CHAPTER TEN:

Reorganization of the Financial Market

ARTICLE 90- Government is authorized to approve and execute, within a maximum period of six months with effect from the date of the enactment of this Law, the administrative, recruitment, and disciplinary by-laws and directives peculiar to the banking system within the framework of the articles of associations of the banks with a view of developing and improving the quality of banking services and enhancing competition in banking activities on the basis of the joint proposal of the banks’ general assemblies and the State Administrative and Employment Affairs Organization.

ARTICLE 91- Authorization is given to the Central Bank of the Islamic Republic of Iran to use its Partnership Bonds upon the approval of the Money and Credit Council in addition to cases mandated by clause 5 of the Article (20) of the Usury-Free Banking Operation Law enacted on 30/8/1983 (8/6/1362), provided that it will not contradict the Usury-Free Banking Law.

ARTICLE 92- In order to enhance the competitive environment for banking activities and expand the financial market and promote domestic saving, the Central Bank of the Islamic Republic of Iran is required to create the ground for authorized operation of various non-bank (non-governmental) credit institutions; and to exercise the necessary supervision over their practices and prevent unauthorized entities from entering into such activities. Conditions pertaining to the establishment of the non-banking (non-governmental) credit institutions, the scope of their operation and their insolvency and bankruptcy are subject to criteria applied to the non-bank credit institutions specified in the State Monetary and Banking Law enacted in 1972, and refrain from the practice that, in the opinion of the Money and Credit Council , must be exclusively performed by the banks.

The Central Bank of the Islamic Republic of Iran is required to supervise the proper performance of the banks and non-bank (non-governmental) credit institutions in line with the approved criteria.

ARTICLE 93- In order to strengthen the initial capital requirement of the banks, and their capability to compete in the international banking operation, government is authorized to issue special partnership bonds up to a maximum amount of five thousand billion (5,000,000,000,000) Rials during the Third Plan period. Equivalent to the total amount of the bonds transferred to the Treasury account will be refunded to the banks for inclusion into the banks’ capital as the increased share of government. Until complete settlement of the principal and profit of the said partnership bonds, the banks annual profit before tax deduction shall be distributed according to the following mechanisms:

A- Proportion of outstanding bonds to the bank’s total capital will be used as a coefficient to determine profits on special partnership bonds to be paid to each bank.

B- The remaining annual profit of each bank will be utilized to settle part of the principal of the special partnership bonds.

The executive by-law of this Article shall be proposed within three months with effect from the enactment of this Law by the Central Bank of the Islamic Republic of Iran and Ministry of Economic Affairs and Finance, and shall be approved by the Cabinet.

ARTICLE 94- A computerized network for the capital market of Iran will be set up by the Stock Exchange Council in order to perform electronic transactions of the securities at the national level and provide information service coverage at the national and international levels, upon a comprehensive review of the information system and electronic exchange, and in coordination with the action already taken under Note (26) of the Second Five-year Economic, Social and Cultural Development Plan of the Islamic Republic of Iran enacted on 12/12/1994. The Stock Exchange Council is required to approve within a maximum period of six months with effect form the enactment of this law, the necessary regulations pertaining to the type of information, the dissemination method and coordination with the country’s banking network. The executive criteria for the electronic transaction and the ways to treat the violators and security of the business transactions shall be proposed by the government and approved by the Islamic Consultative Assembly.

ARTICLE 95- The Stock Exchange Council is authorized :

A- to take measure in respect of establishing a nation-wide regional stock-exchange within the framework of the Stock Exchange Law.

B- to take appropriate legal measures in order to make other financial instruments negotiable in the Tehran Stock Exchange (TSE), in addition to the implementation of the provisions of Item (2) of the Article (1) of the Law of Establishment of Tehran Stock Exchange enacted on 28/5/1966.

C- to take action in regard to setting up a commodity stock exchange in cooperation with other relevant organizations.

ARTICLE 96- Government is authorized to approve and implement special financial, administrative, employment and disciplinary by-laws and criteria for the insurance industry, proposed jointly by the State Administrative and Employment Affairs Organization, general assemblies of the insurance companies and the Central Insurance of Iran, under their articles of association aiming at development and improvement of the quality of the services rendered by, and competitiveness in the insurance industry.,

ARTICLE 97- Authorization is given to the Bank San’at Va Ma’dan (Industry and Mine Bank), Agriculture Bank, and Export Development Bank to finance through foreign financial resources the non-governmental projects that have technical, economical and financial justification, and guarantee the repayments. Neither government nor the Central Bank of the Islamic Republic of Iran will be liable or will guarantee repayment of the above funds. In any case observation of Item (6) of the Article (85) of this Law is mandatory.

ARTICLE 98- In order to promote competitiveness in the financial market, encourage saving and investment, prepare the ground for the country’s economic development and prevent any loss to the society; and with due consideration of the Note under Article forty four (44) of the Constitution; and also in the framework of the following criteria, authority, and conditions determined for the establishment of bank by the non-public sector, permission will be granted to the real and legal entities of the non-public sector to establish bank:

A- Policy making in the areas of monetary, credit and foreign exchange; bank note printing, coinage, maintaining the foreign exchange funds, supervision over other banks; issuance of permission for banking operation will remain under the authority of government in order to exercise the government sovereignty.

B- Criteria related to the operation practices of the banks such as maintaining the financial ratios aiming at preserving a sound financial structure , and the type of contracts and operations of the bank will be determined on the basis of the country’s Monetary and Banking law of 1972 and the Usury-Free Banking Law.

C- Government may grant permission to real and legal entities to set up banks under the following terms and conditions:

1- Having adequate experience and knowledge of banking operation and practices,

2- Having the ability to secure the required capital and to perform the work,

3- Possessing clear financial and ethical record.