost all Iranians on a monthly basis.

The payments have remained the same since it was established in 2010, although more than 3 million in the high-income deciles have been removed from the subsidy list.

 

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CBI, Parliament Working to Resolve Caspian Dilemma

 

The Central Bank of Iran and the Iranian Parliament are working closely to resolve the issues surrounding the Caspian credit institution and the overall saga of shadow banks engulfing the informal money market.

With the intensity of the situation growing in the wake of protests by victims of the bankrupt institution, a senior lawmaker said the parliament is reserving its option of referring the case to the judiciary.

“Last year, a number of meetings were held on the illegal institutions and our conclusion was that CBI must present the parliament with a schedule to organize all the institutions,” Mohammad Reza Pour-Ebrahimi, the head of Majlis Economic Commission, was quoted as saying by Banker.ir in a TV interview.

CBI has since submitted a report to the commission, “which was not met with approval”, and therefore the central bank needs to showcase more effective measures.

The official then reiterated that he plans to make good on the letter he sent from the commission to CBI, indicating that “if CBI does not come up with a clear and scheduled plan within the framework of laws and regulations to organize the informal money market by the end of the current week [June 2], the commission will invoke Article 236”.

The article states that if at least 10 members of the parliament or any of its commissions announce that the president, a minister or any officials within their subordinate entities have “not adhered to norms or have violated or refused to implement the law or have executed it incompletely”, proceedings leading to the official’s impeachment can start.

Pour-Ebrahimi said he has confirmed the issue with the parliament that CBI’s performance has been unsatisfactory and if it continues to remain so, the case need to be decided by the judiciary.

However he added that another meeting with top CBI officials will take place next Tuesday to review measures undertaken during the past week. If that meeting does not reach a desirable end, the commission will move to invoke Article 236 which, if approved, will send the case to the judiciary.

On the other hand, CBI Governor Valiollah Seif has also reportedly been in direct contact with the parliament speaker, Ali Larijani.

According to Shahab Naderi, a member of the commission who spoke with Tasnim News Agency, Seif sent a letter to Larijani, which included a full report of CBI’s efforts on taming the unruly credit institutions.

The illegal credit institutions spawned quickly during the tenure of the former administration and according to Pour-Ebrahimi, they currently hold 25% of the country’s liquidity.

Caspian was formed as a result of a merger of eight institutions, namely Mazandaran Farmers, Kermanshah Farmers, Isfahan Hasanat, Mashhad Peyvand, Al-Zahra, Sadr Tous, Omid Jalin and Fereshtegan, to reimburse the depositors.

A few days ago, Peyman Qorbani, CBI’s deputy for supervisory affairs, announced that the long-running case of illegal credit institutions will be closed by the end of the current Iranian year in March 2018.  

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Just now, screwball said:

 

The official then reiterated that he plans to make good on the letter he sent from the commission to CBI, indicating that “if CBI does not come up with a clear and scheduled plan within the framework of laws and regulations to organize the informal money market by the end of the current week [June 2], the commission will invoke Article 236”.

 

Interesting 

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1 minute ago, screwball said:

However he added that another meeting with top CBI officials will take place next Tuesday to review measures undertaken during the past week. If that meeting does not reach a desirable end, the commission will move to invoke Article 236 which, if approved, will send the case to the judiciary.

On the other hand, CBI Governor Valiollah Seif has also reportedly been in direct contact with the parliament speaker, Ali Larijani.

 

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CBI Chief: Int’l banks cautious due to unfamiliarity with Iran’s economy

Tehran, June 1, IRNA – Governor of Central bank of Iran (CBI) Valiollah Seif in a meeting with Australian Ambassador to Iran Ian Biggs in Tehran on Thursday underlined that the caution practiced by the international banks in their transactions with Iran is attributed to their lack of familiarity with Iran’s economy.

 
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“The cautiousness shown by the world banks in their cooperation with Iranian banks is due to their lack of sufficient knowledge about economy of Iran which is of course attributed to the unilateral sanctions imposed against Iran and lack of communications among banks throughout the years of sanctions,” Seif said during the meeting. 

The governor of the Central Bank of Iran reiterated that there is a calm atmosphere for economic cooperation prevalent in the country, and said, “Our goal in establishment of banking relations is to move in the direction of non-risky areas for the other sides’ banks and central bank of Iran.” 

The Australian ambassador, for his part, said that Iran’s economy is progressive, and said, “I have been in Iran since 10 months ago and now a suitable opportunity has been provided for economic cooperation between the two countries. 

Biggs said that his main goal during his mission to Iran is to expand economic cooperation with Iran. 

2050**2050

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