07 April 2008
To the Kind Attention of:
The Editor of the Financial Times
I am writing to you upon an instruction by H.E. Governor of the Central Bank of Iran (CBI) regarding the article dubbed; "Steer clear of Iran's Central Bank, says US", published in your esteemed journal on March 22nd, 2008 (by Daniel Dombey and Stephanie Kirchgaessner) and as the director of the PR department of CBI I would like to clarify some of the points mentioned therein.
1. A very vigilant regulator itself, CBI has always strongly and professionally adhered to international rules and regulations and as per its legal duty continues to supervise as ever the timely fulfillment of "commitments" by the Iranian banking industry within the framework of the recognized international standards and practices and prides itself over the clean and default-free performance record of the industry despite all unjust and illegal pressures and threats by certain institutions while maintaining a close watch to prevent any disruptions to the sound and legal flow of financial transactions worldwide.
While maintaining reservations on the recent restrictions by United Nations Security Council against two Iranian banks, CBI has been doing its utmost care to see the UN ratifications implemented by the letter. Even when Bank Sepah came under UNSC restrictions, CBI kept a high profile on the case so as to scrutinizingly see the remaining commitments of Bank Sepah fulfilled as licensed by the relevant UN authorities.
2. Though pretty unfair and unrealistic, the recently adopted policies by the United States financial authorities have come in no surprise to the Iranian banking sector as the negative attitude by the US administration against Iranian entities has been in place for quite sometime now, let's say for almost a quarter of a century. However, a closer look at the history of CBI's positive and constructive cooperation with international financial organizations and regulatory and supervisory bodies clearly indicates that the Central Bank of Iran took action in 2002 to devise and notify a batch of instructions on AML to the Iranian banks and since then arduously followed up the case with the country's legislative branch. An effort which finally bore fruit as the parliament recently approved the bill on AML. Additionally, in a letter to the Financial Action Task Force, CBI has already applied for Iran's membership to the body and even the Governor has personally requested that the application be placed on the fast track agenda of the FATF.
The presence of CBI officials in a recent meeting in Paris with the FATF is indicative of the great importance CBI attaches to ensuring that the Iranian banking system is functioning soundly and accurately and to depicting a true and transparent picture of the Iranian banking system. Here, at the Central Bank of Iran, we are on the belief that such meetings can be of great influence to advancing our banking tools and mechanisms and building a smart and healthy cooperation with other FATF members coming on the back of their invaluable experiences.
In addition, maintaining a favorable membership status with the International Monetary Fund (IMF) for long, CBI has been conducting a positive and constructive relation with the international body constantly providing regular reports on its performance and as further demonstration of its adherence to and respect for the international regulations and standards CBI has encouraged and welcomed regular visits by the International Monetary Fund (“IMF”) over the years to review and report upon the banking regulations in Iran.
3. It is indeed highly recommended that the international journalists take a more profound look at the Iranian banking sector and the relevant regulations in a bid to develop a more comprehensive picture of what exactly is in place and how the wheel is turning as there are only 10 banks in Iran owned by the state.
Iranian commercial banks have long "steered clear of the US dollar". They now open only non-US dollar documentary letters of credit as all imports and exports are traded in non-USD transactions. Subsequently, they have also stopped completely to use the so-called "U-Turn Mechanism", a known innovative method for USD settlements which the US financial authorities were NOT UNAWARE of and would only work out with their implicit approval.
As for transactions performed by the CBI, it is worth mentioning that it receives oil proceeds directly from the international oil companies purchasing Iranian crude oil. These proceeds are then deposited into CBI accounts with Major European and other banks. Later, CBI sells the foreign exchange to the Iranian banking system in the inter-bank market for foreign exchange. Once the foreign exchange is sold to a bank, the amount purchased by the bank is transferred from the seller's bank accounts to the account of the bank overseas and local regulators constantly keep a close watch over the activities of Iranian subsidiaries or branches just as they do with all other similar entities.
Dear editor, as you are fully aware, the Iranian banking sector and quite recently the CBI have become the focus of attention by some of the world media as a result of unilateral and biased decisions by the US treasury authorities for which there is no solid and legally justifiable evidence. Therefore, I would like to once again reiterate that the Central Bank of Iran (CBI) has always adhered to the best international practices and respected the international laws. The international financial community meanwhile, has always appreciated the professionalism of the management and staff of CBI and can be the best judge of that.
Therefore, while appreciating the professionalism displayed by the esteemed "Financial Times" in printing the aforementioned article, I would like to request that the daily kindly moves to act in line with its professional standards of journalism and print the above points in its next immediate edition, thus maintaining its principle of neutrality as ever. Also in case of a request for any further proposed face to face interviews with H.E. the Governor of CBI, I shall be delighted to seek an arrangement by the first practical chance.
Thank you for your kind attention,
CBI Public Relations Department