Since three years ago, the Central Bank of Iran has endeavored to simplify the process of establishing foreign banks in free trade zones in line with economic policies, the secretary-general of CBI said.
Seyyed Mahmoud Ahmadi added that the since the directive concerning offshore banks was approved 16 years ago, a new measure is being drafted and will soon be ready for Cabinet approval.
"As a stopgap measure, instructions concerning the activity of foreign banks in FTZs were devised based on those regulations that were compiled and ratified in the Money and Credit Council," he was quoted as saying by CBI's website.
Ahmadi noted that the new regulations are in line with policies to promote infrastructure development, economic growth, investment and job creation in FTZs.
The official emphasized that foreign banks planning to establish a branch in FTZs need to possess sufficient capital since the sector is highly risky.
"The banking supervisory system ought to ensure that these banks are able to absorb losses and continue their services to customers even in critical conditions," he added.
Ahmadi further said a global principle in granting banking licenses is for founders of the bank to be in possession of appropriate tools, efficient management, supervision and accountability to meet regulatory demands whenever required.
According to the official, CBI's criteria to determine the regulations of offshore banks in FTZs are as follows:
*They should meet the goal of FTZs in attracting foreign investment;
*Stability and health of monetary and banking institutions must be guaranteed;
*Banks, institutions and recognized international investors find the opportunity to have a presence in FTZs; and
*FTZs do not become a conduit for capital flight.
Ahmadi insisted that his comments are not in response to comments by presidential advisor, Akbar Torkan, that CBI's strict regulations have scared away potential bidders from establishing banks in FTZs.
Akbar Torkan, who is also the secretary of High Council of Free Zones, was among the critics of the high capital requirement for FTZ banks, saying that it would deter investors from setting up banks in FTZs.
"The fact that the minimum capital required to establish a bank in free trade zones has increased from €25 million to €150 million means that the process of establishing foreign banks in these zones will become harder and slower, which will change the equation altogether," he said.
Money and Credit Council decided on September 2016 to lower the minimum capital requirement to establish a bank in free trade zones from the previous €150 million to €100 million.
The move was an about-face for MCC since the decision-making body had only recently set the capital requirement for banks in free trade zones at €150 million. The latest easing of capital requirement, however, was not enough to silence critics like Torkan.