“Therefore, once the CBI and the banking network decide to lower interest rates, savings will continue to migrate to these institutions,” which freely offer higher interest rates to depositors, he said. Khaalati, however, insists that his colleagues will be able to rein in the illegal institutions after the implementation of a four-phase scheme that seeks to identify the illegal lenders, determine the status of companies that have applied for licenses, halt the activities of illegal firms and subsequently dismantle and prosecute them.
Policymakers are very much concerned about the liquidity currently in the hands of such institutions. The liquidity deposited in these unlicensed bodies in February 2015 accounted for 15%-20% of the total money supply at the time, according to CBI Governor Valiollah Seif. This money could easily be channeled to speculative activity in currency, gold and real estate markets, leading to economic instability — just like what happened in the final years of Ahmadinejad’s term.
Moreover, given that the regulator has had little control over such entities, they could easily be involved in money laundering. Given Iran’s desire to get off the Financial Action Task Force blacklist, the monetary policymaker appears to have escalated pressure on unlicensed financial entities in order to comply with the task force’s guidelines.
Yet many observers in Tehran believe that there are simply too many of these institutions to be controlled anytime soon, as the CBI has listed only five institutions as “authorized” on its website — implying that the rest are all illegal.