Central Bank of Iran edit
extracted from Wikipedia, the Free Encyclopedia
(using Wikipedia Reflection Script)
|
Central Bank of Iran edit
|
|
The Central Bank of the Islamic Republic of Iran (Persian: بانک مرکزی جمهوری اسلامی ايران, Bank Markazi Jomhouri Islami Iran) is the central bank of Iran.
Contents |
The Ilkhanate were one of the rulers of Iran that tried to introduce paper currency in Iran in the late 13th century, without success.1
In modern banking, the British first opened the Imperial Bank of Persia in 1889, with offices in all major cities of Persia and India. To compete with the British bank, Imperial Russia also opened the Russian Loan and Development Bank.2
The first state owned Iranian bank, Bank Melli Iran was established in 1927 by the government of Iran.3 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 bank4.
The Central Bank of Iran was renamed to "the Central Bank of the Islamic Republic of Iran" immediately after the Islamic revolution 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 Iran5
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.
The governors of Central Bank of Iran are as follows6:
| 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 | 1981 |
| Majid Ghasemi | 1986 |
| Seyed Mohammad Hossein Adeli | 1989 |
| Mohsen Nourbakhsh | 1994 |
| Mohammad Javad Vahhaji (acting) | 2003 |
| Ebrahim Sheibani | 2003 |
| Tahmasb Mazaheri | 2007 |
| Mahmoud Bahmani | 2008 |
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 Iran5 are as follows:
In a country where the government claims to follow the strict Islamic principles, running a traditional banking network would be against the fundamental teachings of Qur’an. Therefore, immediately 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 Islamic Majlis of Iran 7. According to this law, Iranian banks can only engage in interest-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". 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.
Critics believe that this law has simply created the context for legitimising usury 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 principle amount, the expected interest and the late fees are collected through possession and or sale of secured collaterals.
Double digit inflation rates have been a fact of life in Iran for the past 20 years. Between 2002 and 2006, rate of inflation has been fluctuating between 12 and 16%18.
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 missed19.
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.
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. However, this rate is lower than the inflation rate, which makes the cost of borrowing less than the free market cost of borrowing that would have been determined by free market supply and demand based on the inflation rate and investment risk.20
