|Ownership||100% state ownership 1|
|Central bank of||Iran|
|Currency|| Iranian rial |
IRR (ISO 4217)
|Reserves||$130 billion (2017)|
|Reserve requirements||10% to 13%|
|Interest paid on excess reserves?||Yes|
Standard tableau of Central Bank of Iran
|Formed||9 August 1960|
|Jurisdiction||Islamic Republic of Iran|
|Headquarters|| CBI Tower, Tehran |
|1 According to article 10(e) of the Monetary and Banking Act of (1972), CBI's capital "is fully paid up and wholly owned by the Government".|
2 Bank Melli Iran had supervisory functions and regulated the activities of all banks in Iran, while being the largest profit-making commercial bank in the country.
The Central Bank of Iran (CBI), also known as Bank Markazi, officially the Central Bank of the Islamic Republic of Iran (Persian : بانک مرکزی جمهوری اسلامی ايران, romanized: Bank Markazi-ye Jomhuri-ye Eslāmi-ye Irān; SWIFT Code: BMJIIRTH) is the central bank of Iran.
Established under the Iranian Banking and Monetary Act in 1960, it serves as the banker to the Iranian government and has the exclusive right of issuing banknote and coinage. CBI is tasked with maintaining the value of Iranian rial and supervision of banks and credit institutions. It acts as custodian of the National Jewels, as well as foreign exchange and gold reserves of Iran.It is also a founding member of the Asian Clearing Union, controls gold and capital flows overseas, represents Iran in the International Monetary Fund (IMF) and internationally concludes payment agreements between Iran and other countries.
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, the British-owned Imperial Bank of Persia (Bānk-e Šāhī) was founded and it was given the exclusive right to issue bank notes in Iran. In 1890 it introduced the first bank notes in Iran, ranging from 1 to 1,000 tomans.The bank did not do much to strengthen the Iranian capital formation or support then-currency of Iran, qiran.
To compete with the British bank, Imperial Russia also opened the Russian Loan and Development Bank. [ unreliable source ]Polyakov's Bank Esteqrazi was bought in 1898 by the Tzarist government of Russia, and later passed into the hands of the Iranian government by a contract in 1920.
The first state-owned Iranian bank, Bank Melli Iran was established in 1927 by the government of Iran.On 30 May 1930, it took the responsibility to function as Iran's central bank, and took the rights of the Imperial Bank for £200,000, while it acted as a commercial bank at the same time. 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 three decades, Bank Melli Iran acted as the central bank of Iran and was charged with the responsibility to maintain the value of Iranian rial. In 1955, the bank was given the responsibility to supervise the national banking system.
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.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 (1960).
The Central Bank of Iran was renamed to "the Central Bank of the Islamic Republic of Iran", and Iran's banking system adhered to the new Islamic rules that prohibit earning or paying interest in 1983.
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 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 Minister, 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.MCC meets every three months.
In practice, the ability of the banking system to create money is not much constrained by the amount of scriptural money through fractional reserve banking. Indeed, most banks first extend credit and look for reserves later.[ citation needed ] 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 (e.g. it needs Majlis' approval before issuing participation bonds) and has no control over the government's fiscal policy.
The current combination of the Central Bank's board of directors are the President, Economy and Commerce Ministers, Deputy-President for strategic planning, and a Minister selected by the Cabinet.
Seven economists 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.Then President Mahmoud Ahmadinejad critiqued this proposal and said that it is important for the Central Bank of Iran not to fall under private control "because it would not benefit the Iranian people" over the long run.
The President of Iran proposes a person as the governor of CBI, who must be verified by the general assembly and appointed as per a presidential decree.
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:
To achieve the objectives as stated in the MBAI, CBI is endowed with the responsibility of fulfilling the following functions:
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 Majlis .This law describes and authorizes an Iranian Shiite version of Islamic commercial laws (as differentiated from a less 'liberal' Sunni version). According to this law, Iranian banks can only engage in interest-free Islamic transactions (as interest is considered 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 "provisional profit" called Mobadala.
In practice, 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 (12) Islamic contracts, such as Mozarebe, Foroush Aghsati, Joalah, Salaf, and Gharzolhasaneh. Details of these contracts and related practices are outlined in the Iranian Interest-Free banking law and its guidelines. Examples are:
Sharia-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.
According to the IMF, Islamic banking forbids pure monetary speculation and stresses that deals should be based on real economic activity and therefore poses less risk than conventional banking to the stability of financial systems.
Critics believe that the Iranian Interest-Free banking law has simply created the context for legitimizing 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 principal amount, the expected interest and the late fees are collected through possession and or sale of secured collaterals.
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 materialized, local debit 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.However, Iran remains largely a cash-based economy.
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.
In 2011, two new payment systems were launched: Scripless Securities Settlement System (TABA) as the electronic infrastructure for placement and settlement of various securities, including governmental and CBI participation papers. The launching of the automated clearing house system (PAYA) for processing individual and multiple payment orders, connection of Iran's Interbank Information Transfer Network (Shetab) to other ATM and POS switch systems for the acceptance of international bank cards, designing of the electronic card payment system (SHAPARAK) for the centralization and reorganization of POSs.
According to the Ministry of ICT in 2018, Post Bank of Iran will issue Iran's first digital currency over the blockchain technology (with the advantage, in relation to the sanctions against Iran that blockchain transactions do not need any clearing bank).
Furthermore, given Iran's large reserves of oil and gas, the Iranian rial could become a reserve currency if parity is established with oil and gas,as was between USD and gold in the past (e.g. parity of 1,000,000 tomans for a barrel of oil), such as with Venezuela's newly minted "Petro" crypto-currency.
Finnotech.ir is Iran's premier banking API provider and Informatics Services Corporation (ISC) is a leading operator of information systems for the banking industry (including Shetab).As of 2016, Iran had 50 companies active in fintech. Speaking of fintechs' role in Iran's financial sector, the CBI allows them to operate as long as they are not involved in money creation, currency exchange, offering payment tools (like cards) and attracting deposits.
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 banking systems instead of cash transactions.
In 2009, 10.7% of cheques bounced.
In 2007, Tetra-Tech IT Company announced that Visa and MasterCard could be used 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. Some wealthier people have debit cards, but MasterCard or Visa are no longer available in Iran, and few foreign banks are active there because of international sanctions. Around 94% of Iranians had a debit card, compared with less than 20% in Egypt (2015).
In 2016, Iran introduced its own domestic credit card system based on Sukuk principles and reported talks with MasterCard (and other international payment operators) for a re-entry.
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 Iran, the use of hawala by Iranians has reportedly increased.
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 laundering. 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. Despite president Hassan Rouhani showing interest in FATF, there has been a massive disagreements by hardliners related to supreme leader, Ali Khamenei. Among them Ahmad Jannati, the chairman of the Assembly of Experts and the secretary of the Guardian Council and Ali Akbar Velayati, Iran's former foreign secretary and Supreme leader top foreign relationship advisor are two notable people who are against the FATF. These disagreements and lack of FATF being approved by the Iranian parliament has brought FATF enforcement to halt.
It has been estimated by the government of Iran in 2015 that dirty money from drug trafficking in Iran amounts to 10 trillion tomans a year (1 toman equals 10 rials), some of which has been finding its way into "elections and the securing of votes" to influence the country's politics.
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 ounce, a "few hundred tons" of gold were imported, IRNA quoted CBI Governor Mahmoud Bahmani. "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 India and China (see also: U.S. sanctions against Iran.)
In January 2012, the head of Tehran's Chamber of Commerce reported that Iran had 907 tons of gold, purchased at an average of $600 per ounce and worth $54 billion at today's price.The CBI governor however reports only 500 tons (i.e. above ground gold reserves). The discrepancy is unexplained but the 907 tons could (mistakenly) include below-ground gold reserves (320 metric tons as of 2012) and possibly the gold in Iranian private hands (~100 tons in coins or bullion). In 2014, reports from the Central Bank put its gold stores at 90 tons only, the rest possibly used in barter trade following sanctions.
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 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.
This section needs to be updated.December 2018)(
|Source: International Monetary Fund (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|
|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 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|
|-Currency in circulation||157,764||153,478|
|-Cash in vaults||48,588||47,268|
|Deposits of NFPE and municipalities||16,078||17,734|
|-Foreign currency deposits of NFPEs and municipalities||6,561||6,919|
End-period change (in percent of base money)
|-NDA (net of other liabilities)||32.0||-15.5|
The International Monetary Fund reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $71.7 billion. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $153.6 billion. According to the CBI, the country's liquidity amounted to some $174 billion by April 2008,$197 billion by October 2009. and over $300 billion in 2011. Estimates put the amount of capital floating in Iran's market at $254 billion in 2012.
Iran is member of the Islamic Development Bank. 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.
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 Suisse 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 Iran's Central Bank helped the blacklisted banks evade US sanctions, by conducting transactions for 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. In 2012, The U.S. unilaterally expanded sanctions, which cut off from the US financial system foreign firms that do business with the central bank.Iran is reportedly making increasing use of barter trade, cash smuggling, gold and local currencies of its trading partners to circumvent the international sanctions. The CBI has been blacklisted by the U.S. government due to the bank's involvement in the Iranian nuclear program and it has been blocked from using SWIFT since March 2012 as a consequence.
The Central Bank of Iran publishes a variety of periodicals for general and specialist audiences including Economic Trends, Bulletin, Annual Review, Economic Report and Balance Sheet. Other publications include booklets, monographs and brochures. Many of those documents are also available in English.
A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a state or formal monetary union, and oversees their commercial banking system. In contrast to a commercial bank, a central bank possesses a monopoly on increasing the monetary base in a financial crisis. Most central banks also have supervisory and regulatory powers to ensure the stability of member institutions, to prevent bank runs, and to discourage reckless or fraudulent behavior by member banks.
Iran is a republic in which the president, parliament (Majles) and judicial system share powers reserved to the national government, according to its Constitution. The politics of Iran take place in a framework that officially combines elements of theocracy and presidential democracy. The December 1979 constitution, and its 1989 amendment, define the political, economic, and social order of the Islamic Republic of Iran, declaring that Shia Islam is Iran's official religion where around 90–95% of Iranians associate themselves with the Shia branch of Islam.
The Economy of Iran is a mixed and transition economy with a large public sector. It is the world's eighteenth largest by purchasing power parity (PPP). Some 60% of Iran's economy is centrally planned. It is dominated by oil and gas production, although over 40 industries are directly involved in the Tehran Stock Exchange, one of the best performing exchanges in the world over the past decade. With 10% of the world's proven oil reserves and 15% of its gas reserves, Iran is considered an "energy superpower." A unique feature of Iran's economy is the presence of large religious foundations called Bonyad, whose combined budgets represent more than 30 percent of central government spending.
Monetary policy concerns the actions of a central bank or other regulatory authorities that determine the size and rate of growth of the money supply. For example, in the United States, the Federal Reserve is in charge of monetary policy, and implements it primarily by performing operations that influence short-term interest rates.
The rial is the currency of Iran.
Foreign exchange reserves are cash and other reserve assets held by a central bank or other monetary authority that are primarily available to balance payments of the country, influence the foreign exchange rate of its currency, and to maintain confidence in financial markets. Reserves are held in one or more reserve currencies, nowadays mostly the United States dollar and to a lesser extent the euro.
Bank Melli Iran is the first national and commercial retail bank of Iran. It is considered as the largest Iranian company in terms of annual income with a revenue of 364 657 billion Rials in 2016. It is the largest bank in the Islamic world and in the Middle East. By the end of 2016, BMI had a net asset of $76.6 billion and a vast network of 3.328 banking branches; so it is known as the largest Iranian bank based on the amount of assets. The brand of BMI was recognized as one of the 100 top Iranian brands in 10th National Iranian Heroes Championship in 2013. The National Bank has 3328 active branches inside, 14 active branches and 4 sub-stations abroad and it has 180 booths. The first managing director of BMI was Kurt Lindenblatt from Germany. Also, the first foreign branch of BMI was opened in Hamburg, Germany in 1948.
The Central Bank of Iraq (CBI) is the central bank of Iraq.
The Tehran Stock Exchange (TSE) is Iran's largest stock exchange, which first opened in 1967. The TSE is based in Tehran. As of May 2012, 339 companies with a combined market capitalization of US$104.21 billion were listed on TSE. TSE, which is a founding member of the Federation of Euro-Asian Stock Exchanges, has been one of the world's best performing stock exchanges in the years 2002 through 2013. TSE is an emerging or "frontier" market.
The Bank of Albania is the central bank of Albania. Its main headquarters are in Tirana, and the bank also has five other branches located in Shkodër, Elbasan, Gjirokastër, Korçë, and Lushnjë.
The fiscal year begins on March 21 and ends on March 20 of the next year according to Iranian calendar. The Ministry of Finance and Economic Affairs is the government agency authorized to levy and collect taxes. In 2008, about 55% of the government's budget came from oil and natural gas revenues, the rest from taxes and fees. An estimated 50% of Iran's GDP was exempt from taxes in FY 2004. There are virtually millions of people who do not pay taxes in Iran and hence operate outside the formal economy.
The Central Bank of Syria (CBS) is the central bank of Syria. The bank was established in 1953 and started operations in 1956. Its headquarters are in Damascus, with 11 branches in the provincial capitals. The objective of the bank is "to foster the stability, integrity and efficiency of the nation’s financial and payment systems so as to promote optimal macro economic performance".
Following the Iranian Revolution, Iran's banking system was transformed to be run on an Islamic interest-free basis. As of 2010 there were seven large government-run commercial banks. As of March 2014, Iran's banking assets made up over a third of the estimated total of Islamic banking assets globally. They totaled 17,344 trillion rials, or US$523 billion at the free market exchange rate, using central bank data, according to Reuters.
Currency intervention, also known as foreign exchange market intervention or currency manipulation, is a monetary policy operation. It occurs when a government or central bank buys or sells foreign currency in exchange for its own domestic currency, generally with the intention of influencing the exchange rate and trade policy.
There have been a number of sanctions against Iran imposed by a number of countries, especially the United States, and international entities. The first sanctions were those imposed by the United States in November 1979 after a group of radical students seized the American Embassy in Tehran and took the people inside hostage. The sanctions by Executive Order 12170 included freezing about $12 billion in Iranian assets, including bank deposits, gold and other properties, and a trade embargo. These sanctions were lifted in January 1981 as part of the Algiers Accords, which was a negotiated settlement of the hostages’ release.
The Iranian targeted subsidy plan, also known as the subsidy reform plan, was passed by the Iranian Parliament on January 5, 2010. The government has described the subsidy plan as the "biggest surgery" to the nation's economy in half a century and "one of the most important undertakings in Iran's recent economic history". The goal of the subsidy reform plan is to replace subsidies on food and energy with targeted social assistance, in accordance with a Five Year Economic Development Plan and a move towards free market prices in a 5-year period. The subsidy reform plan is the most important part of a broader Iranian economic reform plan.
Bahār-e Āzādī, also known as "Imami", is an Iranian bullion gold coin minted by the Security Printing and Minting Organization of the Central Bank of the Islamic Republic of Iran (CBI), replacing Pahlavi Coin after Iranian Revolution. On the first edition of the coin Imam Reza Shrine and Calligraphy of the word علی ("Ali") was seen on sides of the coin. Two years after the death of Ruhollah Khomeini in 1991, at first the left portrait of him was minted on obverse of coins which replaced by right three face instead of the calligraphy.
The National Development Fund of Iran (NDFI) is Iran's sovereign wealth fund. It was founded in 2011 to supplement the Oil Stabilization Fund. NDFI is independent of the government's budget. Based on Article 84 of the Fifth Five-year Socio-Economic Development Plan (2010–2015), the National Development Fund was established to transform oil and gas revenues to productive investment for future generation. It is a member of the International Forum of Sovereign Wealth Funds and therefore is signed up to the Santiago Principles on best practice in managing sovereign wealth funds. Withdrawing any money from this fund requires the Supreme Leader's permission.
|Bank of issue of Iran|
Bank Melli Iran
| Central Bank of Iran|