Iran’s central bank may cut services to debtors
Baku, Azerbaijan, Mar.16
By Fatih Karimov - Trend:
The Central Bank of Iran (CBI) has warned the banking system's debtors to settle their outstanding debts, otherwise they will be deprived of bank services, the Mehr News Agency reported on March 16.
The CBI is studying a plan to set up a bad bank, tasked with buying the bad loans of other banks with significant nonperforming assets.
Saeed Arianpour, the managing director of the company for collecting non-performing loans, told the Fars News Agency that the plan is being studied by the Central Bank for a year.
The bad bank will be reportedly state-run.
Bad banks are set up to buy the bad loans of a bank with significant nonperforming assets at market price.
By transferring the bad assets of an institution to the bad bank, the banks clear their balance sheet of toxic assets but would be forced to take write downs. Shareholders and bondholders stand to lose money from this solution (but not depositors). Banks that become insolvent as a result of the process can be recapitalized, nationalized or liquidated.
The governor of the Central Bank of Iran, Valiollah Seif, confirmed that the national banking system's bad loans reached 800 trillion rials (about $32 billion), the Mehr News Agency reported on January 8.
Many factors are involved in the bad loans, such as the international sanctions and mismanagements in the banking system, Seif said.
The Central Bank has set up a special working group to follow up the case and collect the debts, he noted.