CBI sets new programs to curb cash growth

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TEHRAN – The Director General of Monetary and Credit Operations of the Central Bank of Iran (CBI) presented the bank’s new programs to monitor the activities of banks in order to prevent the growth of liquidity in the country, reported the Mehr news agency.

According to Mohammad Nadali, monitoring the creation of liquidity by banks, moving banks away from corporate governance and monitoring the capital adequacy of banks are among the programs seriously pursued by the CBI in this regard.

Nadali put Iranian banks’ current liquidity creation ratio at 7.9, which means that every monetary unit that leaves the central bank increases 7.9 times as it revolves in the country’s banking network.

Central banks around the world are using various tools to limit the ability of banks to create liquidity and direct the money generated in the banking network to productive activities, the official said.

He further referred to the tools, methods and regulations that the CBI uses to limit the growth of liquidity in the country, saying: “One of these tools is the liquidity generation coefficient; the central bank regulates this coefficient by controlling the amount of legal deposit it receives from banks. “

“In order to limit the liquidity generation capacity of banks, the CBI requires them to keep a percentage of their assets in legal deposit with the central bank. This figure is currently around 10 to 13%, ”explained Nadali.

Alternatively, the central bank has also defined a specific liquidity coverage index for banks, on the basis of which they are required to hold a percentage of their assets in their portfolio. This is to prevent banks from lending too much.

The central bank also has a new program to have more effective supervision of the activities of banks using new tools and modern technologies.

“In order to have more control over the banks’ liquidity creation, we monitor the monthly growth of their balance sheets; we are increasing the legal deposit obligations of banks that do not comply with CBI regulations, ”he added.

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