Bank Markazi Iran
Encyclopedia
The Central Bank of the Islamic Republic of Iran (CBI) is the central bank
of Iran
. It is entirely government owned. Among its major purposes are: maintenance of the value of the national currency, balance of payments as well as facilitating trade transactions and contributing to the economic advancement of the country.
The Central bank is in charge of laying and implementing monetary and credit policies of the country. Laying exchange policies and determining exchange rates
are among the functions of Bank Markazi. The importation of goods, issuance of documentary credits
and registration of orders for documentary bills of exchange for imports are also done in accordance with the policies of the Central Bank. It is a member central bank of the Asian Clearing Union
.
, trade boomed and subsequently banking operation expanded to an extent that Iranians managed to learn the banking method from the people of Babylon
.
The first attempt at introducing paper currency in Iran occurred during the Mongol
Ilkhanate
of the 13th century CE. The innovation, developed in Song Dynasty
China
, did not take hold in Iran, and paper currency did not return to Iran in any significant manner for several centuries.
in 1889, with offices in all major cities of Persia and India. It was established in 1885 with a concession from the government of Persia to Baron Julius De Reuter
, under a Royal charter
from Queen Victoria
.
To compete with the British bank, Imperial Russia also opened the Russian Loan and Development Bank.
The first state owned Iranian bank, Bank Melli Iran
was established in 1927 by the government of Iran. The bank's primary objective was to facilitate government's financial transactions and to print and distribute the Iranian currency (rial
and toman
). For more than 33 years, Bank Melli Iran was acting as the central bank of Iran with the responsibility to maintain the value of Iranian rial.
In August 1960, the Iranian government established the Central Bank of Iran (CBI) and separated all central banking responsibilities from Bank Melli Iran and assigned it to the newly formed central bank.
The Central Bank of Iran was renamed to "the Central Bank of the Islamic Republic of Iran" immediately after the Islamic revolution in 1979 and the overthrow of the Shah of Iran
. Scope and responsibilities of the Central Bank of the Islamic Republic of Iran (CBI) have been defined in the Monetary and Banking Law of Iran.
CBI maintains a museum of historic and ancient jewelry owned and used by the ex-kings of Persia. This museum houses the Imperial Crown Jewels
and is one of the most appealing tourist attractions in Iran.
, two Ministers chosen by the Cabinet
, The Head of the Chamber of Commerce
, the General Prosecutor
and two lawmakers (MPs
).
Each year, after approval of the government’s annual budget, the CBI presents a detailed monetary and credit policy to the MCC for approval. Thereafter, major elements of these policies are incorporated in the five-year economic development plan.
The Iranian Central Bank needs more independence from the government in order to combat inflation, according to the country’s Parliament Research Center
. As of 2010, Iran’s Central Bank, is not able to conduct a “proactive” monetary policy
and has no control over the government’s fiscal policy. The Central Bank must obtain approval from the Majlis in order to issue participation papers.
are the President
, Economy and Commerce Ministers, Deputy-President for strategic planning, and a Minister selected by the Cabinet.
s with at least 15 years of work experience were to become members of the general assembly according to a new law proposed by the Majlis in 2010, thus moving this body from being state-dominated to one where the private sector has greater say in
the decision making process. Tenure of each member would be for 10 years and only for one term. The President of Iran
has stressed that it is important for the Central Bank of Iran not to fall under private control, since it would not benefit the Iranian people.
proposes a person as the governor of CBI, who must be verified by the general assembly and appointed as per a presidential decree. The governors of Central Bank of Iran are as follows:
To achieve the objectives as stated in the MBAI, CBI is endowed with the responsibility of fulfilling the following functions:
-free Islamic transactions (interest is considered as usury
or riba
and is forbidden by Islam and the holy book of Qur’an). These are commercial transactions that involve exchange of goods and services in return for a share of the assumed "profit".
Iran uses what are officially termed "provisional" interest rates, as rates paid to depositors or received from borrowers should reflect the profits or losses of a business. Under these rules, deposit rates, known as "dividends", are in theory related to a bank's profitability. In reality, however, these dividends have become fixed rates of return—depositors have never lost their savings because of losses made by the banks and almost never received returns larger than the provisional ex-ante profit rates. Interest charged on loans is presented as "fees" or a share of corporate profits.
All such transactions are performed through Islamic contracts, such as Mozarebe, Foroush Aghsati, Joale, Salaf, and Gharzol-hassane. Details of these contracts and related practices are outlined in the Iranian Interest-Free banking law and its guidelines. This law describes and authorizes an Iranian Shiite version of Islamic commercial laws. Iran’s banking system adheres to Islamic rules that prohibit earning or paying interest.
Shariah-compliant assets has reached about $400 billion throughout the world, according to Standard & Poor’s Ratings Services, and the potential market is $4 trillion.
Iran, Saudi Arabia
and Malaysia are at the top with the biggest sharia-compliant assets.
or riba
. In reality all banks are charging their borrowers a fixed pre-set amount at a rate of interest that is approved by the Central Bank at least once a year. No goods or services are exchanged as part of these contracts and banks rarely assume any Commercial Risk
. High value collateral
items such as real estate
, commercial paper
, bank guarantees and machinery eliminate any risk of loss. In case of defaults or bankruptcies, the principal amount, the expected interest and the late fees are collected through possession and or sale of secured collaterals.
The Central Bank has developed the Real Time Gross Settlement System (SATNA) as the main
center for settlement of Iranian banks' transactions in rial. Upon implementation of the first
and second phases of this system in 2006/07, real time settlement through the interbank
information transfer network (Shetab Banking System
) and interbank clearing house
was started in the review year. Since 2007/08, bank-to-bank and customer-to-customer payments were also settled through SATNA. The Retail Funds Transfer System (SAHAB), launched at end-2006/07 for real time transfer of a large volume of payments of relatively small value, was further developed in 2007/08. Moreover, there are further plans to connect Iran's SHETAB to information transfer networks of other countries.
systems instead of cash transactions.
The proportion of cheques bouncing has been rising to about 10.7 per cent - more than one in ten - in 2009.
and MasterCard
is now possible for online sales and in Iranian e-card terminals at shopping malls, hotels, restaurants, and travel agencies for Iranians and foreign tourists.
Iran's electronic commerce will reach 10 trillion rials ($1 billion) by March 2009.
, the use of hawala by Iranians reportedly has increased.
. In 2008, the Paris-based Financial Action Task Force (FATF) Watchdog praised the Islamic Republic's crackdown on money laundering. The 34-member financial watchdog congratulated Tehran on its commitment to seal money laundering loopholes. However in 2010, FATF, named Ecuador and Iran on a list of states that it says are failing to comply with international regulations against money laundering and financing terrorism.
s will no longer be announced by the Central Bank but will instead be reported by the Statistical Center of Iran.
In October 2000, the parliament approved establishment of the Oil Stabilization Fund (OSF).
Monetary policy in Iran has not been successful in meeting the inflation
and monetary targets set in the Iranian Five-Year Development Plans, owing mainly to the monetary impact of government spending out of oil revenue. Although the attainment of the inflation targets has improved somewhat recently, the objective of a gradual disinflation to single-digit levels has not been achieved. Moreover, the implicit intermediate target of monetary policy, money growth, has
been systematically missed.
The Central Bank is an extension of the Iranian government and as such it does not operate independently. Interest rate
is usually set based on political priorities and not monetary targets. There is little alignment between fiscal
and monetary policy
.
The Central Bank assesses the inflation rate with the use of the prices of 395 goods and services in Iran's urban areas.
High levels of inflation have also been associated with a growth in Iran's money supply. The Central Bank's data suggest that the money supply
growth has been about 40% annually. The rapid growth of money supply came from high demands for borrowing capital at the rate of 12% the banks offer, imposed by the Government to make credit
accessible to average Iranians and small entrepreneurs. However, this rate is lower than the rate of inflation. This makes the cost of borrowing less than free market cost as determined by supply and demand
, based on the inflation rate and investment risk
.
. As of August 2006, the World Bank
has financed 48 development projects in the country for a total original commitment of US$3,413 million. World Bank loans to Iran come only from the International Bank for Reconstruction and Development
(IBRD). Iran is a member of the World Bank's Multilateral Investment Guarantee Agency
. Iran joined the International Monetary Fund
(IMF) on December 29, 1945. CBI governors attend IMF's board discussions on Iran on behalf of the government. These meetings are usually held once a year in Washington, D.C.
. The Central Bank of Iran has an observer status
at the annual meetings of the Bank for International Settlements
(BIS) in Basel
, Switzerland
.
announced separately that they were halting operations in Iran. In September 2006 the Treasury Department banned all dealings by Bank Saderat Iran
with the US financial system, and in January 2007 it also blacklisted Bank Sepah
and its British subsidiary, Bank Sepah International. In October 2007 the US Treasury blacklisted Bank Melli and Bank Mellat
.
Under pressure from the US, 12 Chinese banks have reduced ties with Iranian banks since early September 2007, but five of them resumed commercial ties in mid-January 2008. In mid-February 2008, the US Treasury alleged that Bank Markazi (Iran’s central bank) helped the blacklisted banks evade US sanctions
, by conducting transactions for them. The allegations could lead to sanctions and stiff penalties against Iran’s central bank, especially if US allies participate in them.
The Central Bank possesses limited foreign cash reserves due to the international sanctions and problems in the transfer of funds in and out of country.
Videos
Central bank
A central bank, reserve bank, or monetary authority is a public institution that usually issues the currency, regulates the money supply, and controls the interest rates in a country. Central banks often also oversee the commercial banking system of their respective countries...
of Iran
Iran
Iran , officially the Islamic Republic of Iran , is a country in Southern and Western Asia. The name "Iran" has been in use natively since the Sassanian era and came into use internationally in 1935, before which the country was known to the Western world as Persia...
. It is entirely government owned. Among its major purposes are: maintenance of the value of the national currency, balance of payments as well as facilitating trade transactions and contributing to the economic advancement of the country.
The Central bank is in charge of laying and implementing monetary and credit policies of the country. Laying exchange policies and determining exchange rates
Iranian rial
The rial is the currency of Iran. It is subdivided into 100 dinar but, because of the very low current value of the rial, no fraction of the rial is used in accounting....
are among the functions of Bank Markazi. The importation of goods, issuance of documentary credits
Letter of credit
A standard, commercial letter of credit is a document issued mostly by a financial institution, used primarily in trade finance, which usually provides an irrevocable payment undertaking....
and registration of orders for documentary bills of exchange for imports are also done in accordance with the policies of the Central Bank. It is a member central bank of the Asian Clearing Union
Asian Clearing Union
The Asian Clearing Union , with headquarters in Tehran, Iran, was established on December 9, 1974 at the initiative of the United Nations Economic and Social Commission for Asia and the Pacific...
.
History
During the Achaemenid eraAchaemenid Empire
The Achaemenid Empire , sometimes known as First Persian Empire and/or Persian Empire, was founded in the 6th century BCE by Cyrus the Great who overthrew the Median confederation...
, trade boomed and subsequently banking operation expanded to an extent that Iranians managed to learn the banking method from the people of Babylon
Babylon
Babylon was an Akkadian city-state of ancient Mesopotamia, the remains of which are found in present-day Al Hillah, Babil Province, Iraq, about 85 kilometers south of Baghdad...
.
The first attempt at introducing paper currency in Iran occurred during the Mongol
Mongols
Mongols ) are a Central-East Asian ethnic group that lives mainly in the countries of Mongolia, China, and Russia. In China, ethnic Mongols can be found mainly in the central north region of China such as Inner Mongolia...
Ilkhanate
Ilkhanate
The Ilkhanate, also spelled Il-khanate , was a Mongol khanate established in Azerbaijan and Persia in the 13th century, considered a part of the Mongol Empire...
of the 13th century CE. The innovation, developed in Song Dynasty
Song Dynasty
The Song Dynasty was a ruling dynasty in China between 960 and 1279; it succeeded the Five Dynasties and Ten Kingdoms Period, and was followed by the Yuan Dynasty. It was the first government in world history to issue banknotes or paper money, and the first Chinese government to establish a...
China
China
Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...
, did not take hold in Iran, and paper currency did not return to Iran in any significant manner for several centuries.
Modern era
In modern banking, the British first opened the Imperial Bank of PersiaImperial Bank of Persia
The Imperial Bank of Persia was an Iranian bank. It was established in 1885 with a concession from the government of Persia to Baron Julius De Reuter, under a Royal charter from Queen Victoria....
in 1889, with offices in all major cities of Persia and India. It was established in 1885 with a concession from the government of Persia to Baron Julius De Reuter
Paul Reuter
Paul Julius Freiherr von Reuter was a German entrepreneur and later naturalized British citizen...
, under a Royal charter
Royal Charter
A royal charter is a formal document issued by a monarch as letters patent, granting a right or power to an individual or a body corporate. They were, and are still, used to establish significant organizations such as cities or universities. Charters should be distinguished from warrants and...
from Queen Victoria
Victoria of the United Kingdom
Victoria was the monarch of the United Kingdom of Great Britain and Ireland from 20 June 1837 until her death. From 1 May 1876, she used the additional title of Empress of India....
.
To compete with the British bank, Imperial Russia also opened the Russian Loan and Development Bank.
The first state owned Iranian bank, Bank Melli Iran
Bank Melli Iran
Bank Melli Iran , also called the National Bank of Iran, is the first national Iranian bank. The bank was established in 1927 by the order of the Majlis and since then has consistently been one of the most influential Iranian banks.In 1931 the Iranian Majlis authorized the bank to print and...
was established in 1927 by the government of Iran. The bank's primary objective was to facilitate government's financial transactions and to print and distribute the Iranian currency (rial
Iranian rial
The rial is the currency of Iran. It is subdivided into 100 dinar but, because of the very low current value of the rial, no fraction of the rial is used in accounting....
and toman
Iranian toman
The toman , is a superunit of the official currency of Iran, the rial. Toman, derived from a Mongolian word meaning ten thousand , was the currency of Iran until 1932. It was divided into 10,000 dinar. Between 1798 and 1825, the toman was also subdivided into 8 rial, each of 1250 dinar...
). For more than 33 years, Bank Melli Iran was acting as the central bank of Iran with the responsibility to maintain the value of Iranian rial.
In August 1960, the Iranian government established the Central Bank of Iran (CBI) and separated all central banking responsibilities from Bank Melli Iran and assigned it to the newly formed central bank.
The Central Bank of Iran was renamed to "the Central Bank of the Islamic Republic of Iran" immediately after the Islamic revolution in 1979 and the overthrow of the Shah of Iran
Pahlavi dynasty
The Pahlavi dynasty consisted of two Iranian/Persian monarchs, father and son Reza Shah Pahlavi and Mohammad Reza Shah Pahlavi The Pahlavi dynasty consisted of two Iranian/Persian monarchs, father and son Reza Shah Pahlavi (reg. 1925–1941) and Mohammad Reza Shah Pahlavi The Pahlavi dynasty ...
. Scope and responsibilities of the Central Bank of the Islamic Republic of Iran (CBI) have been defined in the Monetary and Banking Law of Iran.
CBI maintains a museum of historic and ancient jewelry owned and used by the ex-kings of Persia. This museum houses the Imperial Crown Jewels
Iranian Crown Jewels
The Imperial crown jewels of Iran include several elaborate crowns and decorative thrones, thirty tiaras, and numerous aigrettes, a dozen bejewelled swords and shields, a vast number of unset precious gems, numerous plates and other dining services cast in precious metals and encrusted with gems,...
and is one of the most appealing tourist attractions in Iran.
Money and Credit Council
The Money and Credit Council (MCC) is the highest banking policy-making body of Bank Markazi. Its permanent members include the CBI Governor, the Finance and Economy MinisterMinistry of Economic Affairs and Finance (Iran)
The Ministry of Economic Affairs and Finances function are:*acting as the state treasury,*public finance,*economic and financial policy making,*implementing tax policies,*in charge of foreign direct investment,...
, two Ministers chosen by the Cabinet
Cabinet of Iran
The Cabinet of Iran is a formal body composed of government officials, ministers, chosen and led by a President. Its composition must be approved by a vote in the Parliament...
, The Head of the Chamber of Commerce
Iran Chamber of Commerce Industries and Mines
The Iran Chamber of Commerce, Industries and Mines is a non-profit semi-governmental institution, established to facilitate economic growth and development in the country. ICCIM is a forum in the field of industries, mines and agriculture...
, the General Prosecutor
Attorney General
In most common law jurisdictions, the attorney general, or attorney-general, is the main legal advisor to the government, and in some jurisdictions he or she may also have executive responsibility for law enforcement or responsibility for public prosecutions.The term is used to refer to any person...
and two lawmakers (MPs
Majlis of Iran
The National Consultative Assembly of Iran , also called The Iranian Parliament or People's House, is the national legislative body of Iran...
).
Each year, after approval of the government’s annual budget, the CBI presents a detailed monetary and credit policy to the MCC for approval. Thereafter, major elements of these policies are incorporated in the five-year economic development plan.
The Iranian Central Bank needs more independence from the government in order to combat inflation, according to the country’s Parliament Research Center
Strategic Majlis Research Center
Majlis Research Center is the research arm of the Iranian parliament . This Center has access to the classified information of Foreign Ministry, Intelligence Ministry and Defense Ministry of Iran.- External links :*...
. As of 2010, Iran’s Central Bank, is not able to conduct a “proactive” monetary policy
Monetary policy
Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability. The official goals usually include relatively stable prices and low unemployment...
and has no control over the government’s fiscal policy. The Central Bank must obtain approval from the Majlis in order to issue participation papers.
General Assembly
The current combination of the Central Bank's board of directorsBoard of directors
A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors...
are the President
President of Iran
The President of Iran is the highest popularly elected official in, and the head of government of the Islamic Republic of Iran; although subordinate to the Supreme Leader of Iran, who functions as the country's head of state...
, Economy and Commerce Ministers, Deputy-President for strategic planning, and a Minister selected by the Cabinet.
"Reform" proposal
Seven economistEconomist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...
s with at least 15 years of work experience were to become members of the general assembly according to a new law proposed by the Majlis in 2010, thus moving this body from being state-dominated to one where the private sector has greater say in
the decision making process. Tenure of each member would be for 10 years and only for one term. The President of Iran
President of Iran
The President of Iran is the highest popularly elected official in, and the head of government of the Islamic Republic of Iran; although subordinate to the Supreme Leader of Iran, who functions as the country's head of state...
has stressed that it is important for the Central Bank of Iran not to fall under private control, since it would not benefit the Iranian people.
Governors of the Central Bank of Iran
The President of IranPresident of Iran
The President of Iran is the highest popularly elected official in, and the head of government of the Islamic Republic of Iran; although subordinate to the Supreme Leader of Iran, who functions as the country's head of state...
proposes a person as the governor of CBI, who must be verified by the general assembly and appointed as per a presidential decree. The governors of Central Bank of Iran are as follows:
| Governor | Date |
|---|---|
| Ebrahim Kashani | 1960 |
| Ali Asghar Poor Homayoon | 1961 |
| Mahdi Samii | 1964 |
| Khodadad Farmanfarmayan | 1969 |
| Mahdi Samii | 1970 |
| Abdolali Jahanshahi | 1971 |
| Mohammad Yeganeh | 1973 |
| Hassan-Ali Mehran | 1975 |
| Yoosef Khoshkish | 1978 |
| Mohammad Ali Molavi | 1979 |
| Alireza Nobari | 1979 |
| Mohsen Nourbakhsh Mohsen Nourbakhsh Seyed Mohsen Nourbakhsh was an Iranian economist, most famous as Governor of the Central Bank of Iran and the former Minister of Economic and Finance of Iran.-Personal Life and Education:... |
1981 |
| Majid Ghasemi | 1986 |
| Seyed Mohammad Hossein Adeli | 1989 |
| Mohsen Nourbakhsh Mohsen Nourbakhsh Seyed Mohsen Nourbakhsh was an Iranian economist, most famous as Governor of the Central Bank of Iran and the former Minister of Economic and Finance of Iran.-Personal Life and Education:... |
1994 |
| Mohammad Javad Vahhaji (acting) | 2003 |
| Ebrahim Sheibani Ebrahim Sheibani Ebrahim Sheibani is an Iranian economist who is currently the Iranian Ambassador to Austria, Slovenia and Slovakia. His previous positions include governor of the Central Bank of Iran and secretary general under the late Mohsen Nourbakhsh.He also served as the chairman of the money and credit... |
2003 |
| Tahmasb Mazaheri | 2007 |
| Mahmoud Bahmani Mahmoud Bahmani Mahmoud Bahmani is an Iranian politician and economist. He is the current Governor of the Central Bank of Iran.-Career:... |
2008 |
Objectives and functions
The objectives of the Central Bank of the Islamic Republic of Iran as per its charter and according to section 10 of the Monetary and Banking Law of Iran (MBAI) are as follows:- Maintaining the value of national currency
- Maintaining the equilibrium in the balance of paymentsBalance of paymentsBalance of payments accounts are an accounting record of all monetary transactions between a country and the rest of the world.These transactions include payments for the country's exports and imports of goods, services, financial capital, and financial transfers...
- Facilitating trade-related financial transactionFinancial transactionA financial transaction is an event or condition under the contract between a buyer and a seller to exchange an asset for payment. It involves a change in the status of the finances of two or more businesses or individuals.-History:...
s - Improving the economic growth potential of the country
To achieve the objectives as stated in the MBAI, CBI is endowed with the responsibility of fulfilling the following functions:
- Issuance of notes and coins
- Supervision of banks and credit institutions
- Formulation and regulation of foreign exchange policies and transactions
- Regulation on gold transactions
- Formulation and regulation on transactions and inflow/outflow of Domestic currency
Islamic banking
After the Islamic Revolution, the Central Bank was mandated to establish an Islamic banking law. In 1983 the Islamic Banking law of Iran was passed by the Majlis. According to this law, Iranian banks can only engage in interestInterest
Interest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets. It is most commonly the price paid for the use of borrowed money, or money earned by deposited funds....
-free Islamic transactions (interest is considered as usury
Usury
Usury Originally, when the charging of interest was still banned by Christian churches, usury simply meant the charging of interest at any rate . In countries where the charging of interest became acceptable, the term came to be used for interest above the rate allowed by law...
or riba
Riba
Riba means one of the senses of "usury" . Riba is forbidden in Islamic economic jurisprudence fiqh and considered as a major sin...
and is forbidden by Islam and the holy book of Qur’an). These are commercial transactions that involve exchange of goods and services in return for a share of the assumed "profit".
Iran uses what are officially termed "provisional" interest rates, as rates paid to depositors or received from borrowers should reflect the profits or losses of a business. Under these rules, deposit rates, known as "dividends", are in theory related to a bank's profitability. In reality, however, these dividends have become fixed rates of return—depositors have never lost their savings because of losses made by the banks and almost never received returns larger than the provisional ex-ante profit rates. Interest charged on loans is presented as "fees" or a share of corporate profits.
All such transactions are performed through Islamic contracts, such as Mozarebe, Foroush Aghsati, Joale, Salaf, and Gharzol-hassane. Details of these contracts and related practices are outlined in the Iranian Interest-Free banking law and its guidelines. This law describes and authorizes an Iranian Shiite version of Islamic commercial laws. Iran’s banking system adheres to Islamic rules that prohibit earning or paying interest.
Shariah-compliant assets has reached about $400 billion throughout the world, according to Standard & Poor’s Ratings Services, and the potential market is $4 trillion.
Iran, Saudi Arabia
Saudi Arabia
The Kingdom of Saudi Arabia , commonly known in British English as Saudi Arabia and in Arabic as as-Sa‘ūdiyyah , is the largest state in Western Asia by land area, constituting the bulk of the Arabian Peninsula, and the second-largest in the Arab World...
and Malaysia are at the top with the biggest sharia-compliant assets.
Criticism
Critics believe that this law has simply created the context for legitimizing usuryUsury
Usury Originally, when the charging of interest was still banned by Christian churches, usury simply meant the charging of interest at any rate . In countries where the charging of interest became acceptable, the term came to be used for interest above the rate allowed by law...
or riba
Riba
Riba means one of the senses of "usury" . Riba is forbidden in Islamic economic jurisprudence fiqh and considered as a major sin...
. In reality all banks are charging their borrowers a fixed pre-set amount at a rate of interest that is approved by the Central Bank at least once a year. No goods or services are exchanged as part of these contracts and banks rarely assume any Commercial Risk
Credit risk
Credit risk is an investor's risk of loss arising from a borrower who does not make payments as promised. Such an event is called a default. Other terms for credit risk are default risk and counterparty risk....
. High value collateral
Collateral (finance)
In lending agreements, collateral is a borrower's pledge of specific property to a lender, to secure repayment of a loan.The collateral serves as protection for a lender against a borrower's default - that is, any borrower failing to pay the principal and interest under the terms of a loan obligation...
items such as real estate
Real estate
In general use, esp. North American, 'real estate' is taken to mean "Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; an item of real property; buildings or...
, commercial paper
Commercial paper
In the global money market, commercial paper is an unsecured promissory note with a fixed maturity of 1 to 270 days. Commercial Paper is a money-market security issued by large banks and corporations to get money to meet short term debt obligations , and is only backed by an issuing bank or...
, bank guarantees and machinery eliminate any risk of loss. In case of defaults or bankruptcies, the principal amount, the expected interest and the late fees are collected through possession and or sale of secured collaterals.
Payment systems
In 2005, the government obliged the Central Bank of Iran and the Iranian banks, mostly state owned, to set up all the necessary infrastructures (regulatory, hardware, software) for fully launching e-money in Iran by March 2005. While this plan has not yet fully materialised, local debit/credit cards are now commonplace and have removed the main obstacle to the growth of e-commerce (in the national scale) as well as the full roll out of e-government initiatives.The Central Bank has developed the Real Time Gross Settlement System (SATNA) as the main
center for settlement of Iranian banks' transactions in rial. Upon implementation of the first
and second phases of this system in 2006/07, real time settlement through the interbank
Interbank
Interbank is a Peruvian provider of financial services.-History:In 1897, Elias Mujica opened an agency at Jiron de la Union in Lima's historical center under the name of Banco Internacional...
information transfer network (Shetab Banking System
Shetab Banking System
The Shetab system is the only electronic banking clearance and automated payments system used in Iran. The system was introduced in 2002 with the intention of creating a uniform backbone for the Iranian banking system to handle ATM, POS and other card-based transactions.Prior to its introduction,...
) and interbank clearing house
Clearing house (finance)
A clearing house is a financial institution that provides clearing and settlement services for financial and commodities derivatives and securities transactions...
was started in the review year. Since 2007/08, bank-to-bank and customer-to-customer payments were also settled through SATNA. The Retail Funds Transfer System (SAHAB), launched at end-2006/07 for real time transfer of a large volume of payments of relatively small value, was further developed in 2007/08. Moreover, there are further plans to connect Iran's SHETAB to information transfer networks of other countries.
Cheques
As of January 21, 2010 account holders will no longer be allowed to withdraw more than $15,000 from Iranian banks but they can still write checks for larger amounts. The government wants people to use bank checks and electronic bankingShetab Banking System
The Shetab system is the only electronic banking clearance and automated payments system used in Iran. The system was introduced in 2002 with the intention of creating a uniform backbone for the Iranian banking system to handle ATM, POS and other card-based transactions.Prior to its introduction,...
systems instead of cash transactions.
The proportion of cheques bouncing has been rising to about 10.7 per cent - more than one in ten - in 2009.
Debit/credit cards
In 2007, Tetra-Tech IT Company announced that using VISAVisa
Visa or VISA may refer to:* Visa , a document issued by a country's government allowing the holder to enter or to leave that country...
and MasterCard
MasterCard
Mastercard Incorporated or MasterCard Worldwide is an American multinational financial services corporation with its headquarters in the MasterCard International Global Headquarters, Purchase, Harrison, New York, United States...
is now possible for online sales and in Iranian e-card terminals at shopping malls, hotels, restaurants, and travel agencies for Iranians and foreign tourists.
Iran's electronic commerce will reach 10 trillion rials ($1 billion) by March 2009.
Hawala
Many Iranian businesses and individuals also rely on hawala, an informal trust-based money transfer system that exists in the Middle East and other Muslim countries. Since the imposition of recent U.S. and UN financial sanctions on IranSanctions against Iran
This article outlines economic, trade, scientific and military sanctions against Iran, which have been imposed by the U.S. government, or under U.S. pressure by the international community through the United Nations Security Council...
, the use of hawala by Iranians reportedly has increased.
Anti-money laundering law
The Central Bank of Iran is enforcing the newly-passed Anti-Money Laundering law to curb possible crime. The minister of intelligence, the governor of the Central Bank of Iran (CBI) and several other ministers are among the members of the special committee in charge of the campaign against money launderingMoney laundering
Money laundering is the process of disguising illegal sources of money so that it looks like it came from legal sources. The methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount...
. In 2008, the Paris-based Financial Action Task Force (FATF) Watchdog praised the Islamic Republic's crackdown on money laundering. The 34-member financial watchdog congratulated Tehran on its commitment to seal money laundering loopholes. However in 2010, FATF, named Ecuador and Iran on a list of states that it says are failing to comply with international regulations against money laundering and financing terrorism.
Key statistics
As of 2010, major economic indicatorEconomic indicator
An economic indicator is a statistic about the economy. Economic indicators allow analysis of economic performance and predictions of future performance. One application of economic indicators is the study of business cycles....
s will no longer be announced by the Central Bank but will instead be reported by the Statistical Center of Iran.
GDP growth
- The Government of Iran projects GDP growth to average 8% between 2010 and 2015 in its 5-year economic development plan.
- According to Business Monitor International (BMI) in 2010, growth will average 3.6% between 2009/2010 and 2013/2014. This is substantially below an estimated 5.6% for previous 5 years.
- The International Monetary FundInternational Monetary FundThe International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
(IMF) forecasts Iran's economy will grow 1.6% in 2010 and 0% in 2011, from 1.1% in 2009 and 1% in 2008 and 7.8% in 2007. Through the successful implementation of the Iranian Economic Reform Plan (targeted energy subsidy plan in particular), the IMF predicts Iran's economyEconomy of IranThe economy of Iran is the eighteenth largest in the world by purchasing power parity and according to Iranian officials' claims is going to become the 12th largest by 2015. The economy of Iran is a mixed and transition economy with a large public sector and some 50% of the economy centrally planned...
to grow at a rate of 8% by 2014/2015.
- Projections by the EconomistThe EconomistThe Economist is an English-language weekly news and international affairs publication owned by The Economist Newspaper Ltd. and edited in offices in the City of Westminster, London, England. Continuous publication began under founder James Wilson in September 1843...
in 2010 place Iran's nominal GDP at $701.9 billion in 2013. The Economist's 2010-revised projections for GDP growth in Iran are: 3.0% (2010); 3.0% (2011); 2.9% (2012); 3.1% (2013); 2.9% (2014); 2.9% (2015).
Money supply and inflation
- Money supplyMoney supplyIn economics, the money supply or money stock, is the total amount of money available in an economy at a specific time. There are several ways to define "money," but standard measures usually include currency in circulation and demand deposits .Money supply data are recorded and published, usually...
: The International Monetary FundInternational Monetary FundThe International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
reports that in 2001, currencyCurrencyIn economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...
and demand deposits—an aggregate commonly known as M1Money supplyIn economics, the money supply or money stock, is the total amount of money available in an economy at a specific time. There are several ways to define "money," but standard measures usually include currency in circulation and demand deposits .Money supply data are recorded and published, usually...
—were equal to $71.7 billion. In that same year, M2Money supplyIn economics, the money supply or money stock, is the total amount of money available in an economy at a specific time. There are several ways to define "money," but standard measures usually include currency in circulation and demand deposits .Money supply data are recorded and published, usually...
—an aggregate equal to M1 plus savings deposits, small time depositTime depositA time deposit is a money deposit at a banking institution that cannot be withdrawn for a certain "term" or period of time...
s, and money marketMoney marketThe money market is a component of the financial markets for assets involved in short-term borrowing and lending with original maturities of one year or shorter time frames. Trading in the money markets involves Treasury bills, commercial paper, bankers' acceptances, certificates of deposit,...
mutual funds—was $153.6 billion. According to the CBI, the country's liquidity amounted to some $174 billion by April 2008 and $197 billion by October 2009.
- InflationInflationIn economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
: According to the Central Bank of Iran, inflation rateInflation rateIn economics, the inflation rate is a measure of inflation, the rate of increase of a price index . It is the percentage rate of change in price level over time. The rate of decrease in the purchasing power of money is approximately equal.The inflation rate is used to calculate the real interest...
was 13.5% in 2009 and 25.6% in 2008.
Lending rates
In 2010, "Iran Credit Rating Consulting Company" became Iran's first credit agency by decree of the CBI.- Commercial banks' lending rate: 12.0% (2007), 11.5% (2008), 12.0% (2009). Free market rate is 24-25 percent (Aug 2009).
Exchange rates
- Average exchange rates: rialsIranian rialThe rial is the currency of Iran. It is subdivided into 100 dinar but, because of the very low current value of the rial, no fraction of the rial is used in accounting....
per US dollar - 9,900 (2009), 9,143 (2008), 9,408 (2007), 9,227 (2006), 8,964 (2005), 8,885 (2004), 8,193 (2003)
- note: Iran has been using a managed floating exchange rateFloating exchange rateA floating exchange rate or fluctuating exchange rate is a type of exchange rate regime wherein a currency's value is allowed to fluctuate according to the foreign exchange market. A currency that uses a floating exchange rate is known as a floating currency....
regime since unifying multiple exchange rates in March 2002. - Pre-unification, rials per US dollar:
- Market: 8,200 (2002), 8,050 (2001), 8,350 (2000)
- Official: 6,906 (2002), 1,753 (2001), 1,764 (2000)
Banking balance sheets
- Debt: The government's and banks' debts to the central bank dropped from 905,926 billion Rials (about 90 billion Dollars) in November 2008 to about 776,486 billion Rials (about 77 billion Dollars) in November 2009. According to CBI reports, the value of its assets fell by 11.6 percent during the last 12 months to 1,137,455 Rials in November 2009. Meanwhile, the total debt of 11 state-run banks alone to the Central Bank of Iran has exceeded $32 billion in 2009, showing a 10-fold increase over the past four years. Bank Melli Iran, with nearly $9 billion, had the biggest debt followed by Bank SepahBank Sepah-History:The first Iranian bank, Bank Sepah was established in 1925 ; its first branch, in Rasht, opened that year. The bank also has branches in Frankfurt, Paris and Rome as well as a wholly owned subsidiary, Bank Sepah International plc which operates in London. "Sepah" is the poetic Persian...
, Iran's oldest, with about $4.8 billion. Bank MaskanBank MaskanBank Maskan , also known as the Housing Bank, is a bank in Iran. In 2008, the Central Bank banned all banks and other financial institutions, except for Maskan Bank, from providing residential mortgages.-Structure:Their subsidiaries include:...
, Keshavarzi BankKeshavarzi BankKeshavarzi Bank, also known as Agribank, is a major Iranian banking establishment offering retail and commercial services. The company was established in 1933 and as a Farming and Industrial Bank...
, Bank of Industry and Mines and the Export Development Bank of Iran were next with the respective debts of $4.7, $4.1, $3.5 and $1.1 billion. Private-sector banks had much lower debts. Bank ParsianParsian BankParsian Bank is Iran's largest private bank, headquartered in Tehran, Iran. Founded in February, 2002 as a nongovernmental bank, Parsian Bank now has 174 branches across Iran, 104 of which are in Tehran. The bank entered the Tehran Stock Exchange in 2004...
, the largest private-run bank, owed about $421 million to the Central Bank. In addition, the collective debt of state-sector companies to the Central Bank has reached $25 billion (2009).
- Overdue loans: According to unofficial figures, overdue loans have reached IR175,000bn ($17.8bn, €13.6bn, £11bn), an increase of 75 per cent over three years (November 2008). Plan to inject about $13 billion to recapitalize the banking sector (2008) Ninety individuals have managed to secure collective facilities totaling $8 billion from Iranian banks, with previous $27 billion unpaid loans (2009). In October 2009, Iran's General Inspection OfficeGeneral Inspection Office (Iran)The General Inspection Office of Iran is linked to the Judiciary of Iran. It is also called the State Inspectorate Organization of Iran....
informed that Iranian banks have some USD 38 billion of delinquent loans, while they are only capitalized at USD 20 billion. Current average for late debts of Iran's state banks is over 15 percent while the global standard is 3 to 5 percent.
Foreign reserves
- Reserves of foreign exchange & gold: $40 billion (2005) to $80 billion (2008) to $100 billion (2010) because of a sharp increase in the price of oil (and non-oil exports).
- Composition: In 2007, 10% of the Reserves were held in GoldGoldGold is a chemical element with the symbol Au and an atomic number of 79. Gold is a dense, soft, shiny, malleable and ductile metal. Pure gold has a bright yellow color and luster traditionally considered attractive, which it maintains without oxidizing in air or water. Chemically, gold is a...
, 20% in US dollarDollarThe dollar is the name of the official currency of many countries, including Australia, Belize, Canada, Ecuador, El Salvador, Hong Kong, New Zealand, Singapore, Taiwan, and the United States.-Etymology:...
s (down from 40% in 2006), the rest mostly in EuroEuroThe euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...
and other major currencies (i.e., Yen, British Pound and the Swiss FrancSwiss francThe franc is the currency and legal tender of Switzerland and Liechtenstein; it is also legal tender in the Italian exclave Campione d'Italia. Although not formally legal tender in the German exclave Büsingen , it is in wide daily use there...
).
- In 2009, Iran's President Mahmoud Ahmadinejad ordered the replacement of the US dollar by the euro in the country's foreign exchange accounts because "it would help decouple Iran from the US banking system."
- In October 2010, Iran's Gold reserves hit "record high" as the Central Bank took "preventive measures" to avoid a possible asset freeze by Western countries. In 2009, when the gold price was on average $656 per once, a "few hundred tons" of gold were imported, IRNA quoted CBI Governor Mahmoud BahmaniMahmoud BahmaniMahmoud Bahmani is an Iranian politician and economist. He is the current Governor of the Central Bank of Iran.-Career:...
. "At present, the price of each ounce of gold is $1,230. Consequently, the value of the national reserves has risen by a few billion dollars" he said. Iran has changed 15% of its foreign exchange reserves into gold as the number is 1.7% for countries such as IndiaIndiaIndia , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
and ChinaChinaChinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...
(see also: U.S. sanctions against Iran.)
Oil revenues
- Oil revenues: Foreign currency proceeds from crude sales are managed by the Central Bank. According to Farda newspaper, the difference between President Ahmadinejad administration's revenues and the amount deposited with the Central Bank of Iran exceeds $66 billion. This amount is broken down as follows:
- $35 billion in imported goods (2005–2009),
- $25 billion in oil revenues (2005–2008),
- $2.6 billion in non-oil export revenues,
- $3 billion in foreign exchange reserves.
- This is a large number as it is equal one-tenth of Iran's total oil revenues since the 1979 revolutionIranian RevolutionThe Iranian Revolution refers to events involving the overthrow of Iran's monarchy under Shah Mohammad Reza Pahlavi and its replacement with an Islamic republic under Ayatollah Ruhollah Khomeini, the leader of the...
.
Oil Stabilization Fund (OSF) and National Development Fund
In October 2000, the parliament approved establishment of the Oil Stabilization Fund (OSF).
- Funding: Any budget surplus revenues from the sale of crude oil and gas is to be paid into the Oil Stabilization Fund (OSF).
- Usage: Part of the reserves are held in the $23.3 billion (2006) Oil Stabilization Fund, designed for capital investment or for budget support if oil prices - Iran's main foreign exchangeForeign exchange reservesForeign-exchange reserves in a strict sense are 'only' the foreign currency deposits and bonds held by central banks and monetary authorities. However, the term in popular usage commonly includes foreign exchange and gold, Special Drawing Rights and International Monetary Fund reserve positions...
earner - fall perilously low. - A new fund will replace the Oil Stabilization Fund in 2011 called the National Development Fund. Based on Article 84 of the Fifth Five-year Socio Economic Development Plan (2011-2015), the National Development Fund was established to transform oil and gas revenues to productive investment for future generation. The money will increasingly be deposited in domestic banks. Accordingly, 20% of oil income is to be transferred to the National Development Fund. The new fund is to extend 50% of its financial facilities to private, cooperative and non-governmental sectors and 20% to promote foreign investmentForeign Direct Investment in IranForeign direct investment in Iran has been hindered by unfavorable or complex operating requirements and by international sanctions, although in the early 2000s the Iranian government liberalized investment regulations. Iran ranks 62nd in the World Economic Forum's 2011 analysis of the global...
. It is foreseen that the Development Fund will reach $30 billion by March 2012.
Foreign exposure and transactions
- Iran's foreign debt: $22.07 billion in 2010 ($10.6 billion of short-term debts and $11.4 billion of mid-term and long-term debts).
- Iran's deposits in foreign banks: stand at $35 billion while its obligations amount to $25 billion (2007). In 2007, IranIranIran , officially the Islamic Republic of Iran , is a country in Southern and Western Asia. The name "Iran" has been in use natively since the Sassanian era and came into use internationally in 1935, before which the country was known to the Western world as Persia...
had $62 billion worth of assets held abroad.
- Transactions: Foreign transactions with Iran amounted to $150 billion between 2000 and 2007 worth of major contracts and both private and government lines of creditLine of creditA line of credit is any credit source extended to a government, business or individual by a bank or other financial institution. A line of credit may take several forms, such as overdraft protection, demand loan, special purpose, export packing credit, term loan, discounting, purchase of...
. According to the Bank for International SettlementsBank for International SettlementsThe Bank for International Settlements is an intergovernmental organization of central banks which "fosters international monetary and financial cooperation and serves as a bank for central banks." It is not accountable to any national government...
(BIS), the balance of Iran’s foreign exchange interactions in foreign banks and financial institutes during Q3 2008 stood above $24.3 billion.
Inflation and monetary policy
Double digit inflation rates have been a fact of life in Iran for the past 20 years. Between 2002 and 2006, the rate of inflation in Iran has been fluctuating between 12 and 16%.Monetary policy in Iran has not been successful in meeting the inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
and monetary targets set in the Iranian Five-Year Development Plans, owing mainly to the monetary impact of government spending out of oil revenue. Although the attainment of the inflation targets has improved somewhat recently, the objective of a gradual disinflation to single-digit levels has not been achieved. Moreover, the implicit intermediate target of monetary policy, money growth, has
been systematically missed.
The Central Bank is an extension of the Iranian government and as such it does not operate independently. Interest rate
Interest rate
An interest rate is the rate at which interest is paid by a borrower for the use of money that they borrow from a lender. For example, a small company borrows capital from a bank to buy new assets for their business, and in return the lender receives interest at a predetermined interest rate for...
is usually set based on political priorities and not monetary targets. There is little alignment between fiscal
Fiscal policy
In economics and political science, fiscal policy is the use of government expenditure and revenue collection to influence the economy....
and monetary policy
Monetary policy
Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability. The official goals usually include relatively stable prices and low unemployment...
.
The Central Bank assesses the inflation rate with the use of the prices of 395 goods and services in Iran's urban areas.
High levels of inflation have also been associated with a growth in Iran's money supply. The Central Bank's data suggest that the money supply
Money supply
In economics, the money supply or money stock, is the total amount of money available in an economy at a specific time. There are several ways to define "money," but standard measures usually include currency in circulation and demand deposits .Money supply data are recorded and published, usually...
growth has been about 40% annually. The rapid growth of money supply came from high demands for borrowing capital at the rate of 12% the banks offer, imposed by the Government to make credit
Credit (finance)
Credit is the trust which allows one party to provide resources to another party where that second party does not reimburse the first party immediately , but instead arranges either to repay or return those resources at a later date. The resources provided may be financial Credit is the trust...
accessible to average Iranians and small entrepreneurs. However, this rate is lower than the rate of inflation. This makes the cost of borrowing less than free market cost as determined by supply and demand
Supply and demand
Supply and demand is an economic model of price determination in a market. It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers will equal the quantity supplied by producers , resulting in an...
, based on the inflation rate and investment risk
Financial risk
Financial risk an umbrella term for multiple types of risk associated with financing, including financial transactions that include company loans in risk of default. Risk is a term often used to imply downside risk, meaning the uncertainty of a return and the potential for financial loss...
.
Direct instruments
- Banking profit rates
- Credit ceiling
Indirect instruments
- Reserve requirement ratio
- CBI Participation Papers
- Open deposit account (ODA): control liquidity through absorption of banks’ excess resources. The CBI pays profit to these deposits with the CBI on the basis of specific rules.
Central bank balance sheet
| Source: International Monetary Fund International Monetary Fund The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world... (In billions of rials; unless otherwise indicated) | Prel. 2008/09 | Proj. 2009/10 |
|---|---|---|
| Net foreign assets (NFA) | 703,329 | 789,498 |
| In millions of U.S. dollars | 72,381 | 77,050 |
| -Foreign assets | 773,352 | 863,336 |
| In millions of U.S. dollars | 79,587 | 84,257 |
| -Foreign liabilities 1/ | 70,023 | 73,839 |
| In millions of U.S. dollars | 7,206 | 7,206 |
| Net domestic assets (NDA) | -139,843 | -225,654 |
| Net domestic credit | -5,141 | 21,083 |
| -Central government, net | -283,735 | -228,046 |
| Claims | 74,779 | 74,779 |
| Deposits | 358,514 | 302,824 |
| -Claims on banks | 239,758 | 206,409 |
| -Claims on non financial public enterprises (NFPEs) | 38,836 | 42,719 |
| -Other items net, excluding central bank participation papers (CPPs) | -134,701 | -246,737 |
| Base money | 556,925 | 556,925 |
| Currency | 206,352 | 200,745 |
| -Currency in circulation | 157,764 | 153,478 |
| -Cash in vaults | 48,588 | 47,268 |
| Reserves | 334,495 | 338,445 |
| -Required reserves | 225,228 | 307,757 |
| -Excess reserves | 109,267 | 30,688 |
| Deposits of NFPE and municipalities | 16,078 | 17,734 |
| Other liabilities | 6,561 | 6,919 |
| -CPPs | 0 | 0 |
| -Foreign currency deposits of NFPEs and municipalities | 6,561 | 6,919 |
| Memorandum items: End-period change (in percent of base money) | ||
| -Base money | 45.4 | 0.0 |
| -NFA | 13.4 | 15.5 |
| -NDA (net of other liabilities) | 32.0 | -15.5 |
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Foreign relations
Iran is member of the Islamic Development BankIslamic Development Bank
The Islamic Development Bank is a multilateral development financing institution located in Jeddah, Saudi Arabia. It was founded by the first conference of Finance Ministers of the Organisation of the Islamic Conference , convened 23 Dhu'l Qa'dah 1393 AH.The bank officially began its activities on...
. As of August 2006, the World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
has financed 48 development projects in the country for a total original commitment of US$3,413 million. World Bank loans to Iran come only from the International Bank for Reconstruction and Development
International Bank for Reconstruction and Development
The International Bank for Reconstruction and Development is one of five institutions that compose the World Bank Group. The IBRD is an international organization whose original mission was to finance the reconstruction of nations devastated by World War II. Now, its mission has expanded to fight...
(IBRD). Iran is a member of the World Bank's Multilateral Investment Guarantee Agency
Multilateral Investment Guarantee Agency
The Multilateral Investment Guarantee Agency is a member organization of the World Bank Group that offers political risk insurance. It was established to promote foreign direct investment into developing countries. MIGA was founded in 1988 with a capital base of $1 billion and is headquartered in...
. Iran joined the International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
(IMF) on December 29, 1945. CBI governors attend IMF's board discussions on Iran on behalf of the government. These meetings are usually held once a year in Washington, D.C.
Washington, D.C.
Washington, D.C., formally the District of Columbia and commonly referred to as Washington, "the District", or simply D.C., is the capital of the United States. On July 16, 1790, the United States Congress approved the creation of a permanent national capital as permitted by the U.S. Constitution....
. The Central Bank of Iran has an observer status
Observer status
Observer status is a privilege granted by some organizations to non-members to give them an ability to participate in the organization's activities. Observer status is often granted by intergovernmental organizations to non-member states and international nongovernmental organizations that have...
at the annual meetings of the Bank for International Settlements
Bank for International Settlements
The Bank for International Settlements is an intergovernmental organization of central banks which "fosters international monetary and financial cooperation and serves as a bank for central banks." It is not accountable to any national government...
(BIS) in Basel
Basel
Basel or Basle In the national languages of Switzerland the city is also known as Bâle , Basilea and Basilea is Switzerland's third most populous city with about 166,000 inhabitants. Located where the Swiss, French and German borders meet, Basel also has suburbs in France and Germany...
, Switzerland
Switzerland
Switzerland name of one of the Swiss cantons. ; ; ; or ), in its full name the Swiss Confederation , is a federal republic consisting of 26 cantons, with Bern as the seat of the federal authorities. The country is situated in Western Europe,Or Central Europe depending on the definition....
.
US sanctions
The US Treasury Department has also stepped up its attempt to restrict financing of foreign investment and trade with Iran. In January 2006, Swiss banks UBS and Credit SuisseCredit Suisse
The Credit Suisse Group AG is a Swiss multinational financial services company headquartered in Zurich, with more than 250 branches in Switzerland and operations in more than 50 countries.-History:...
announced separately that they were halting operations in Iran. In September 2006 the Treasury Department banned all dealings by Bank Saderat Iran
Bank Saderat Iran
Bank Saderat Iran is an Iranian Bank. Its name means "the Export Bank of Iran". Bank Saderat Iran was founded by the prominent Mofarrah and Bolurfrushan families, commenced operation on 13 November 1952 with a board of three directors and 20 employees...
with the US financial system, and in January 2007 it also blacklisted Bank Sepah
Bank Sepah
-History:The first Iranian bank, Bank Sepah was established in 1925 ; its first branch, in Rasht, opened that year. The bank also has branches in Frankfurt, Paris and Rome as well as a wholly owned subsidiary, Bank Sepah International plc which operates in London. "Sepah" is the poetic Persian...
and its British subsidiary, Bank Sepah International. In October 2007 the US Treasury blacklisted Bank Melli and Bank Mellat
Bank Mellat
Bank Mellat is a Private Iranian bank. Its name means "Bank of the Nation". Bank Mellat was established in 1980, with a paid of capital of Rials 33.5bn as a merger of ten pre-revolution private banks comprising: Tehran, Dariush, Pars, Etebarat Taavoni & Tozie, Iran & Arab, Bein-al-melalie-Iran,...
.
Under pressure from the US, 12 Chinese banks have reduced ties with Iranian banks since early September 2007, but five of them resumed commercial ties in mid-January 2008. In mid-February 2008, the US Treasury alleged that Bank Markazi (Iran’s central bank) helped the blacklisted banks evade US sanctions
Iran and Libya Sanctions Act
The Iran and Libya Sanctions Act of 1996 was a 1996 act of Congress that imposed economic sanctions on firms doing business with Iran and Libya. On September 30, 2006, the act was renamed to the Iran Sanctions Act , as it no longer applied to Libya, and extended until December 31, 2011...
, by conducting transactions for them. The allegations could lead to sanctions and stiff penalties against Iran’s central bank, especially if US allies participate in them.
The Central Bank possesses limited foreign cash reserves due to the international sanctions and problems in the transfer of funds in and out of country.
Significant buildings
- Mirdamad Building - 144 Mirdamad BoulevardMirdamad BoulevardMirdamad Boulevard is the center of Davoodiyeh district in the north of Tehran. The boulevard starts from Valiasr Street in its west and continues eastward passing Mother Square up to Shariati street...
, Tehran, Iran - Ferdowsi Building - Ferdowsi Ave, Tehran, Iran
- Jewelry MuseumIranian Crown JewelsThe Imperial crown jewels of Iran include several elaborate crowns and decorative thrones, thirty tiaras, and numerous aigrettes, a dozen bejewelled swords and shields, a vast number of unset precious gems, numerous plates and other dining services cast in precious metals and encrusted with gems,...
- Ferdowsi Ave, Tehran, Iran
Contacts
- Official website
- Swift Address: BMJIIRTH
- Postal address: 144 Mirdamad Boulevard, Tehran, Iran
See also
- Banking and Insurance in Iran
- Iranian rialIranian rialThe rial is the currency of Iran. It is subdivided into 100 dinar but, because of the very low current value of the rial, no fraction of the rial is used in accounting....
(Iran's currency) - Tehran Stock ExchangeTehran Stock ExchangeThe Tehran Stock Exchange is Iran's largest stock exchange, which first opened in 1967. The TSE is based in Tehran. As of July 2010, 337 companies with a market capitalization of US$72 billion were listed on TSE...
- Shetab Banking SystemShetab Banking SystemThe Shetab system is the only electronic banking clearance and automated payments system used in Iran. The system was introduced in 2002 with the intention of creating a uniform backbone for the Iranian banking system to handle ATM, POS and other card-based transactions.Prior to its introduction,...
- Supreme Audit Court of IranSupreme Audit Court of IranThe Supreme Audit Court of Iran is a government agency of the Islamic Republic of Iran. Located in Tehran, it is supervised by the Iranian Parliament and dates back to 1906....
- Labour and tax laws in IranLabour and tax laws in IranTaxation in Iran generates particular unease among foreign firms because they appear to be arbitrarily enforced – tax bills are initially based on 'assumed earnings' calculated by the Finance and Economy Ministry according to the size of the company and the sector in which it operates...
- Economy of Iran
- Privatization in IranPrivatization in IranAccording to the Fourth Five-Year Economic Development Plan , the Privatization Organization of Iran affiliated to the Ministry of Economic Affairs and Finance is in charge of setting prices and ceding shares to the general public and on the Tehran Stock Exchange...
- Iranian oil bourseIranian oil bourseThe Iranian Oil Bourse International Oil Bourse, Iran Petroleum Exchange Kish Exchange or Oil Bourse in Kish is a commodity exchange which opened on February 17, 2008. It was created by cooperation between Iranian ministries, the Iran Mercantile Exchange and other state and private institutions...
- Ministry of Petroleum of IranMinistry of Petroleum of IranThe Ministry of Petroleum manages the oil industry, the producer of oil and petrochemical products. MoP is in charge of all issues pertaining to exploration, extraction, exploitation, distribution and exportation of crude oil and oil products. In addition, according to the "", issuing import...
- Imperial Bank of PersiaImperial Bank of PersiaThe Imperial Bank of Persia was an Iranian bank. It was established in 1885 with a concession from the government of Persia to Baron Julius De Reuter, under a Royal charter from Queen Victoria....
- Islamic bankingIslamic bankingIslamic banking is banking or banking activity that is consistent with the principles of Islamic law and its practical application through the development of Islamic economics. Sharia prohibits the fixed or floating payment or acceptance of specific interest or fees for loans of money...
- History of bankingHistory of bankingThe first banks were the merchants of the ancient world that made loans to farmers and traders that carried goods between cities. The first records of such activity dates back to around 2000 BC in Assyria and Babylonia...
- List of central banks
- International rankings of Iran
External links
Central Bank of the Islamic Republic of Iran official site (including statistics about Iran's economy)- Annual Review (2009-10) - Report by the CBI by sector of activity, including marco-economic data.
- Islamic banking - 2007 Iran-Daily press article
Videos
- Iranian Fiscal & Monetary Policies - PressTV video
- Iran's Banking System - 2010 PressTV video