Size of bank take-over in Iran shocks

Press, 11 June 1979, Page 9

Size of bank take-over in Iran shocks

NZPA-Reuter Teheran Iran’s nationalisation of private banks appeared yesterday to have been decided over the heads of key economic officials.

Central Bank sources, surprised by the extent of the nationalisation measure, said that the bani.’s governor, Dr Ali Movlavi, had only just begun to work out the practical consequences. “We knew the State would announce some sort of take-over, but we thought it would be on a far smaller scale.” the sources said.

Iranian and foreign bankers were also surprised by the announcement by the Prime Minister (Dr Mehdi Bazargan).

They said the nationalisation ran contrary' to the policies that Dr Movlavi and the Finance Minister (Dr Ali Ardalan) had outlined to them during the last few months.

“The nationalisation shows all the signs of having originated from Qom rather than economic experts,” one Western banker said, referring to the holy city 150 km south of Teheran where the unofficial Head of State, Ayatollah Ruhollah Khomeiny lives. Dr Bazargan announced the take-over after his regular meeting with the Ayatollah in Qom, and said the decision had been taken by the secret Revolutionary Council, believed to consist entirely of clergymen.

'lore than 24 hours after the announcement, foreign bankers had still not been told what would happen to the foreign capital invested in 14 Iranian banks. Dr Movlavi, in a radio interview, said the legitimate rights of Iranian shareholders as well as foreign ones would be safeguarded. Explaining the reasons for the nationalisation. Dr Movlavi said that, in spite of the support of the Central Bank the private banks had beer unable to provide the loans for industry and agriculture which the country needed.

The Government had therefore decided to inter vene in order to contribute to the economic revival of Iran. The new managing directors of the nationalised banks will be named by a spe-cially-created banking body consisting of the Prime Minister, the Minister of Finance, the Ministers of Commerce, Mines and Industry, Housing, Agriculture, and the chief of the Plan and Budget Organisation. The Central Bank was closed to the public and Iranian banking sources said several bank presidents had been unable to contact any officials to find out what they should do. Central Bank sources said Dr Movlavi and Dr Ardalan were meeting at a secret location to work out the practical details of the nationalisation, and to study the issue of compensation. The reasons for the takeover were explained to Iranians by the Plan and Budget Organisation chief, Mr Ali Moinfr.r, and not by Dr Movlavi or the Finance Minister.

Since being named head of the Central Bank, Dr Movlavi, aged 63, an economist, has appeared anxious to boost international business confidence in Iran and improve his country’s creditworthiness.

The real test of the nationalisation's impact on the public will come when the banks reopen for normal business.

Dr Bazargan indicated that one reason for the take-over was that some banks were facing financial difficulties. According to a draft text of Iran’s proposed constitution leaked to the press last April, insurance companies and heavy industry will also be nationalised.