Iran says money creation by banks weakened in April-July

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Iran’s central bank says its policies led to a reduction in money creation by banks from April to July.

The Central Bank of Iran (CBI) claims that the stricter policies adopted by the bank have led to a weakening of the money creation process in the country.

The head of CBI’s banking health check department said on Sunday that the major lender had ordered less flexibility around the capital adequacy ratio required of the country’s banks in a bid to control unwarranted growth in their balance sheets.

Ali Akbar Miremadi said the policy had led to a significant decline in banks’ lending capacity in the four months to the end of July.

Miremadi said the average loan balance growth in private and state-owned banks in Iran fell to 5.3 percent in April-July from 16.5 percent in the same period last year.

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

It comes as the CBI said in a separate statement on Saturday that tighter monetary policies adopted by the Iranian government should not be a reason for banks to halt or delay lending to businesses and households in the country.

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