Iran says money creation by banks weakened in April-July

The Central Bank of Iran (CBI) says tighter polices adopted by the bank have led to a weakening of the money creation process in the country.

CBI’s head of banking health check department said on Sunday that the top lender had ordered less flexibility around the capital adequacy ratio required of the banks in the country with the aim of controlling unjustified growth in their balance sheet.

Ali Akbar Miremadi said that the policy had led to a major decline in the banks’ lending ability over the four months to late July.

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Miremadi said the average lending balance growth in private and state banks in Iran had dropped to 5.3% in April-July from 16.5% reported over the same period last year.

“The pace of growth in the balance of loans granted, to some extent, represents the money creation by the banks and this has dropped by 67.8% and reduced to a third of what had been reported last year,” said a CBI statement carried by the IRIB News.

That comes as the CBI said in a separate statement on Saturday that tighter monetary policies adopted by the Iranian government should not be a justification for the banks to stop or delay granting loans to businesses and households in the country.

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