Central Bank of Iran (Part Two)

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Chapter 1- General

ARTICLE 10

(a) Bank Markazi Iran shall be responsible for the formulation and
implementation of the monetary and credit policies with due regard to
the general economic policy of the country.
(b) The objectives of Bank Markazi Iran are to maintain the value of the
currency and equilibrium in the balance of payments, to facilitate trade
transactions, and to assist the economic growth of the country.
(c) Bank Markazi Iran has legal entity and shall be subject to the rules and
regulations pertaining to joint-stock companies in matters no provided
for by this Act.
(d) Unless specifically stipulated by Law, Bank Markazi Iran shall not be
subject to the general laws and regulations applying to ministries,
government corporations and agencies and agencies affiliated to the
Government, nor to the provisions of the banking section set forth in
this Act.
(e) The capital of Bank Markazi Iran is five thousand million rials which
is fully paid up and wholly owned by the Government and is made up of
the Bank’s previous capital, the difference gained through the
implementation of Article (1) of this Act, and the Bank’s reserves. The
Bank’s capital may be increased upon recommendation of its General
Meeting and the approval of the Council of Ministers;
(f) The headquarters of Bank Markazi Iran shall be in Tehran but may,
should the interests of the country so require, be transferred elsewhere
with the approval of the Council of Ministers.
(g) Bank Markazi Iran may at its discretion open branches wherever
necessary, appoint Bank Melli Iran to act as its agent or, where Bank
Melli Iran has no branch or agency, appoint another bank as agent;
(h) Bank Markazi Iran may only be liquidated through appropriate
legislation.

Chapter 2- Functions and Powers

ARTICLE 11
Bank Markazi Iran, as the authority responsible for the monetary and
credit system of the country, shall fulfill the following functions;
(a) Issuance of notes and coins constituting the currency of the country
according to the provisions of this Act;
(b) Supervision of banks and credit institutions according to the provisions
of this Act;
(c) Formulation of regulations pertaining to foreign exchange
transactions, commitments and guarantees with the approval of the
currency and credit council, and also control of foreign exchange
transactions;
(d) Control of gold transactions and formulation of regulations pertaining
to such transactions with the approval of the Council of Ministers;
(e) Control of the outflow and the repatriation of Iranian currency and
formulation of regulations pertaining thereto with the approval of the
Currency and Credit Council.

ARTICLE 12
Bank Markazi Iran, as banker to the Government, shall fulfill the following
functions.
(a) Keeping of the accounts of ministries, government agencies, agencies
affiliated to the government, government corporations and
municipalities, as well as organization more than half of whose
capitals are held by ministries, government agencies, agencies affiliated to the government, government corporations or
municipalities, and also handling of all their banking transactions
at home and abroad.
(b) Sale of all types of Government Bonds and Treasury Bills and
repayment of principal and payment of interest thereof as the agent of
the Government, with the right to transfer such agency to individuals
or other organizations;
(c) Custody of the country’s foreign exchange and gold reserves;
(d) Maintenance of funds in rials for the International Monetary Fund,
the International Bank for Reconstruction and Development, the
International Finance Corporation, the International Development
Association and similar institutions or their affiliates.
(e) Concluding payments agreements in the execution of monetary,
financial, trade and transit agreements between the Government and
foreign countries;

NOTE 1
Ministries, municipalities, government corporations, and organizations
referred to in Section (a) of this Article shall deposit their funds exclusively with,
and conduct their banking transactions through, Bank Markazi Iran shall furnish
Bank Markazi Iran with such information as it may require in the fulfillment of its
functions;

NOTE 2
Ministries, corporations, and organizations which, under special laws, are
authorized to conduct their banking transactions through other banks, shall not be
subject to the provision of Section (a) and the first part of Note (1) of this Article.

ARTICLE 13
Bank Markazi Iran shall be vested with the following powers:
1- Granting of loans and credits to ministries and government
organizations, subject to legal authorization;
2- Guarantee of commitments made by the Government, ministries
or government organizations, subject to legal authorization;
3- Granting of loans and credits to, and guarantee of loans and
credits obtained by, government corporations and municipalities
and organizations affiliated to the government or municipalities
against adequate collateral;
4- Rediscounting drafts and short-term commercial bills presented
by other banks and granting of credits to banks against adequate
collateral;
5- Purchase and sale of Treasury Bills and Government Bonds as
well as bonds issued by foreign governments or accredited
international financial organizations;
6- Purchase and sale of gold and silver;
7- Opening and maintaining current accounts with foreign banks,
maintaining accounts for domestic and foreign banks, carrying
out all other authorized banking operations, and securing
credits at home and abroad on its own account or on behalf of
domestic banks.

NOTE 1
Granting of loans and credits to, and guarantee of loans and credits
obtained by, ministries and government agencies shall be subject to reciprocal
guarantee by the Ministry of Finance.

NOTE 2
Regulations pertaining to the implementation of this Article shall be
presented to the Currency and Credit Council for approval.

ARTICLE 14
Bank Markazi Iran shall, for the proper implementation of the monetary
system, have the authority to intervene in and supervise monetary and banking
affairs as follows:
1- By determining the official rediscount rate and loan interest
rates which may vary according to the type of loan, bill or
document.
2- By determining, for different categories of banks according to
their operations or on the basis of other criteria at its own
discretion, the ratio of the bank’s liquid assets to their total
assets or to their different types of liabilities.
3- By determining the ratios of, and the rates of interest payable
on, the legal deposits of banks at Bank Markazi Iran. The said
ratios may differ according to the structures and activities of the
banks, but shall at no time fall below ten or exceed thirty
percent.
4- By determining the maximum and minimum rates of interest
and charges receivable or payable by banks.
5- By determining the ratio of the sum-total of paid up capital and
reserves of banks to their different types of assets.
6- By determining the maximum amount of commitment on the
part of banks emanating from opening letters of credit, effecting
endorsements or issuing guarantees, as well as the type and
amount of collateral for such commitments.
7- By determining the terms and conditions pertaining to hirepurchase
transactions financed by banks.
8- By formulating regulations governing the opening of current,
savings and other accounts.
9- By determining the types and amounts of prizes and other
incentives offered by banks to attract current or savings deposits
as well as rules relating to publicity in this respect.
10- By auditing the accounts and documents and inspecting the
operations of banks and obtaining information and statistics
from them with due regard to the principles of professional
secrecy.
11- By limiting the activities of banks to one or more specific areas
of operation whether temporarily or permanently;
12- By determining the manner in which savings and similar
deposits with banks may be utilized.
13- By determining the maximum aggregate amount of overall loans
and credits granted by banks or the maximum amount of their
loans and credits in each specific field.
14- By determining the general conditions under which banks may
obtain loans from individuals or issue certificates of deposit.
15- By applying Sections 1 to 14 of this Article to non-banking credit
institutions and formulating regulations there-for.

NOTE
Application of the authority granted through this Article shall be subject to
the prior approval of the Currency and Credit Council.
ARTICLE 15
The Governor of Bank Markazi Iran shall represent the Government at the
International Monetary Fund. Bank Markazi Iran shall act as intermediary
between the Government and the International Monetary Fund, the fulfilment of
all functions and duties and the application of all authority vested in Bank Melli
Iran under the law Authorizing Participation of the Government of Iran in the
International Monetary Fund being hereby transferred to Bank Markazi Iran.

Chapter 3- Organization

ARTICLE 16
Bank Markazi Iran is composed of the following organs:
I- The General Meeting;
II- The Currency and Credit council;
III- The Executive Board;
IV- The Note Reserve Control Board;
V- The Supervisory Board.

I – The General Meeting;

ARTICLE 17
(a) – The General Meeting of the Bank is composed of the Minister of Finance, the Minister of Economy and one other Minister, appointed by the Council of Ministers, representing the Government. The Minister of Finance shall be the Chairman of the General Meeting;
(b) Members of the other organs of the Bank shall attend the General Meeting and participate in the discussions but shall have no votes;
(c) The General Meeting shall have the following functions;
1- To consider and approve the Balance Sheet of Bank Markazi Iran;
2- To consider reports submitted by the Supervisory Board and decide upon the points raised therein;
3- To consider and approve the recommended appropriation of the net profit;
4- To elect the members of the Supervisory Board upon the recommendation of the Minister of Finance;
5- To fulfill other functions entrusted to it under the provisions of this Act.
(d) The General Meeting shall be held at least once every year at the latest by the end of Tir of the next year. Other General Meetings may be held at the discretion of the Minister of Finance, or upon recommendation of the Governor of Bank Markazi Iran and invitation by the Minister of Finance;
(e) The presence of all voting members and the Governor of Bank Markazi Iran, or his Deputy, shall be essential for any discussions and decisions in General Meetings;
(f) Resolutions of the General Meeting shall be effective with a majority vote.
II – The Currency and Credit council;

ARTICLE 18
(a) In order to be in a position to consider and decide on the general policy of Bank Markazi Iran and to supervise the monetary and banking affairs of the country, the Currency and Credit Council shall:
1- Examine and approve the organization, budget, employment code and internal regulations of Bank Markazi Iran;
2- Examine and comment on the Balance Sheet of Bank Markazi Iran in preparation for the discussions at the General Meeting;
3- Review and approve the regulations drawn up under the provisions of this Act;
4- Comment upon the banking, monetary and credit issues of the country as well as bills concerning loans, credit guarantees, and on any other issues referred to the Council by the Government;
5- Give consultative views and advice to the Government on banking, monetary and credit issues which, in the Council’s opinion, may bear upon the economic conditions and especially the credit policy of the country;
6- Comment on any other issues referred to it within the framework of this Act by the Governor of Bank Markazi Iran.
(b) The Currency and Credit Council shall be composed of:
1- The Governor of Bank Markazi Iran;
2- The Prosecutor General;
3- One of the Undersecretaries of the Ministry of Finance designated by the Minister of Finance;
4- One of the Undersecretaries of the Ministry of Economy designated by the Minister of Economy;
5- Head of the Budget Bureau;
6- President of the Chamber of Commerce, Industry and Mines;
7- Managing Director of the Bankers’ Association (Article 38 of this Act);
8- Two experts in financial and monetary matters accepted and appointed by the Minister of Finance;
9- One expert in commercial and industrial matters accepted and appointed by the Minister of Economy;
10- One expert in agricultural matters accepted and appointed by the Minister of Agriculture;
NOTE 1
The Governor of Bank Markazi Iran shall be the Chairman of the Currency and Credit Council.
NOTE 2
The experts mentioned in Subsections 8, 9 and 10 of Section (b) of this Article shall be appointed to the membership of the Council for a period of two years and shall be eligible for reappointment.
NOTE 3
In case of resignation, death, disqualification or incapacitation for membership in the Council of any of the experts mentioned in Subsections 8, 9 and 10 of Section (b) of this Article another person shall be appointed for the remaining term of office in the manner prescribed;
(c) The Council shall convene at the invitation of the Governor of Bank Markazi Iran or at the request of not less than three of its members, and shall discuss issues raised by the Governor or the members who have requested the meeting;
(d) Meeting of the Council shall attain quorum with the presence of eight members, recommendations and decisions becoming effective with a minimum of six votes out of those present;
(e) The Council may invite experts for consultation;
(f) Members of the council and those invited for consultation shall treat the proceedings of the meetings as strictly confidential except where legally called upon to divulge information or to stand witness;
(g) For attendance at the meetings, members of the Council shall receive a fee the amount of which shall be determined upon the recommendation of the Governor of the Bank and the approval of the General Meeting;
(h) Before assuming office, members of the Currency and Credit Council shall take oaths in the General Meeting to exercise utmost care and impartiality in fulfilling the functions entrusted to the Council, and to the effect that all measured they adopt shall be in the interest of the country and that they shall treat as strictly confidential all matters relating to the Bank and the Council.
III – The Executive Board;

ARTICLE 19
(a) – The Executive Board of the Bank shall consist of a Governor, a Deputy Governor, a Secretary General, and three Vice Governors each with powers and responsibilities as specified in this Act;
(b) 1. The Governor of Bank Markazi Iran, as the Bank’s highest executive and administrative authority, shall be responsible for all the affairs of the Bank excluding such responsibilities as have been entrusted to the other organs of the Bank under the provisions of this Act;
2. The Governor of Bank Markazi Iran shall be responsible for the proper conduct of the Bank’s affairs and the implementation of this Act and the regulations relating thereto;
3. The Governor of Bank Markazi Iran shall represent the Bank before all official bodies, local and foreign, with the right of attorney;
4. The Governor may delegate part of his powers to members of the Executive Board and the Bank’s employees and empower them to sign on his behalf;
5. The Governor of Bank Markazi Iran shall be appointed to office by Royal decree for a term of five years upon the recommendation of the Minister of Finance and the approval of the Council of Ministers and shall be eligible for reappointment;
(c) The Deputy Governor of the Bank shall be appointed to office by Royal Decree for a term of five years upon the recommendation of the Governor of Bank Markazi Iran, the agreement of the Minister of Finance and the approval of the Council of Ministers, and shall be eligible for reappointment. The scope of authority of the Deputy Governor of Bank Markazi Iran shall be determined by the Governor and in the case of the Governor’s absence, resignation, hiatus or death, the Deputy Governor shall wield all the powers of the Governor;
(d) The Secretary General of the Bank shall be appointed to office upon the recommendation of the Governor of Bank Markazi Iran and the approval of the General Meeting and shall also be responsible for the Currency and Credit Council Secretariat. The Secretary General of the Bank shall send the minutes of the Currency and Credit Council meetings to the Ministers of Finance and Economy for their information;
(e) The Vice Governors of the Bank shall be appointed by the Governor of Bank Markazi Iran who shall also determine their duties.

ARTICLE 20
(a) – The General Meeting shall determine the remunerations of the Governor and the Deputy Governor of Bank Markazi Iran, such remuneration being payable out of the Bank’s budget;
(b) Remunerations of the Secretary General and the Vice Governors of the Bank shall be determined by the General Meeting upon the recommendation of the Governor and shall be paid out of the Bank’s budget.
(c) Before assuming office, the Governor, Deputy Governor, Secretary General and Vice Governors of the Bank shall take oaths in the General Meeting to treat as strictly confidential all matters relating to the Bank and to perform their statutory duties to the best of their abilities;
(d) During their terms of office, members of the Executive Board shall be subject to the Act concerning Non-participation of Ministers, Members of Parliament and Government Employees in Government and State Transactions, and shall not own shares in banks or in private credit institutions;
(e) During their terms of office, members of the Executive Board may not hold remunerated positions in government or private organizations;
(f) The Governor and Deputy Governor of Bank Markazi Iran may accept non-remunerated positions in charitable and philanthropic institutions only and as lecturers at universities or institutes of higher education with the approval of the General Meeting. Other members of the Executive Board may accept similar positions with the approval of the Governor of Bank Markazi Iran.
IV – The Note Reserve Control Board;

ARTICLE 21
(a) – The Note Reserve Control Board shall be responsible for supervising the proper execution of the provisions of Article 5 of this Act through taking delivery of and safeguarding newly-printed bank notes, keeping records of the assets referred to in Article 5, maintaining inventories for the Crown Jewels and formulating regulations pertaining to their exhibition and controlling their transfer in and out of the Bank vaults, and finally supervising the destruction of the notes withdrawn from circulation;
(b) The Note Reserve Control Board shall be composed of:
1- Two Senators nominated by the Senate;
2- Two Majlis Deputies nominated by the Majlis;
3- The Governor of Bank Markazi Iran;
4- The Prosecutor General;
5- The Treasurer General;
6- The Head of the Government Auditing Tribunal;
7- The Chairman of the Supervisory Board.
NOTE
The Senators and Majlis Deputies shall be appointed to the Board for a period determined by the respective Houses of Parliament but shall remain on the Board until such time as their successors are appointed.
(c) Regulations pertaining to the execution of the duties entrusted to the Note Reserve Control Board shall be formulated and put into practice by the Board itself;
(d) For their attendance of Board meetings members of the Note Reserve Control Board shall be remunerated at a rate to be determined upon the recommendation of the Governor of the Bank and the approval of the General Meeting.
V – The Supervisory Board.

ARTICLE 22
(a) – The Supervisory Board shall be responsible for auditing the accounts and commitments of Bank Markazi Iran, and shall express its opinion as to the accuracy of the said accounts and commitments;
(b) The duties of the Supervisory Board shall be as follows:
1- To audit the annual Balance Sheet of Bank Markazi Iran and to prepare a report thereon for the Annual General Meeting;
2- To audit the detailed lists of assets and liabilities of the Bank and to audit and certify for publication the summary of its accounts;
3- To inspect the operations of the Bank in order to ensure that they conform with legal requirements
(c) The Supervisory Board shall be composed of a Chairman and four members selected from amongst qualified auditors or persons well versed in accountancy or banking with not less than 10 years of experience, appointed for two years on the recommendation of the Minister of Finance and the approval of the General Meeting and eligible for reappointment;
(d) The Chairman of the Supervisory Board shall, in the capacity of an intermediary submit appropriate reports on the Bank’s activities and current decisions to the Minister of Finance.
NOTE
The Supervisory Board, in the performance of the aforesaid duties, may inspect all the documents pertaining to the accounts and assets of the Bank, and may have access to all the regulations, decisions and writings of the Bank it deems necessary. The Board may not interfere in the current affairs of the Bank but may submit suggestions to the Governor of Bank Markazi Iran within the scope of its duties.

ARTICLE 23
(a) Remunerations payable to members of the Supervisory Board shall be determined by the Minister of Finance and shall be payable out of the Ministry of Finance budget;
(b) Before assuming office, members of the Supervisory Board shall take oaths before the General Meeting to treat as strictly confidential all matters relating to the Bank and to perform their statutory duties to the best of their abilities;
(c) Members of the Supervisory Board shall be subject to the Act concerning Non-participation of Ministers, Members of Parliament and Government Employees in Government and State Transactions;
(d) Members of the Supervisory Board may not hold remunerated positions in Government or private organizations during their terms of office.
(e) Members of the Board may accept non-remunerated positions in charitable and philanthropic institutions only or as lecturers at universities or institutes of higher education with the approval of the General Meeting;
(f) Internal regulations pertaining to the Board’s affairs shall be drawn up by the Board itself, and shall be enforceable upon the approval of the Minister of Finance.

Chapter 4
General Provisions

ARTICLE 24
(a) – The Bank’s fiscal year shall commence on the first day of Farvardin each year and shall end on the last day of Esfand the same year;
(b) The Balance Sheet and Profit and Loss Account of the Bank shall be submitted to the Supervisory Board at least one month before the Annual General Meeting;
(c) Bank Markazi Iran shall publish a summary statement of its accounts at least once every month.

ARTICLE 25
(a) – The net profit of the Bank for each year shall be appropriated as follows:
1- Income tax, payable to the Public Revenue Account of the Government, on the basis of regulation pertaining to Government Corporations;
2- Ten per cent of the net profit to the Statutory Reserve Account until such time as the said reserve equals the Bank’s capital;
3- A certain amount, as recommended by the Governor and approved by the General Meeting, to the Contingency Reserve Account;
4- A certain amount, as recommended by the Governor and approved by the General Meeting, to be carried forward;
(b) The balance of the net profit, after the appropriation set forth in Section (a) of this Article, shall go to the Government.

ARTICLE 26
(a) – The Government shall issue dated bearer Treasury Bills to cover Bank Markazi Iran against probable losses sustained as a result of changes in the legal parity of the Rial in terms of gold or foreign currencies or as a result of force-majeure, and shall place such Bills at the disposal of the Bank;
(b) Gains resulting from changes in the legal parity of the Rial in terms of gold or foreign currencies of from force-majeure shall be used to amortise the principal and interest of Government debts to Bank Markazi Iran, and the surplus, if any, shall go to the Treasury;
(c) Gains or losses resulting from the execution of the payments agreements subject of Section (e) of Article 12 of this Act shall be for the account of the Government.

ARTICLE 27
(a) – All binding documents issued by Bank Markazi Iran shall bear two authorized signatures. Documents relating to the Bank’s internal affairs shall not be subject to this requirement.
(b) The period of and procedure for preservation of the Bank’s documents and books in their originals and also the procedure governing the preparation of films, photo-copies and the like thereof shall be in accordance with regulations to be prescribed by the Currency and Credit Council. Such films, photo-copies, etc., shall, after the lapse of the period prescribed in the said regulations, have the validity of the originals in court.

ARTICLE 28
Bank notes, gold, silver and coin blanks belonging to Bank Markazi Iran shall be exempt from customs duties and levies, commercial profit taxes and all other taxes or levies.

ARTICLE 29
Where the economic and foreign exchange interests of the country require, Bank Markazi Iran may, with the approval of the Council of Ministers, exempt exporters of one or more types of commodities from submitting Foreign Exchange Undertakings.

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