One of the recent plans that has been put on the agenda of the Islamic Consultative Assembly is the comprehensive plan for banking in the Islamic Republic, which has caused a lot of controversy, especially in economic circles. Both active and retired bank managers, as well as former central bank executives, have opposed it. Private sector economic activists have criticized it, and there have been protests against it in religious seminaries. This shows that not only has this plan failed to convince different groups in society, but the situation is such that many consider the old law on interest-free banking, passed in 1983, to be preferable and demand that the current situation remain. But why has this law come under criticism from various groups in society? In fact, this plan has not only failed to solve the problems of the previous law, but has also created a dusty atmosphere that, according to experts, could have worse consequences than the continuation of the previous controversial implementation. But where is the problem with this law and what

The Jurisprudential Council and its scope of authority

One of the most important areas that has received attention is the discussion of the Supreme Council of Jurists and the scope of their decisions and opinions; in fact, it is planned to add a new pillar to the pillars of the central bank and this new pillar will also have extensive powers; especially in terms of its supervisory dimension, which has sounded the alarm for many bank managers. Although many bank managers are appointed by the government or semi-governmental institutions and are considered “self-made,” these same managers know that banking laws in Iran are such that they cannot be implemented correctly and must be somehow “bent”; therefore, they resort to loopholes and practically the central bank has not taken any action against the lawlessness of banks. This has caused bank managers to feel a sense of security and be able to do whatever they want. Now, if the Supreme Council of Jurists is formed and insists on carrying out banking activities based on a theoretical model and interferes in the affairs of banks, and

On the other hand, in addition to the above cases, many consider the existence of a jurisprudential institution necessary only as an advisory body and not as an institution responsible for policy-making. This wide range of powers has created the idea that a Guardian Council should also be established in the Central Bank to oversee the legality of monitoring measures; in fact, the issues and conflicts that exist in the political sphere due to the presence of the Guardian Council will also take shape in the economic sphere.

Lack of independence of the central bank

In this plan, not only has a step towards the independence of the central bank from the government not been taken, but it has also provided the means for the government to have more control over the central bank through the selection, appointment, and dismissal of its president. Additionally, the government has a say in the composition of the board of directors, so that not only is the president of the central bank chosen by the president, but also the members of the board are appointed by the government to ensure the bank’s obedience to the government’s orders. This will result in more alignment of policies and less possibility for the bank to make decisions against the government’s will. This will allow the central bank to remain independent in implementing policies and act more as an executor of the government’s orders. Considering the eagerness of governments in Iran to cover budget deficits through printing banknotes and expansionary policies, which most governments have believed in after the revolution, this approach will lead to continued rampant inflation in the country.

The loss of the ability to work as a central bank expert.

The Central Bank, through the forces it has trained, is more of a specialized and expert institution than a political one. However, the new comprehensive banking plan of the Islamic Republic has led to the opening of other institutions and powers to the Central Bank, resulting in a decrease in its level of expertise and becoming more of an inter-institutional entity. The presence of representatives from the legislative and judicial powers in the structure of the Central Bank not only does not help with its independence and increasing the level of expertise in its plans, but also, to the extent possible, leads to decisions being made based on the opinions of all the powers in the country, resulting in a solution that is agreed upon by all. As the number of interfering institutions increases, the level of decisions will move towards being political rather than expert. For example, there may be a need for the country to adopt a contractionary policy that may lead to an increase in unemployment, but due to the presence of a representative from the parliament

Vagueness and lack of goal clarification

Many believe that the new law is too general in terms of its goals and in many cases, the law has not been clearly explained, leading to more complications in banking matters. For example, it is said that the current plan does not provide direction for bank resources like the previous law did, and as a result, banks have more freedom to allocate resources to whichever sector they see fit. This may lead to resources being diverted away from production and instead, benefiting non-productive sectors, causing economic losses for the country. On the other hand, some individuals believe that the new banking plan will lead to more formalization of contracts, while others point out the potential issues with the new plan’s compliance with Islamic banking principles.

Contradiction of goals and duties

Like many laws and policies in the country, this law also suffers from conflicting goals and duties, due to the lack of expertise of the country’s legislators in economic matters. It is unlikely that anywhere in the world the central bank’s duty is to promote growth and employment; because firstly, there are ministries and specialized institutions for this purpose, and secondly, the main duty of the central bank is to control inflation. The central bank may adopt contractionary policies to control inflation, which can lead to a decrease in employment levels. Now, if the duties of a central bank include both controlling inflation and promoting employment, we are faced with a strange contradiction. In economic literature, there is a trade-off between inflation and employment levels. In other words, one must choose between controlling inflation and promoting employment. Policies to increase employment and reduce unemployment lead to an increase in inflation, and the opposite is also true; meaning that policies to reduce inflation lead to an increase in unemployment and recession. Therefore, it is