Bijan Bidabad says about possible
inauguration of foreign bank branches in Iran that "The Iranian banking market
has turned into a monopolized bipolar market in which, one pole consists of
state-run banks and another pole comprises Gharz al-Hassaneh (interest-free)
funds which conduct banking activities in the absence of due supervision."
"The existing banking system is so
powerful that in some cases, it refrains from conforming to the ratifications
of Majlis and government and refrain from implementing those policies through
their lobbies," he said.
Bidabad noted that the closed system of
the Iranian banking does not make room for foreign banks to get active while
circulars and bylaws are not powerful enough to make banks comply with them.
"Therefore, under these conditions,
reforming the banking system and bringing a rival to this closed market is a
necessity for the promotion of banking services," he said.
The expert noted that conditions
considered by the Central Bank of Iran do not allow for domestic private banks
to easily embark on banking activities.
"Therefore, foreign banks which enjoy
powerful financial backing and a lot of experience can become active in Iran
as the main rival of domestic banks."
Bidabad maintains that foreign banks can
create good conditions for competition in the Iranian monetary and financial
market.
Referring to activities of foreign banks
under conditions governing in international markets, the expert noted,
"Foreign banks are working in international markets on interest rates that are
practically close to zero. They have obtained good conditions for competition
in banking markets through presenting optimal services. Therefore, entry of
foreign banks into Iran will provide applicants of financial resources with
low-interest financial services, on the one hand, while strengthening rial and
boosting supply of foreign exchange resources, on the other hand."
Bidabad stated that the quality of bank
services provided by foreign banks can be a guide for domestic banks.
"Low interest rate of bank facilities
will be a practical alarm bell for the Iranian banks and will prompt them to
correct their economic structure," he opined.
The expert stated that activation of
foreign banks in Iran will provide applicants with low-interest financial
services.
He also noted that presence of foreign
banks in Iran will help lower interest rate of bank facilities.
"Monetary exchanges as well as foreign
exchange transactions that are currently slow and high-cost in Iran, will
become rapid and inexpensive once the foreign banks start to work here.
Operations of foreign banks in Iran will finally correct domestic banking
system because our banking system, compared to international banking, is
sluggish and less productive and also paves the way for rent seeking.
Morteza Allahdad, an economic expert,
noted that if foreign banks are to say yes to invitation extended to them by
the Iranian Ministry of Economic Affairs and Finance, our banking regulations
should change. Of course, many foreign banks in the Persian Gulf littoral
countries, Malaysia, and even England are providing their customers with the
Islamic banking services.
"There is no doubt that foreign banks
embark on extensive studies before entering a market and if conditions were
not suitable, they would not work in that market.
"Transition from state-run banking to
private banking will cause banks to be divided into three categories in medium
term. One group of banks will transfer their shares to international banks in
the process of privatization. The second group is totally privatized while the
third group remains state-run," he said.
