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EconomyDomestic Economy
Tuesday, June 06, 2017

Malaysian Delegation to Visit Tehran

 

Ahigh-ranking delegation from Malaysia will visit Tehran within a month. This was announced by Malaysian Ambassador to Iran Rustam bin Yahaya in a meeting with Iran Chamber of Commerce, Industries, Mines and Agriculture Chairman Gholamhossein Shafei on Wednesday. “Surveying solutions to eliminate obstacles to banking ties, expanding cooperation in the field of information and communications technology and signing a memorandum of understanding to begin preferential trade between the two countries are among the aims pursued by the visiting delegation,” ICCIM’s news portal quoted Yahaya as saying. Shafei said an Iranian economic delegation will visit Malaysia in the Iranian month of Khordad (May 22-June 21).  “There is ample scope for the two sides to cooperate in the fields of agriculture and halal food,” he said.

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ven though a handful of Iranian banks are fighting formidable challenges, including unhealthy balance sheets and thin capital cushions, they are not facing any existential threats, said a Central Bank of Iran official in response to recent claims that the financial system is nearing bankruptcy.  

“At present, a number of banks are facing problems like capital shortage, accumulation of souring assets and non-performing loans higher than international standards and this has caused them to generate little profit in the past two years,” admitted Abbas Kamarei, CBI’s director general for supervision over banks and credit institutions, Banker.ir reported.

 “CBI is exerting oversight on their performance as the supervising entity and their bankruptcy is something that will not take place easily,” he added.

Noting that bankruptcy of banks differs from that of companies, the official pointed to measures considered in international banking instructions to prevent bankruptcy, namely structural reforms and merging.

CBI, under the leadership of Valiollah Seif, has been striving to kick-start major reforms in the banking system, including introducing the Banking Reform Bill and the Central Bank Bill that are yet to find their way to the parliament.

On the other hand, the idea of bank mergers has been floated more seriously recently, with Seif confirming the possibility earlier this month.

In a reference to the reform measures, which also include installing a new grand system of supervision over banks and credit institutions, Kamarei said CBI has been working in tandem with the administration of President Hassan Rouhani and the parliament to review the challenges ahead and “employ reformative policies”.

  Combating Shadow Banking

Reflecting Kamarei’s comments, the central bank also published a statement on its official news website, ensuring the people that all is well with the banking system, especially in light of the recent ruckus surrounding uncertified credit institutions.  

The statement said unnamed “enemies” are trying to fan the flames of “false news and rumors” to link the problems in uncertified institutions to the banking system as a whole.

Unlicensed institutions, which are active in the informal money market, reportedly hold 25% of the entire liquidity. They proliferated during the tenure of the former administration and have continued to be the bane of banks.

In its statement, CBI firmly rejects all the “untrue claims that have been raised” and emphasized that the banking system is propelling forward at “full strength”.

It notes that the aforementioned institutions began their activities without obtaining a license from the central bank and got their permits from other organizations such as the Ministry of Cooperatives, Labor and Social Welfare and the Police Department and lured the public by offering sky-high interest on deposits.

Even though CBI tried to advise them and strived to increase their transparency while warning the public of the risks, they brought themselves to ruin, which resulted in many angry customers demanding their money back and prompted CBI to merge eight cooperatives to form the certified Caspian institution with the goal of returning the deposits.

Farshad Heydari, the central bank’s deputy for supervisory affairs, also made a television appearance to discuss the issue of uncertified institutions.

“The current fiscal year (ending March 20, 2018) will be the year the illegal money market will be organized for good,” he said.

Heydari noted that on the strength of the sixth development plan’s banking regulations, which give significant powers to CBI, the activities of illegal institutions will be regulated and allowed in a new framework.

The bank-related regulatory articles of the sixth five-year development plan (2017-22) were communicated to the banking system in tandem with a series of permanent regulations to help achieve the objectives of the plan in late May.

As part of the new regulations, the Money and Credit Council–a decision-making body–gave the central bank extra authority in addition to its legal mandate to implement “complete and all-encompassing oversight over monetary and banking institutions” and to “organize the informal monetary institutions and market”.

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The Central Bank of Iran has released the names of 40 registered banks and credit institutions active in the country, which include the names of five foreign banks mostly based in Tehran and Kish Free Trade Zone.

The only five foreign lenders licensed to operate in Iran are the Hamburg-based Iranian-European Bank, Standard Chartered PLC, Iran-Venezuela Bi-National Bank, Islamic Cooperation Investment Bank and Future Bank, CBI's website reported.

Iranian-European Bank

As the first foreign lender, the Hamburg-based Iranian-European Bank (Europaisch-Iranische Handelsbank AG), affiliated with Iran’s Bank of Industry and Mine, became operational in Kish FTZ back in 2005. In 2008, the bank converted its Tehran representative office into an independent branch.

The lender has a German license, but is owned by the Iranian state. Iran’s Bank of Industry and Mine is the biggest shareholder with Bank Mellat and Tejarat Bank also owning stakes.

Iranian merchants had founded the bank in the early 1970s to support trade between Europe and Iran. The bank’s activities had been frozen for five years , as the lender was hit with nuclear-related sanctions but resumed activities after the lifting of sanctions in 2016.

Standard Chartered

Standard Chartered PLC is a British multinational banking and financial services company headquartered in London. It operates a network of more than 1,200 branches and outlets (including subsidiaries, associates and joint ventures) across more than 70 countries and employs about 87,000 people.

It is a universal bank with operations in consumer, corporate and institutional banking, and treasury services. Despite its UK base, it does not conduct retail banking in the UK, and approximately 90% of its profits come from Asia, Africa and the Middle East, where it often acts as an "intermediary bank" in transnational transactions. The bank opened its branch on Kish Island in February 2006.

Iran-Venezuela Bi-National Bank

Established as a joint venture between Banco Industrial de Venezuela and the Export Development Bank of Iran in 2010 with a starting capital of $200 million offered equally by both countries, the bank aimed to boost commercial relations and investments among Iran, Venezuela and Latin America. The bank has one branch in Tehran.

However, Iran is planning to sell some of its shares in IVBB, as the two countries currently have no commercial relations because the long geographical distance between the two countries and Venezuela’s monetary regulations increase the cost of transactions.

Islamic Cooperation Investment Bank

Islamic Cooperation Investment Bank was established in 2006 as an Iraqi private lender. The bank has 11 branches in Baghdad, Karbala, Najaf, Sulaymaniyah and Tehran.

The bank opened its Tehran branch last year following the investment of Keshavarzi Bank in the bank because of the significant trade volume between Iran and Iraq, as well as expansion of banking relations between the two countries.

Future Bank

Future Bank is a fully commercial lender approved by the Central Bank of Bahrain. The bank has its headquarters in Manama.

The bank was established in July 2004 as a joint venture by three reputed financial institutions—Bank Saderat Iran, Bank Melli Iran and Ahli United Bank of Bahrain—based on the vision of becoming a unified entity that incorporates the strengths of all three constituents. The bank's branch in Iran is located in Kish FTZ.

The bank's major shareholders are members of a vast global network within the (Persian) Gulf Cooperation Council, European and Far Eastern markets, effectively extending their reach beyond the bank's regional footprint.

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The process of transferring foreign exchange to other countries might solely become the jurisdiction of exchangers due to the recent disputes with Halkbank and Emirati banks, a banking expert said.

“Halkbank has cut its forex relations with Iran since the bank also has ties with the US and is under pressure from that side.  The Central Bank of Iran is negotiating with Turkish banks to resolve the issue,” Fars News Agency also quoted Bahaoddin Hosseini Hashemi as saying.

Hossein Yaqoubi, CBI’s director general for international affairs, recently announced that a delegation from the Central Bank of Turkey will soon meet their Iranian counterparts in Tehran to remove obstacles to bilateral banking relations, particularly difficulties involving Iranian citizens’ bank accounts in the Turkish Halkbank.

In late March, a senior executive at Halkbank, one of Turkey’s largest state-owned banks, was arrested in the US on charges of conspiring to evade trade sanctions on Iran.

Mehmet Hakan Atilla is accused of conspiring with Reza Zarrab, an Iranian-Turkish gold trader, to channel hundreds of millions of dollars through the US financial system on behalf of Iranian companies.

According to a source in Iran-Turkey Chamber of Commerce, Turkish Minister of Economy Nihat Zeybekci is also scheduled to visit Iran by the end of the current month on June 21 to negotiate a preferential trade agreement between the two sides.

Hashemi noted that in addition to Halkbank, two banks in China and one bank in Emirates shouldered the bulk of forex transfer for Iranians.

Media reports show bank accounts belonging to Iranian citizens either face closures or limits in the UAE. US companies are among major shareholders in Emirati banks who are legally barred from doing direct business with Iran, the source said, adding that bilateral banking ties have suffered more after US President Donald Trump’s recent visit to Saudi Arabia where he called for setting up a regional alliance against Iran.  

However, the limits have not been officially mandated by the governments of these countries, but are initiated by the lenders themselves.

“There is no serious issue with Chinese banks but since we export petrochemicals there, they have asked for related documents which is their legal right and will be provided soon,” Hashemi said.

The banking expert said most European banks did not engage in any kind of banking relations with Iran and money transfers have been handled only by Asian banks.

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onomyBusiness And Markets
Thursday, June 08, 2017

Tenuous Dollar Role Merits Shift to Other Currencies

 

ACentral Bank of Iran official has denied any downside resulting from the country's decision to ditch the US dollar in its official statements, saying the minor role of the greenback in Iran's currency basket justifies the decision.

"In general, the base currency of financial reporting must feature in a majority of foreign transactions and have a significant share in the foreign exchange resources of the country," Mehdi Kasraei-Pour, CBI's deputy for foreign exchange policies and regulations, told  IRNA.

"Since foreign exchange revenues and hard currency needed for imports are in a variety of currencies in which greenback has a meager share, the change in the currency of choice for financial statements will not have an impact on the country's economy."

Late January, CBI Governor Valiollah Seif announced that Iran will stop using the US dollar as its currency of choice in its financial and foreign exchange reports from the current fiscal year (started March 21), giving strong hints that the country may opt for euro in releasing its economic reports.

CBI in April announced that in line with measures launched years ago, it will continue to gradually reduce the greenback's role in its foreign exchange basket.

According to Kasraei-Pour, the US dollar has lost its status to count as the main currency of choice for official statements.

As a result of persisting non-nuclear sanctions imposed on Iran decades ago, which prohibit the country from engaging in any kind of transactions that go through the American financial system, "the US currency cannot be used in international transactions of the Iranian banking system and has no place in the basket of forex resources of the central bank".

Kasraei-Pour stressed that as the bulk of transactions in the economy are done through other credible currencies, there is no justification for using the US dollar.

"Therefore, selecting another currency that boasts international stability and credibility and also plays a major part in our foreign trade can be considered a substitute for the greenback without having an impact on economic conditions," he added.

On individuals preferences toward keeping the dollar, the official said gradually and "with long-term planning", people will change their habits.

Minimal Impact

Asked whether the change in the currency of choice will have an impact on Iran's foreign exchange holdings in other countries, the CBI deputy said it will have no impact whatsoever.

The reason behind the insignificance, he adds, is that the dollar's share in the country's forex reserves has drastically reduced, in a way that "it does not constitute more than 8% of the reserves on average".

Kasraei-Pour also shot down any possibility of the country's accounting procedures undergoing any significant changes, pointing out that Iran's accounting system is based on rial and "all forex transactions are also recorded in rial in official accounts and financial reports after being exchanged ".

On the possibility of pegging rial against a basket of currencies, the official said inclusive studies were done on the matter in 2002-04 "and the basket was used until 2011 when we faced a currency crisis".

Therefore, he adds, determining a basket of currencies and calculating rial based on that basket is also currently being used, but other factors such as economic changes must also be reviewed in this regard.

In 2011, the Iranian currency went into a free fall and lost almost 70% of its value.

Kasraei-Pour gave assurances that the change in the currency of choice for financial reporting will not impact exchange rates because traditionally, "the focus of demand in the country for the dollar has to do with travel, students studying abroad and medical purposes, which means the dominance of greenback can gradually subside". 

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he process of transferring foreign exchange to other countries might solely become the jurisdiction of exchangers due to the recent disputes with Halkbank and Emirati banks, a banking expert said.

“Halkbank has cut its forex relations with Iran since the bank also has ties with the US and is under pressure from that side.  The Central Bank of Iran is negotiating with Turkish banks to resolve the issue,” Fars News Agency also quoted Bahaoddin Hosseini Hashemi as saying.

Hossein Yaqoubi, CBI’s director general for international affairs, recently announced that a delegation from the Central Bank of Turkey will soon meet their Iranian counterparts in Tehran to remove obstacles to bilateral banking relations, particularly difficulties involving Iranian citizens’ bank accounts in the Turkish Halkbank.

In late March, a senior executive at Halkbank, one of Turkey’s largest state-owned banks, was arrested in the US on charges of conspiring to evade trade sanctions on Iran.

Mehmet Hakan Atilla is accused of conspiring with Reza Zarrab, an Iranian-Turkish gold trader, to channel hundreds of millions of dollars through the US financial system on behalf of Iranian companies.

According to a source in Iran-Turkey Chamber of Commerce, Turkish Minister of Economy Nihat Zeybekci is also scheduled to visit Iran by the end of the current month on June 21 to negotiate a preferential trade agreement between the two sides.

Hashemi noted that in addition to Halkbank, two banks in China and one bank in Emirates shouldered the bulk of forex transfer for Iranians.

Media reports show bank accounts belonging to Iranian citizens either face closures or limits in the UAE. US companies are among major shareholders in Emirati banks who are legally barred from doing direct business with Iran, the source said, adding that bilateral banking ties have suffered more after US President Donald Trump’s recent visit to Saudi Arabia where he called for setting up a regional alliance against Iran.  

However, the limits have not been officially mandated by the governments of these countries, but are initiated by the lenders themselves.

“There is no serious issue with Chinese banks but since we export petrochemicals there, they have asked for related documents which is their legal right and will be provided soon,” Hashemi said.

The banking expert said most European banks did not engage in any kind of banking relations with Iran and money transfers have been handled only by Asian banks.

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Domestic production in Iran is highly subsidized by the state, which is borne out by the fact that the country is not a member of World Trade Organization and the significantly high tariffs it slaps on imports.

However, overshadowing the country's protectionist policies is the practice of allocating cheap, subsidized foreign exchange by the government to imports, which runs counter to the spirit of boosting domestic industries.

According to a report by the Institute for Trade Studies and Research (affiliated with the Ministry of Industries, Mining and Trade), import tariffs levied during the year to March 20, 2017, amounted to 115.5 trillion rials ($3.1 billion) that accounted for 14.6% of the government's total tax income, 10.3% of the country's total income and 5.5% of the government's budget.

The ratio of import tariff income to total value of imports stood at 7.4%.

This is while during the period, the value of smuggled commodities to Iran hit $15 billion, which is equivalent to 22% of all imports (both legal and smuggled) to the country and reduces that ratio from 7.4% to 5.7%.

Back then, the gap between the official and free market forex rates was about 4,921 rials ($0.13). If only half the total imports benefited from the official rate, the amount of currency subsidy spent  during the 12-month period  would have reached  129 trillion rials ($3.44 billion)–12% more than all the import revenues in that year.  

So in reality, import-export policies (especially when it concerns the currency measures) were not only uneconomical but were also detrimental to domestic production.

The report says that based on the difference between the rate of domestic and foreign inflation, the government has kept the exchange rate lower than its real value by 38% and 11% in 2013 and 2016, respectively.

Iran currently uses two exchange rates: the free market rate, which stood at 37,380 rials to the US dollar on Wednesday, and another official exchange rate for a number of state transactions. CBI fixed the official rate at 32,451 rials on Wednesday.

In order to bridge the gap between the two rates, the government began to gradually increase the official exchange rate for it to get closer to the unofficial market rate and tried to shorten the list of imports eligible to receive foreign currency at official rates.

Top economic officials, including CBI Governor Valiollah Seif and Economy Minister Ali Tayyebnia, had repeatedly promised that the forex rate will be unified soon after all the prerequisites are in place.

Lack of Competition

In its 2016-17 Global Competitiveness Report, the World Economy Forum ranked Iran 76th among 138 countries with regard to competitive economy.

As cited in the report, Iran has the highest trade tariffs whereas the average figure stands at 28% while Switzerland, Singapore and the United States remain the most competitive economies with a nearly 0% trade duty.

The most problematic factors for doing business in Iran cited by WEF are access to financing, inflation, government bureaucracy, policy instability and corruption. The report indicates that prevalence of foreign ownership in Iran is the least in the world. Reliance on professional management, intensity of local competition and labor market efficiency are also assessed as poor.

The figures point to the fact that lack of economic openness could threaten growth and prosperity. It also highlights that protectionist measures such as allocation of subsidized currency and high import tariffs are not sufficient to sustain growth and must be accompanied by measures fostering competitiveness.

The ITSR report also points to other hurdles in the way of  domestic production such as currency devaluation by Iran's major trade partner China while dumping practices by trade partners are also hurting domestic economy.

Dumping is the practice of selling goods in export markets for prices lower than in the producer’s home market or below the cost of production. 

According to experts, in order to support domestic producers and manage imports while maintaining market balance, forex rate unification should be placed on the policymakers' agenda as soon as possible.

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vestment when they intend to repatriate it out of the country, a member of Tehran Chamber of Commerce, Industries, Mines and Agriculture said.

“Achieving a high economic growth rate is not possible without attracting foreign investment which will not happen unless necessary infrastructure such as a unified forex rate is provided,” Seyyed Reza Haji-Aqamiri was also quoted as saying by IBENA.

The official noted that the government can control forex rates since most of the currencies come from oil sales collected by the government while the share of non-oil exports is not considerable, therefore the Central Bank of Iran and the government can always determine the forex rate.

“Governments always endeavor to control the forex rate to prevent the depreciation of their national currency. However, the forex rate should be in tandem with the supply and demand dynamic,” he added.

Haji-Aqamiri further said that if the forex rate is unified but not adequate, resources cover the demand for foreign currency and multiple rates will appear again.

Iran adopted single exchange rates in the past only to return to dual or multiple rates when economic conditions worsened due to sanctions or unstable circumstances. 

“Last December, when the US dollar changed hands for 42,000 rials in Tehran’s market, the government could have kept it in that range, but they had to bring down the rate as a result of market pressures,” he said.

Iran currently uses two exchange rates: the free market rate that stood at 37,600 rials to the US dollar on Saturday and another official exchange rate for a number of state transactions. The CBI has fixed the official rate at 32,446 rials.

In order to unify the two rates, the government began to gradually increase the official exchange rate for it to come closer to the unofficial market rate and tried to shorten the list of imports eligible to receive forex at the official rate.

All major economic officials, including CBI Governor Valiollah Seif and Economy Minister Ali Tayyebnia, had repeatedly promised that the forex rate will be unified by the end of the last fiscal year (ended March 20, 2017).

However, due to the currency market volatility in the final months of 2016, which saw the rial hitting record lows against the greenback (reaching 42,000 rials to the dollar in the free market in late December), those plans were put on hold indefinitely.

The business community and experts have demanded that the government unify the exchange rates and stop its forex market intervention for propping up the rial.

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resident Hassan Rouhani, who was reelected last month, reaffirmed his reform plans to develop a climate conducive to a free and competitive economy.

“Politics should be withdrawn from the economic landscape to make room for the private sector. The government should give up [control of] the economy. Neither the government, nor our dear military personnel are good business managers,” the president was quoted as saying Tuesday by his official website.

“We need to hand over the reins of the economy to the people  and help create a competitive environment.”

Rouhani was addressing a gathering of lawmakers in a feast of Iftar to break the Ramadan fast in Tehran.

The moderate cleric fought a strong conservative challenge for reelection in the May 19 presidential vote by winning 57% of the ballots cast.

Rouhani first came to office in 2013 on a moderate platform to revive Iran’s foreign policy and revive the struggling economy saddled with years of international sanctions.

He oversaw negotiations that led to the 2015 landmark agreement to end the protracted conflict with the West over the nuclear energy program.

It has been in place since January 2016 to remove the shackles of global restrictions on the economy in return for temporary curbs on its nuclear program.

The nuclear accord, widely seen as Rouhani’s signature achievement, and his economic performance have been the main targets of conservative critics and the focus of their presidential election campaign.

His rivals took every opportunity to highlight grievances that tangible benefits from the pact have not trickled down to the masses, especially those at the lower-end of the economic ladder.

 Indispensible Opening

The opponents have railed against his policy of open trade with the outside world in the wake of the sanctions relief on concerns that it could leave the Islamic Republic vulnerable to hostile western governments.

Rouhani has often argued that a limited opening to the West is indispensable if the economy is to weather the prolonged slump and move forward.

Parliament Speaker Ali Larijani told the meeting that plans to revive the ailing economy should top the agenda of the three branches of government.

He renewed a call to Rouhani to appoint capable people to his Cabinet on the basis of merit and regardless of their political leanings.

“What is important is that competent and qualified people run the country’s affairs,” the lawmaker said.

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The Central Bank of Iran has notified the lending priorities of the banking system for the current fiscal year (started March 21), outlining the roadmap for lenders as they seek to support business and industries still reeling from a biting recession that hit nearly all economic sectors.

There is also a special focus in the directive on businesses and projects in need of capital instructions and the credit needs of small- and medium-sized enterprises.

With the ultimate aim of sustaining production, maintaining current employment, generating new jobs and boosting the economic growth of the country, it has been decreed that 10,000 businesses and 6,000 unfinished projects with a physical progress of at least 60% will receive funds while 5,000 business units will be renovated.

In order to achieve this goal, 300 trillion rials ($8 billion) are to be allocated by the banking system, 200 trillion rials ($5.33 billion) of which "will be for working capital needs and financing unfinished projects" with the remaining 100 trillion rials ($2.66 billion) for "rebuilding and renovating business units that meet technical, financial and economic justifications", according to the official news website of CBI.

While stressing that SMEs are "the first priority for receiving the earmarked credits", the central bank directs lenders to coordinate with the Ministry of Industries, Mining and Trade to register the information in the integrated databank—called Behinyab—considered for this purpose.

Since many guilds are in the supply chain of commodities needed by SMEs and their role in productive and distributive activities is indispensable to the economy, and since they do not need to be registered in the system, CBI advises banks to put maximum efforts in supporting them in tandem with SMEs.

Supporting the ailing SMEs was one of the top priorities of the Iranian banking sector in the previous fiscal year, which goal was achieved following the allocation of 170 trillion rials ($4.53 billion), higher than the initially designated 160 trillion rials ($4.26 billion), to SMEs in line with President Hassan Rouhani's focus on boosting production and employment.

SME Focus

In a statement published on its website on Saturday, CBI also commends the performance of lenders in the previous year, which "strived to pull SMEs out of recession and improve economic conditions, especially in the industries sector, by optimally employing the resources and correctly guiding the funds".

According to the central bank, this performance was a driving force behind the 1.9% economic growth, excluding the oil sector, and a 5.8% growth in the industrial sector in the first three quarters of the previous year.

Furthermore, CBI notes, GDP growth minus oil also increased and reached 4.6% in the third quarter of last year (Sept. 22- Dec. 21, 2016).

The central bank, led by Governor Valiollah Seif, has set out guidelines for allocating funds to small- and medium-sized enterprises if their workforce during the past year had been fewer than 50 and between 50 and 100 individuals respectively.

It decrees that the businesses must be introduced by a "provincial task force for easing and removing hurdles to production" and approved by an agent bank as having technical, financial and economic justification, while their activities must have entirely or partly halted as a result of a cash crunch.

 Enterprises that have spent the previously received loans prudently, businesses that had not been able to repay their loans to the banking system as a result of not receiving their dues from a "state organization or affiliate" and businesses that boast a "higher sustainable job creation rate and viability" will also be eligible for the fresh round of funds.

CBI's directive also includes a number of other articles, asserting that the amount of non-performing loans of SMEs must not be higher than the amount of loans they are requesting and their total bounced checks must not exceed 25% of the value of requested funds.

Furthermore, CBI strictly forbids agent banks from appropriating applicants' loans in return for their bad debts or bounced checks, saying it is "in contrast with the supportive goals of the overarching plan to boost production".

The directive allows lenders to reallocate working capital to businesses "at a maximum amount equal to the value of their previous loans", should the business manages to pay off all or part of its previously obtained funds within the set repayment period.  

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https://financialtribune.com/articles/economy-business-and-markets/66121/1st-gold-etf-makes-debut-in-iran.....

Sunday, June 11, 2017

1st Gold ETF Makes Debut in Iran

As the Iranian capital market’s very first exchange-traded commodity, the fund will have an asset composition of both derivatives and securities based on gold
The gold fund will offer no dividend per share and the investor will profit based on the increasing value of purchased units over time
 

Iran’s capital market witnessed the underwriting of its first investment fund with Bahar Azadi Gold Coin as its underlying asset on Saturday. Offered by Lotus Investment Fund, Lotus Gold Fund’s underwriting is set to continue on to Wednesday under the ‘TALA’ symbol on Iran Mercantile Exchange.

As the Iranian capital market’s very first exchange-traded commodity, the fund will have an asset composition of both derivatives and securities based on gold, Bourse Press reported

The minimum investment threshold is 10 units and the maximum is 10 million. Each unit is priced at 10,000 rials ($0.26), bringing the ETF's total capital to 1 trillion rials ($26.31 million).

The ETF is also going to utilize active management, which is a portfolio management strategy where the manager makes specific investment with the goal of outperforming an investment benchmark index. It operates in contrast to passive management, in which investors expect a return that closely replicates a benchmark index’s movement and returns.

The gold fund will offer no dividend per share and the investor will profit based on the increasing value of purchased units over time. Considering ETF's active management, earnings are expected to exceed profits made from physical gold trading.

Investors can participate in the underwriting process both through brokerages and online using their personal trading codes.

An exchange-traded fund gives traders and investors exposure to commodities in the form of shares. Traded like a stock, ETCs track the price movement of various commodities such as oil, gold and silver, and then fluctuate in value based on those commodities. ETCs may track individual commodities or a basket of commodities.

ETCs provide a net asset value, which is considered as their fair value. Since the ETC is traded on an exchange, its value on the market may fluctuate above or below the net asset value.

According to Lotus Investment Fund Managing Director Ali Teymouri, the new ETF will provide investors with an array of advantages, the main one being the possibility of a safe investment in gold.

And what makes gold investment attractive? According to a report published by Lotus, systemic risks are closing in on both global and domestic fronts.

US stocks’ rising P/E ratios, the Federal Reserve’s hesitance in raising interest rates due to US President Donald Trump’s inconsistent fiscal and foreign policy and China’s escalating debt are some of the bad global omens.

On the domestic front, the large bulk of banks’ toxic assets, coupled with the significant difference between inflation and banking interest rates, dissuades investors from cashing in on equities.

"Investing in gold, on the other hand, shields investors from fluctuations in foreign exchange rate and inflation. The commodity can also be easily liquidated and helps investors have a healthy diversified portfolio. It also provides those engaged in its physical trade with a safer and tax-free option," Teymouri said.

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https://financialtribune.com/articles/economy-business-and-markets/66156/europe-money-transfer-via-saman.......

Europe Money Transfer Via Saman

 

Saman Bank is now able to transfer money to European banks without any hurdle, the bank’s website has announced.”According to agreements, money transfer for different purposes, including for students and medical expenses, can be conducted through banks with which Saman has correspondent relations, provided the destination bank accepts it,” the bank said in a statement. Based on the report, the service is not restricted to Saman Bank’s customers and those of other Iranian banks can also benefit within the framework of central bank regulations. In May 2017, Saman Bank launched a representative office in Rome aiming to promote investment opportunities in Iran and offer banking, financial and legal consultancy services to European investors keen on doing business in Iran.Capital Intelligence Ratings, last May, affirmed Saman Bank’s long- and short-term foreign currency rating of ‘B’.

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N. Delhi Okays Capital Markets MoU With Tehran

 

The Indian government approved on Thursday a memorandum of understanding signed by Iran’s Securities and Exchange Organization and Securities and Exchange Board of India back in November. Signed by Indian Prime Minister Narenda Modi, the MoU is set to facilitate bitumen exports to India through Iran Mercantile Exchange and expand Iran-India cooperation in the capital market, especially between commodity exchanges, according to the head of SEO’s public relations, Yaser Fallah. “As one of Iran’s largest bitumen buyers, India can now purchase the commodity with a higher, guaranteed quality from IME,” he added.

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financialtribune.com/articles/economy-domestic-economy/66089/iran-aseman-airlines-signs-firm-contract-to-buy-3030-boeing.......

Sunday, June 11, 2017

Iran Aseman Airlines Signs Firm Contract to Buy 30+30 Boeing Jets - Update

 
 
 

Iran Aseman Airlines signed a final contract with the American planemaker Boeing in Tehran on Saturday to purchase 30 B737-Max passenger jets worth $3 billion based on catalog prices with the option of adding 30 more in the future.

The aircraft which have yet to be licensed by the US Treasury Department's Office of Foreign Assets Control are scheduled to be delivered as of 2022. Five to ten jets are expected to be delivered in that year, Aseman told Financial Tribune.

Iran’s Civil Servants Pension Organization, affiliated to the labor ministry, is a major shareholder of Aseman.

Update

A spokesman for Aseman, Seyyed Amirreza Mostafavi, told us an OFAC permit is expected to be granted in a month.

"Boeing has applied US Treasury Department’s Office of Foreign Assets Control for approval of a license to perform under this transaction," reads a Boeing statement shared with the Financial Tribune.

The company said that Boeing will support financing of 95% of the value of the deal.

A preliminary agreement was signed between Aseman and Boeing on March 18 in the presence of Boeing representatives in Tehran after almost one year of negotiations.

Iran Aseman Airlines is the second Iranian airline to order brand new aircraft from Boeing after the lifting of nuclear sanctions in January 2016, as part of the nuclear deal Iran clinched with world powers earlier in 2015.

In December 2016, Iran Air finalized a deal with Boeing to buy and lease 100 jets including 50 narrow-body 737max 8s, 15 wide-body 777-300ERs and 15 777-9s, which are scheduled to be delivered to Iran Air over 10 years. Iran Air has additionally struck a massive deal with Boeing’s rival Airbus to buy 100 jets.

Aseman is also in talks with Airbus to add two A340s and seven A321s to its fleet, which is the third largest in Iran, after Iran Air and Mahan.

While many analysts have expressed concern that Iran’s plane deals might be at risk amid uncertainty over US President Donald Trump’s Iran policy, Iran has so far received seven planes, including three Airbus jets and four ATR turboprops.

Aircraft manufacturers need OFAC licenses as more than 10% of their components come from the United States.

Aseman has three A320-200s, one A340-300, four ATR72-200s, two ATR72-500s, three B727-200s, one B727-200(F), two B737-400s and 19 Fokker 100s.

A spokesman for Aseman, Seyyed Amirreza Mostafavi, told us an OFAC permit is expected to be granted in a month.

"Boeing has applied US Treasury Department’s Office of Foreign Assets Control for approval of a license to perform under this transaction," reads a Boeing statement shared with the Financial Tribune.

 

 
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Economy, Business And Markets
Sunday, June 11, 2017

Anticipation Grows for Iran Ahead of FATF Session

 

The Financial Action Task Force–the global body that monitors money laundering worldwide–will have Iran on top of its mind when it convenes for its forthcoming plenary and working group meetings on June 18, the Central Bank of Iran's director for international affairs announced. 

The group is expected to rule whether Iran's progress in implementing its action plan for combating any likely attempt concerning money laundering and financing of terrorism has been as promised.

"The FATF meetings will kick off on June 18 and  will last for six days in Valencia, Spain, in which the task force will measure Iran's progress in terms of adherence to Anti-Money Laundering/Combating the Financing of Terrorism in both software and hardware sectors," Hossein Yaqoubi was also quoted as saying by IRNA.

Representatives from 198 member countries, along with officials from the United Nations, International Monetary Fund and World Bank, will reportedly attend the meetings.  

The intergovernmental FATF, which is the global standard-setting body for AML/CFT, issued a public statement on February 24 and noted that in June 2016, it welcomed Iran's adoption of and high-level political commitment to an action plan to address any strategic AML/CFT deficiencies and its decision to seek technical assistance in the plan's implementation.

"This led to the suspension of countermeasures for 12 months to monitor Iran's progress in implementing the action plan, but if the FATF determines that Iran has not demonstrated sufficient progress in implementing the action plan at the end of that period, FATF’s call for counter-measures will be reimposed," the group said in its statement.  

However, the group stressed that if Iran meets its commitments under the action plan in this period, FATF will consider next steps.

A Different Outcome

Yaqoubi noted that if FATF's report concerning Iran's improvements turn out to be positive, a large number of Iran's banking restrictions and international issues will be resolved.

"An important reason of international banks' refusal to work with Iran is that we are still on FATF's blacklist and hopefully these problems will go away after the country is completely out of the non-cooperative countries' list," he added.

Hossein Qazavi, a deputy economy minister, elaborated on what Iran has done so far to conform to international standards concerning AML/CFT initiatives to be sufficient for the FATF to permanently terminate all countermeasures against the country.

“Considering the strong arguments we made, FATF would likely be persuaded to remove countermeasures against Iran permanently,” he said.

Although FATF's decisions are not legally binding, they deter other countries from engaging in transactions with the designated high-risk countries.

Qazavi noted that the only thing standing in the way of a pro-Iran stance by FATF would be “political issues and sabotage by a number of hostile countries”, hoping that no such thing would occur at the upcoming event.

The intergovernmental FATF was founded in 1989 to combat money laundering, but its mandate expanded to act on terrorism financing in 2001.

In March 2016, the Iranian Parliament adopted a law for combating the financing of terrorism and expressed a high-level political commitment to implement the related action plan.

Iranian authorities have requested an International Monetary Fund assessment of the AML/CFT regime against the FATF standards, which will take place late 2018.

Iran has also become an observer in the Eurasian AML/CFT group.

 

 
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Banking ties with two major Austrian banks are being established, with Iranian banks establishing 22 correspondent relations only with Oberbank, the governor of the Central Bank of Iran said.

"Following the endeavors of Iranian and Austrian economic and banking officials, the two countries' central banks have now forged closer relations," Valiollah Seif was also quoted as saying by CBI's website during a meeting with his Austrian counterpart in Tehran.  Seif added that Iranian lenders also enjoy good relations with Raiffeisen Bank, another credible bank in the EU member state.  

Iran's top banking official met late Sunday with Austria's Finance Minister Hans Jorg Schelling and Governor of National Bank of Austria (OeNB) Ewald Nowotny on Sunday in Tehran to discuss expansion of mutual banking relations.       

Austria’s finance minister expressed satisfaction over the continuation of Vienna meetings in Tehran and described Iranian banks’ progress as very significant and emphasized its importance for his country.

“I hope over these meetings we’ll manage to discuss further details of our relations. The Austrian delegation, which has traveled to Iran with me, is a proof of our determination to accelerate the expansion of economic and banking connections,” Jorg said.

Jorg is leading a high-ranking Austrian delegation consisting of government officials, major banks and companies’ representatives who have traveled to Iran to promote bilateral trade, expand economic relations and resolve banking issues.

He also pointed to the educational programs conducted by OeNB and implemented through the Joint Vienna Institute for Iranian banking experts to promote their knowledge of Anti-Money Laundering/Combating the Financing of Terrorism, which had given rise to great results.

“Another matter that underlines the decisiveness of Austria to extend its economic relations with Iran is opening an account for CBI in OeNB.”

Jorg earlier announced in his meeting with Iran’s Economy Minister Ali Tayyebnia that Oberbank, one of Austria’s biggest banks, has allocated a €1 billion ($910 million) line of credit to finance investment projects in Iran.

At his meeting with Seif, Jorg said there is no need to engage in preliminary talks anymore and “we should strive to implement our plans and achieve joint economic goals”.

  Bankers’ Meeting

Ewald Nowotny, OeNB’s governor, said a number of issues discussed during previous meetings have reached the implementation stage such as the educational program for Iranian bankers, which is being done perfectly and JVI has announced its willingness to improve the program.

“The history of Oberbank and Raiffeisen’s activities in Iran go back many years when Iran had not been hit with nuclear sanctions and today these two banks’ representatives are in Iran to assess the requirements of signing agreements, conditions of guaranteeing projects and opening accounts for Iranian banks,” he added.

The CBI governor said Iran’s banking system needs to comply with the latest international banking standards, especially those related to AML/CFT where good progress has been made so far and Iranian banks are gradually implementing the regulations–mostly those mandated by the International Financial Reporting Standards to improve transparency in financial statements.

Seif was part of the Iranian delegation headed by Tayyebnia who visited Vienna last year to discuss development of banking relations and improvement of economic ties.

“Since 2012, some 13 directives regarding the implementation of AML regulations have been notified to Iranian banks and now customers need to provide detailed information to open an account,” Seif said.

The CBI chief said AML regulations for banks will be fully revised in the next Money and Credit Council meeting and the requirements for the complete implementation of IFRS regulations will be met by Iran’s banking system.

The IFRS-based balance sheet templates were first released by CBI in February to improve financial transparency and the international operations of Iranian banks. Lenders are now required to report their statements in line with IFRS guidelines. 

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EconomyDomestic Economy
Monday, June 12, 2017

Restoration, Diversification

 

South Korean Ambassador to Iran Kim Seung-ho said Seoul is following a set of strategies to restore ties with Tehran to pre-sanctions level, particularly in economic and trade fields.

In an interview with Mehr News Agency, Kim also underlined the diversification and interconnection of bilateral relations. Excerpts follow:

During his last year’s visit to Iran, the prime minister of South Korea agreed to increase the annual trade volume between the two countries to $18 billion. Now the question is how successful we were to hit the target and except for the oil, what sort of new commodities have you imported from Iran?

Our last year trading increased by 30%. But from January to March 2017, it increased by 60%. So I can say that our two-way trade has increased very rapidly and this is quite good news for both countries. The reason as to why this is good news is not only you sell more oil to us but Seoul also sells more products to you.

I should say that South Korea has three basic strategies toward Iran. The first one is “restoration”. Before the sanctions in 2011 … two-way trade was more than $17 billion. But during the sanctions period, it was reduced to one-third. So we have to restore the peak of trade to the former state.

The second strategy is that we have to “diversify our relations” not only in trade but also in cultural, social and political fields. Even in trade, we need not to focus on oil, cars and cellphones.

The third strategy is to “interconnect relations between the two countries”. Trade in the concept of selling and buying is not sustainable enough. We can easily change our trade pattern.

In regard with the first strategy, I should say that restoration is already well underway.

It is proved by the rapid increase of trade in the last two years. But when it comes to … “competition”, we still have a far way to go.

The product portfolio from South Korea to Iran remains thin. Except for oil, there is not much to import from Iran. But after the lifting of sanctions, our oil import from your country has increased by 200%.

At the same time, our concentration on oil has increased. Now, 98% of our imports from your country are oil. So, we have to diversify our relations.

Do you have any plan for this diversification?

We need a bilateral effort contribution. South Korea can’t do it on its own. We need more Iranian effort to penetrate into our market. Relying on oil and petrochemicals is not enough.

Except for automotive assembly, do South Korean car manufacturing companies have any plans for more cooperation with Iran in technology transfer? What’s your plan for Iran’s auto market?

This year Kerman Motor already started to assemble and sell 2 passenger car models of Korean vehicles.

Kerman Motor has the intention to increase two more types within this year.

I heard that the first of the two models was very well received in the Iranian market and the company is now discussing if they can export the Korean cars to neighboring countries as the number of car sales exceed the number of what you need in the Iranian domestic market.

Within this course, which includes importing components of Korean cars and assembling the final product here in Iran, I definitely think that there can be more technology transfer.

But, if you ask whether the Korean companies have specific plans to set up their own factories here, I have no information as it is the private companies’ decision.

The Korean government can’t impose on private companies to do this. But all depends on the promotion of Korean cars in the Iranian market. If they are well received by Iranian costumers, then surely the private companies will put forward another strategy.

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Iran Aseman Airlines signed a final contract with the American planemaker Boeing in Tehran on Saturday to purchase 30 B737-Max passenger jets worth $3 billion based on catalog prices with the option of adding 30 more in the future.

The aircraft which have yet to be licensed by the US Treasury Department's Office of Foreign Assets Control are scheduled to be delivered as of 2022. Five to ten jets are expected to be delivered in that year, Aseman told Financial Tribune.

Iran’s Civil Servants Pension Organization, affiliated to the labor ministry, is a major shareholder of Aseman.

Update

A spokesman for Aseman, Seyyed Amirreza Mostafavi, told us an OFAC permit is expected to be granted in a month.

"Boeing has applied US Treasury Department’s Office of Foreign Assets Control for approval of a license to perform under this transaction," reads a Boeing statement shared with the Financial Tribune.

The company said that Boeing will support financing of 95% of the value of the deal.

A preliminary agreement was signed between Aseman and Boeing on March 18 in the presence of Boeing representatives in Tehran after almost one year of negotiations.

Iran Aseman Airlines is the second Iranian airline to order brand new aircraft from Boeing after the lifting of nuclear sanctions in January 2016, as part of the nuclear deal Iran clinched with world powers earlier in 2015.

In December 2016, Iran Air finalized a deal with Boeing to buy and lease 100 jets including 50 narrow-body 737max 8s, 15 wide-body 777-300ERs and 15 777-9s, which are scheduled to be delivered to Iran Air over 10 years. Iran Air has additionally struck a massive deal with Boeing’s rival Airbus to buy 100 jets.

Aseman is also in talks with Airbus to add two A340s and seven A321s to its fleet, which is the third largest in Iran, after Iran Air and Mahan.

While many analysts have expressed concern that Iran’s plane deals might be at risk amid uncertainty over US President Donald Trump’s Iran policy, Iran has so far received seven planes, including three Airbus jets and four ATR turboprops.

Aircraft manufacturers need OFAC licenses as more than 10% of their components come from the United States.

Aseman has three A320-200s, one A340-300, four ATR72-200s, two ATR72-500s, three B727-200s, one B727-200(F), two B737-400s and 19 Fokker 100s.

A spokesman for Aseman, Seyyed Amirreza Mostafavi, told us an OFAC permit is expected to be granted in a month.

"Boeing has applied US Treasury Department’s Office of Foreign Assets Control for approval of a license to perform under this transaction," reads a Boeing statement shared with the Financial Tribune.

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EconomyBusiness And Markets
Sunday, June 11, 2017

Europe Money Transfer Via Saman 

 

Saman Bank is now able to transfer money to European banks without any hurdle, the bank’s website has announced.”According to agreements, money transfer for different purposes, including for students and medical expenses, can be conducted through banks with which Saman has correspondent relations, provided the destination bank accepts it,” the bank said in a statement. Based on the report, the service is not restricted to Saman Bank’s customers and those of other Iranian banks can also benefit within the framework of central bank regulations. In May 2017, Saman Bank launched a representative office in Rome aiming to promote investment opportunities in Iran and offer banking, financial and legal consultancy services to European investors keen on doing business in Iran.Capital Intelligence Ratings, last May, affirmed Saman Bank’s long- and short-term foreign currency rating of ‘B’.

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Bank Melli Iran’s Hamburg branch has conducted transactions worth €11 billion ($12.3 billion), noting that the bank’s activities soared after economic sanctions against Iran were lifted in January 2016, said a bank’s official. “Opening letters of credit worth over €100 million ($112 million) for Iranian exports to European countries in the post-sanction era is among the services rendered,” Gholamreza Panahi, a BMI board member, added. He noted that the Hamburg branch issued export-import L/Cs valued at €600 million ($673 million).Panahi pointed to the bank’s potential for exporters to do business through safe and reasonable means in the wake of the sanctions relief. BMI was the first Iranian bank to be reconnected to Swift, the international interbank messaging network in the post-sanctions era.

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Anew directive aimed at enhancing banks' capital adequacy ratio in line with international standards was approved during the last meeting of the Money and Credit Council late Tuesday.

The motion–put in place by the financial sector's decision-making body–obligates the banking sector to strengthen its capital base in accordance with the latest international regulations, the Central Bank of Iran's website reported.

The ruling strives to promote the stability of banks, which will accelerate the development of international relations in line with the guidelines for banking reform.

These guidelines will replace the old ones that MCC approved in 2003 and had remained intact.

Need for changing the law became more acute, in view of its limitations and especially after international standards witnessed major changes in the aftermath of the global financial crisis.

According to the directive, banks have five years to upgrade themselves as per the new rulings and instructions.

Last month, the Central Bank of Iran notified Basel III principles on corporate governance to Iranian private banks and credit institutions, as part of the regulator's mandate to incorporate global standards.

Basel III (or the Third Basel Accord) is a global, voluntary regulatory framework on banks' capital adequacy, stress testing and market liquidity risk. The third installment of the Basel Accords was developed in response to the deficiencies in financial regulation revealed by the financial crisis of 2007–8 to strengthen bank capital requirements by increasing bank liquidity and decreasing bank leverage.

As Iranian banks were struggling with low CAR and conforming to international standards, CBI issued a directive last October to plumpup banks’ capital cushions.  

Iranian government took two important steps to improve the capital adequacy ratio of banks, namely the recapitalization of eight public-sector banks and settling payment arrears to the banking system.

As the government increased its capital to public-sector banks by 242 trillion rials ($6.4 billion), their capital adequacy ratio improved significantly but most of the banks are still having issues with the ratio.

Minimum capital requirement–8% under Basel II and 13% under Basel III-obligates banks to maintain the minimum capital ratios of regulatory capital over risk-weighted assets. It was reported last year that the average capital adequacy ratio of Iranian banks is around 5%, which is well below international norms.

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The Iranian housing market has been mired in recession for the past four years, but while its gradual recovery is almost certain, it will heavily hinge on what President Hassan Rouhani’s government will do to reform the banking system, two housing experts said.

A panel of housing experts, including the head of the Association of Home Builders, Hassan Mohtasham, and secretary of Builders Association, Farshid Pourhajat–a guild establishment that works in coordination with policymakers in the housing sector–among others, discussed the key industry’s prospects of supporting some 300 economic subsectors, IRNA reported.   

“The administration must pay special attention to reforming the financial and banking systems of the country because we will not witness growth, especially in building new homes, at the interest rate of 22%,” Mohtasham said.

He added that if the deposit rates, officially set at 18% but offered higher by many lenders, are brought down, people will not be incentivized to keep their money in banks and will steer their capital toward the production sector.

The official also advised the government to prepare the ground for minimizing the costs of building houses by lowering deposit and interest rates.

The fact that close to 2.5 million empty homes exist throughout the country, about 500,000 of which are in the capital Tehran alone, was also highlighted by Mohtasham.

“More than $200 billion have been invested in these units, which are practically unusable as people cannot afford to buy them,” he said.

According to Mohtasham, the housing sector is emerging out of recession and while its pre-boom phase will continue until the end of summer, the next phase will entail a relative rise in prices and home sales.

Pourhajat said if all Iranian banks engage in offering loans to people with the aim of buying homes, “we will witness a jump in residential real-estate deals on a national scale”.

The official added that if supervision over the banking system is increased and leads to a decline in bank interest rates, the number of housing deals would go up because “home deals experienced a relative rise last year” when the Money and Credit Council set the interest rates at 15%.

MCC, which is a decision-making financial body, in May authorized the Cooperatives Development Bank to offer housing loans, previously a prerogative of Bank Maskan and other non-specialized commercial banks.

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