General Information & Client Service
  • Americas: +1.212.553.1653
  • Asia: +852.3551.3077
  • China: +86.10.6319.6580
  • EMEA: +44.20.7772.5454
  • Japan: +81.3.5408.4100
Media Relations
  • New York: +1.212.553.0376
  • London: +44.20.7772.5456
  • Hong Kong: +852.3758.1350
  • Tokyo: +813.5408.4110
  • Sydney: +61.2.9270.8141
  • Mexico City: +001.888.779.5833
  • Buenos Aires: +0800.666.3506
  • São Paulo: +0800.891.2518
March 29, 2018

IMF published staff report and selected issues reports in the context of the 2018 Article IV consultation with the Islamic Republic of Iran. Directors underscored that financial sector reform should be a priority, in particular recapitalization and restructuring of viable banks, along with the resolution of non-viable banks. They highlighted that state-controlled banks should start preparing and implementing recovery plans as soon as possible. Directors also welcomed the progress in strengthening the AML/CFT framework and encouraged timely passage and implementation of the AML and CFT amendments in line with the FATF action plan.

The staff report highlights the need to securitize government’s debt to the Central Bank of Iran (CBI) and provide the CBI full autonomy. Directors agree that the new Central Bank Law should enhance the autonomy of CBI. In the past year, CBI merged or closed several Unlicensed Financial Institutions (UFIs) that threatened financial stability and contributed to excessive interest rate pressures. The legal framework was revised to make CBI the sole authority to license and regulate financial institutions. UFI assets and liabilities were transferred to existing Credit Institutions (CIs). The average Capital Adequacy Ratio (CAR) had fallen to 4.9% by end-June 2017 from 5.2% a year earlier and the nonperforming loans (NPLs) ratio had risen to 11.4%. The banking system continues to operate at a loss as the margin between mandated lending and deposit rates is insufficient to cover high operating costs and increasing provision expenses related to nonperforming assets. The proposal to tighten provisioning and loss recognition standards is a welcome step toward Basel II. The impact of the tighter standards on banks’ capital positions must be quantified and provided for under the recapitalization plan to ensure banks are adequately capitalized.

The staff report also reveals that CBI plans to undertake an independent Asset Quality Review (AQR), including related-party lending assessment to identify the financial system’s recapitalization needs. An AQR will help identify the true extent of non-performing assets, the value of associated collateral, provisions adequacy and credit risk management weaknesses. Staff urged CBI to move expeditiously with the AQR to contain financial stability risks and be prepared to take additional actions following its conclusion, including requiring banks to raise capital, resolve NPLs, improve credit risk management, tackle related-party lending, and demonstrate their commercial viability on a forward-looking basis. The restructuring of state-owned banks (SBs) should proceed now—since the AQR will take time. The authorities acknowledged the complexity and scope of banks’ problems and agreed on the need for action. They noted that NPLs and other frozen assets comprised 28% of banks’ total assets but that the exact recapitalization need will only be finalized once the AQR is completed.

The selected issues report highlights that the authorities have intensified efforts to develop a domestic government securities market. Iran has a well-functioning securities settlement infrastructure. The accounts for the securities are automated and the custody arrangements for the recording of securities ownership remain under the Iran Fara Bourse (IFB). The settlement system allows for T+1 settlement with delivery versus payment arrangement. Electronic platforms work to lower the cost, eliminate delays in trading and settlement and help protect against theft or forgery. IFB provides efficient and low-risk settlement facilities. From the market supervision perspective, the current system provides comprehensive, timely, and reliable information on holders of government securities and on trading developments. IFB also acts as the central depository and the market is supervised by Securities and Exchanges Organization (SEO). As the domestic government securities market develops, the authorities should move to a primary dealer system to aid diversification of the investor base and foster deeper markets.


Related Links

Keywords: Asia Pacific Iran Banking, Securities, PMI, Article IV, Basel II, AQR, NPLs, Resolution Planning, IMF

Related Insights

FSB Report Examines Financial Stability Implications of Fintech

FSB published a report that assesses fintech-related market developments and their potential implications for financial stability.

February 14, 2019 WebPage Regulatory News

US Agencies Amend Regulatory Capital Rule to Allow Phase-In for CECL

US Agencies (FDIC, FED, and OCC) adopted the final rule to address changes to credit loss accounting under the U.S. generally accepted accounting principles; this includes banking organizations’ implementation of the current expected credit losses (CECL) methodology.

February 14, 2019 WebPage Regulatory News

OCC Consults on Company-Run Stress Test Requirements for Banks

OCC proposed amendments to its company-run stress testing requirements for national banks and Federal savings associations, consistent with section 401 of the Economic Growth, Regulatory Relief, and Consumer Protection (EGRRCP) Act.

February 12, 2019 WebPage Regulatory News

CFTC Extends Comment Periods for Trade Execution Requirement Proposals

CFTC announced that it is extending comment period for the proposed amendments related to the regulations on swap execution facilities (SEF) and trade execution requirement.

February 12, 2019 WebPage Regulatory News

OCC Proposes to Renew Information Collection Under Stress Test Rule

OCC is proposing to renew its information collection titled “Annual Stress Test Rule” (OMB Control No: 1557-0311). Comments must be received on or before March 13, 2019.

February 11, 2019 WebPage Regulatory News

OSFI Consults on NSFR Disclosure Requirements for D-SIBs

OSFI proposed the draft guideline on the net stable funding ratio (NSFR) disclosure requirements for domestic systemically important banks (D-SIBs).

February 11, 2019 WebPage Regulatory News

EC Amends Its Regulation to Clarify Impairment Requirements for IFRS 9

EC published the EU Regulation 2019/237 that amends Regulation (EC) No 1126/2008 adopting certain international accounting standards, in accordance with Regulation (EC) No 1606/2002 regarding International Accounting Standard (IAS) 28 on Investments in Associates and Joint Ventures.

February 11, 2019 WebPage Regulatory News

FSB Chair Randal Quarles Speaks About the Upcoming Work of FSB

While speaking at the BIS Special Governors Meeting in Hong Kong, Randal K. Quarles, the Chair of FSB and Vice Chair of FED, discussed his views on how the work of FSB must evolve and the key principles that, he believes, should inform that work.

February 10, 2019 WebPage Regulatory News

OSFI Proposes to Amend the Liquidity Adequacy Requirements for Banks

OSFI proposed revisions to the Liquidity Adequacy Requirements (LAR) Guideline for banks. OSFI published the proposed drafts (with proposed changes highlighted in yellow) of Chapters 1,2, 4, and 5 of the LAR guideline.

February 08, 2019 WebPage Regulatory News

HKMA Publishes FAQs on Local Implementation of IRRBB Framework

HKMA published the frequently asked questions (FAQs) related to the local implementation of the interest rate risk in the banking book (IRRBB).

February 08, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 2593