Dec 15 Iran's central bank will take
chairmanship of the Islamic Financial Services Board (IFSB) for
the year 2017, a move that could help align practices in the
country's banking system with peers across Asia and the Middle
Shut out of the global system by sanctions, Iranian banks
are eager to resume business with foreign lenders with deals
ranging from funding infrastructure to insuring foreign trade.
Years of isolation have led the country to develop practices
that can contrast with those in other Islamic financial centres,
but a prominent role within the Kuala Lumpur-based IFSB could
help narrow those differences.
The IFSB Council said late on Wednesday it had appointed
Iran's central bank governor Valiollah Seif as chairman
effective from Jan. 1, with Bangladesh Bank governor Fazle Kabir
as deputy chairman.
The IFSB is one of the main standard-setting bodies for
Islamic finance, setting prudential guidelines covering areas
including governance, capital adequacy and liquidity risk
Since 1983, Iran's entire banking system has followed
Islamic principles, which includes 34 Islamic banks that held
total assets of 14,451 trillion rials ($448 billion) as of
This represents around a third of total Islamic banking
assets globally, although Iran's version of Islamic finance can
differ with what is observed in other Muslim-majority countries.
For instance, Islamic finance is interpreted by scholars
around the world to ban the payment of interest. This is also
observed in Iran, although banks charge a profit rate that is
periodically set by the central bank, a measure partly borne out
of efforts to curb high inflation.
Derivative contracts are also used in Iran's capital market,
while Islamic banks elsewhere are barred from using conventional
options and future contracts.
There are also differences in trading some debt instruments:
A common type of Islamic bond traded in Iran uses a deferred
sale contract known as salam, while buying and selling salam
contracts has been disallowed in most other markets for over a
($1 = 32,226.0000 rials)
(Reporting by Bernardo Vizcaino; Editing by Simon