The issue of bank mergers is an issue that has a history in the Iranian economy for more than three decades. Many economic analysts consider the advantages and disadvantages of merging banks, which we will mention in this analysis. Please stay with Artan Press until the end.
One of the consequences of merging the banks, from a positive point of view, is that the central bank will go through the process of agility. The independence of the central bank leads to the injection of calm in the financial markets, and calm in these markets accelerates activities in the country’s economy.
The body of the central bank needs to be lightened so that it can conduct policy processes better than ever before. If the body of the central bank is heavy and the share of private banks increases, we will see a decrease in the speed of action in implementing control orders in the country’s financial markets. Regarding the governance performance of the central bank during the last 60 years, in general, the central bank has moved in a significant cycle in these 6 decades, so that in periods with the implementation of transformational, deterrent, supportive and even dictatorial policies to supervise It has acted on the country’s money and currency markets and solved challenges.
*** The most important measures of the Central Bank to reform the banking system
The central bank needs a series of new banking strategies to control market conditions that make the performance of public and private banks transparent. The most important measures taken by the Central Bank to reform the banking system, according to the Governor of the Central Bank, include large-scale issues such as organizing unhealthy banks, reducing the dominance of major shareholders in those banks, reforming the rules for approving managers, merging banks and credit institutions , Formulating and implementing new monetary policy, setting new rules in banking transactions, formulating and communicating instructions on how to defer banks’ overdue receivables.
In line with the evolution of the banking system in the country, we are witnessing the rapid integration of banks. The project of merging military banks, which was launched two years ago, is coming to an end in the near future with the merger of Hekmat Iranian Bank, Mehr Eghtesad and Kowsar Credit Institution, but what is important and questionable in this regard is how Providing banking services to the customers of these banks, what changes does it make and through what platform is it possible?
One issue that has been heavily involved in the merger of some banks is the discussion of capital market developments in the Iranian market. As previously discussed, the conditions of Iran’s financial markets are in transition. The stock market has grown, it will gradually enter into political equations, it will become normal to hear the names of symbols in the streets and parties, all financial institutions will be known and the stock market atmosphere will be familiar to everyone like a bank.
*** The merger of banks increased their exchange power
In a situation where the stock market has grown and the volume of incoming capital is more than outgoing capital, a large part of people’s money will be deposited in the stock market and very strong financial institutions will be formed in the market. According to the approach of financial institutions, it will be that they will gradually move towards integration, and perhaps the power of financial institutions will increase in the not too distant future from banks. Therefore, in the current situation, banks should not lag behind the financial markets.
Banks’ backwardness from the financial markets will have serious consequences for the bank. It is likely that the marketing power will be taken from the banks and this will create two scenarios. Either the banks are on the path to bankruptcy or the process of providing services to these banks will deviate from its normal path. Therefore, it is necessary to increase the exchange power of the banks by merging the banks and take the banks out of the path of becoming enterprises. .
Strengthens the issue of banking system integration. On the other hand, the general policies of private and military banks are not very different from each other, and this convergence in exchanges and monetary exchanges leads to the creation of a strong bank instead of two medium-sized banks. By merging the two units, the capital of the merged unit will be equal to the total capital of both units. A large bank will be more efficient than two small banks, which include liabilities and credits with customers and relations with other banks. It is important to say.
*** Less manpower by merging banks
Another issue that has been addressed in fewer analyzes is the issue of reducing the costs of setting up branches and manpower. Bank mergers can be operated by less manpower, and paper bureaucracy can drastically reduce banking processes. When two or more banks merge, the number of branches also decreases, which leads to cost savings, which is the only important factor in merging two banks.
The negative consequences of bank mergers are as effective as the positive consequences. One of the biggest negative consequences of bank mergers is the loss of trust of bank suppliers. In such a situation, the central bank must offer a strong perspective to depositors and have good reasons for this merger. Therefore, it is necessary to obtain the principal agreement of the Central Bank on the merger and then the issue should be agreed in the general assemblies of the merger banks so as not to cause them to lose more trust.
The mentality that there was a weakness in the previous bank merged with another bank will accelerate the process of depositors’ distrust and can lead to the outflow of capital from the merging bank. The transfer of money and the end of receiving services from merger banks can have a severe impact on the process of financing banks.
In general, the process of merging banks in the economic conditions of the country is a positive step and should be doneIt should be done according to the standards of the day and the experience of developed countries. The slow and continuous process in the process of merging banks will guarantee the success of these processes. It remains to be seen how successful the central bank will be in the short term.
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