Basel II And Basel III

Hamid Tehranfar, the Central Bank of Iran's Vice Governor (Banking Supervision Affairs) told ETEBARNEWS that financial transparency and formulating standards and guidelines enhance the central bank as one of the pillars of systematic supervision. One obstacle in the way of CBI's Supervisory Board is lack of understanding of key supervisory issues and duties.
He added that prior to the establishment of private banks in Iran risk management; capital adequacy and liquidity risk were of little importance. Private banking accentuated the importance of capital requirement (also known as regulatory capital or capital adequacy) to manage credit and liquidity risk in times of crisis. Central Bank of Iran provided an agenda to formulate regulations on capital requirement with regard to the guidelines set by the Basel Committee. According to Mr. Tehranfar "regulatory capital" which was defined by the Basel Committee on Banking Supervision (BCBS) was one of the matters in CBI's regulations on capital requirement implemented in Iranian year of 1381/82 (2012-2013).
"BCBS published a set of minimum capital requirements for banks, known as Basel I in 1998. However they were criticized by some and a new set of rules known as Basel II was later developed with the intent to supersede the Basel I accords. Those regulations were considered part of the cause of 2007 - 2008 financial crisis and Basel III was developed in response to the financial crisis. However its implementation has been extended", he said.
"Basel II and Basel III accords have not been implemented in Iran. It requires creating the essential legal and technical infrastructures", he added.
Hamid Tehranfar said that Basel II Capital Accord was scheduled to be in operation in 2007 which was never implemented in Iran. He added that changes in Basel III extended the implementation to March 2019.
"The implementation would be challenging for us. It requires revision of the supervisory regulations and financial policies", he said.
According to him, CBI's Supervisory Board is determined to implement the Basel II and Basel III. Mr. Tehranfar believes that supervisory systems and regulations must be revised. "Banks' independence is the key to an efficient financial system and efficiency in the banking system. Bank executives should not be forced to engage in particular commercial activities." he said.
Central Bank's Supervisory Board has plans to enhance its capabilities by providing training and adaptation to Iranian banking system requirements.
The seminar was held by Iran Banking Institute.