Theoretically speaking, the monetary market aims to meet short-term financial goals while supplying long-term financial resources for investment and production purposes and is carried out through the capital market.

In most countries the banking system operates in the field of monetary markets, but approval of usury-free banking law in Iran has changed the performance of the Iranian banks as a monetary market and they have embarked on investments. At present, the Iranian capital market comprises of stock exchanges, investment companies and the banking sector. However, newly established companies that would need long-term financial resources cannot avail of bank facilities for supplying their initial capital due to conditions and restrictions set by banks. On the other hand, publishing stocks by those companies could fetch them their needed financial resources. The stock exchange market must comprise of primary and secondary markets.

At present, the country’s monetary and capital markets are facing two problems. There is no organized primary stock exchange in Iran. Also, there is no supervision over companies that embark on unorganized issuance of stocks. Therefore, the primary market could not be mentioned as an active market in the field of investment and organizing it should take precedence by the government.

The second problem is strong presence of the banking system in the capital market. The management of the banking system has not been divided from that of the stock market. On the other hand, investment companies affiliated to banks control a remarkable part of the stock exchange and financing the capital market is practically done through the banking system. Therefore, one could claim that the monetary and capital markets in Iran have been entangled. The stock exchange bill has been drawn up to remove such complexities in the monetary and capital markets. The bill pursues such goals as organizing supervision over the country’s capital market, adopting the necessary mechanisms to prevent violations at the stock market as well as differentiating the management of the monetary and capital markets. Approving the bill would be followed with positive consequences for the country’s financial market.

In addition to the abovementioned bill, other changes that have taken place in the Iranian monetary and capital markets during recent years include:

Developments envisaged for the country’s monetary market include ‘strategic reforms’ to change the powers of directorate and managing directors of banks, computerizing bank services, more supervision over the treatment of bank clients by employees, simplification of methods used for granting credits to clients, improving information system of bank clients such as initiating phone bank services, employment regulations and so on. Moreover, good grounds have been provided for the establishment of private banks in the country. Reducing the interest rate of bank deposits, decreasing obligatory facilities of banks, strengthening sufficiency index of their capital and liberalizing bank credits were the aims of the Third Economic Development Plan. In addition to paving the way for the establishment of private banks during the Third Economic Development Plan, special attention has been paid to privatizing governmental banks during the Fourth Economic Development Plan. Special measures have also been taken to increase supervision over the unorganized monetary market during recent years and a bill on the unorganized monetary market has been drawn up that would positively change performance of the monetary market.