January 10, 2020
The Majlis has ratified the outlines of a “Compre-hensive Islamic Banking Bill” that the Central Bank of Iran (CBI) has firmly opposed, saying it would weaken the Central Bank and leave it even more under political thumbs.
Economists have almost uniformly called for many years for the Central Bank to be given more independence, in keeping with the practice around the world.
Central Bank Governor Abdolnasser Hemmati attended the Majlis session December 17 and told the deputies: “I am not here to deny the efforts of those who prepared the bill. But I want to dissuade deputies from ratifying it,” the parliamentary news website ICANA quoted him as saying.
Hemmati said he opposed the bill “as it deals a blow to the CBI structure” at a time when the country is saddled with economic sanctions.
Regarding the management structure, a “high board” would sit atop the CBI and replace the governor, who would be relegated to the second position.
This returns the Central Bank to the type of subsidiary role it had more than a decade ago when it was overseen by a board filled with cabinet members and other political appointees.
“As CBI governor, I’m not convinced by [the provisions of] the bill,” he said, chastising lawmakers over the fact that they didn’t call for the CBI’s opinion when drafting the bill.
“I’ve been wondering how is it possible to draft 205 articles about a banking system without [lawmakers’] bothering to consult experts and the CBI,” he said.
Under the bill, the CBI is mandated with stabilizing prices, ensuring the health of the banking system and promoting economic growth through financial stability.
Hemmati said if the deputies are honest in their claims about supporting the independence of the CBI, they ought to ratify the government-backed Bank Reform Bill.
That bill was sent to the Majlis more than two years ago. The Banking Reform Bill, which was designed to replace the current decades-old Usury-Free Banking Law, outlines procedures for banks and credit institutions for obtaining a license from the CBI.
“If you want to boost CBI independence, help in correcting the banking regulations,” Hemmati told the chamber.
One provision of the Comprehensive Islamic Banking Bill would establish a “development bank,” which Hemmati says is at odds with the CBI’s independence.
“This is against CBI’s independence because it obliges the CBI to print money and give it to the development bank,” he said.
The development bank is planned to be an affiliate of the Central Bank. According to the provisions of the bill, it will be managed by a board of trustees headed by the national president. Other members would be the minister of economy, head of the Plan and Budget Organization and the CBI governor.
The Majlis approved the general outlines of the bill, but the Majlis must now review the details before voting on final approval.