The International Monetary Fund, in its 2005 Article IV on Iran report, published in 2006, mentions that a real time gross settlement (RTGS) system referred to as the Rial interbank market is expected to become operational in 2006-2007. The Central Bank of the Islamic Republic of Iran has stressed the urgent necessity of reform in the Payment and Settlement Systems in Iran to standardize them and develop value-added services in line with international best practices. However, there is little information publicly available regarding Iran's compliance with the Core Principles for Systematically Important Payment Systems (CPSIPS) promulgated by the Bank for International Settlements (BIS).

General Overview

The International Monetary Fund (IMF), in its 2005 Article IV Report on Iran, published in 2006 mentions that a rial interbank market, incorporating Real Time Gross Settlement (RTGS) System, is expected to become operational in 2006-2007. The Central Bank of the Islamic Republic of Iran (CBI) website provides brief information on the fledgling payment system in Iran. It notes that in response to the double-digit inflation rate and relative stability in the currency denomination in Iran, payment instruments in Iran have graduated from notes to various kinds of checks, particularly traveler''s checks. The origin of modern payment instruments in Iran can be traced to the early 1990s when the commercial bank of Sepah launched its Aber Bank Debit Card and ATM services (CBI website). Since then, information on the CBI website states that almost all Iranian banks have utilized card payment services focusing on cards with debit function, and ATM branches for cash withdrawal. The interbank card switch (SHETAB) was introduced in 2002, connecting all card issuing banks in Iran to the center. Iran, according to the CBI, has built a uniform card payment network where all issued cards are accepted in all acquiring terminals (CBI website).

According to information on the CBI website there is an urgent necessity for reform in the Payment and Settlement Systems in Iran to provide quality service to customers with the optimal use of the latest information and communication technologies. To pursue this objective, the CBI restructured the Interbank Information Exchange Department to form a new organizational unit of the Payment Systems Department. The new unit established a specialized center for regulating the payment system and setting industry-wide standards. The CBI recognizes the weaknesses in the electronic interbank transactions infrastructures in Iran, and therefore designed the National Payment System project, preparing it for bidding in 2001. The CBI expects the implementation of this project to reform and standardize payment systems in Iran and develop value-added services in line with international best practices (CBI website). The reform aims at cost reduction and greater investment opportunities, quality control, industry regulation and supervision, and oversight of central banking functions to minimize and manage risks. As per information on the CBI website, the Payment Systems Department has also established a research body in order to study and apply international best practices in payment systems in collaboration with global banking experts.

The Principles

I. The system should have a well-founded legal basis under all relevant jurisdictions.

II

There is insufficient information publicly available as to Iran's compliance with this principle.

II. The system's rules and procedures should enable participants to have a clear understanding of the system’s impact on each of the financial risks they incur through participation in it.

II

There is insufficient information publicly available as to Iran's compliance with this principle.

III. The system should have clearly defined procedures for the management of credit risks and liquidity risks, which specify the respective responsibilities of the system operator and the participants and which provide appropriate incentives to manage and contain those risks.

II

There is insufficient information publicly available as to Iran's compliance with this principle.

IV. The system should provide prompt final settlement on the day of value, preferably during the day and at a minimum at the end of the day. (Systems should seek to exceed the minima included in this Core Principle.)

II

There is insufficient information publicly available as to Iran's compliance with this principle.

V. A system in which multilateral netting takes place should, at a minimum, be capable of ensuring the timely completion of daily settlements in the event of an inability to settle by the participant with the largest single settlement obligation. (Systems should seek to exceed the minima included in this Core Principle.)

II

There is insufficient information publicly available as to Iran's compliance with this principle.

VI. Assets used for settlement should preferably be a claim on the central bank; where other assets are used, they should carry little or no credit risk and little or no liquidity risk.

II

There is insufficient information publicly available as to Iran's compliance with this principle.

VII. The system should ensure a high degree of security and operational reliability and should have contingency arrangements for timely completion of daily processing.

II

There is insufficient information publicly available as to Iran's compliance with this principle.

VIII. The system should provide a means of making payments which is practical for its users and efficient for the economy.

II

There is insufficient information publicly available as to Iran's compliance with this principle.

IX. The system should have objective and publicly disclosed criteria for participation, which permit fair and open access.

II

There is insufficient information publicly available as to Iran's compliance with this principle.

X. The system's governance arrangements should be effective, accountable and transparent.

II

There is insufficient information publicly available as to Iran's compliance with this principle.

A. The central bank should define clearly its payment system objectives and should disclose publicly its role and major policies with respect to systemically important payment systems.

II

There is insufficient information publicly available as to Iran's compliance with this principle.

B. The central bank should ensure that the systems it operates comply with the Core Principles.

II

There is insufficient information publicly available as to Iran's compliance with this principle.

C. The central bank should oversee compliance with the Core Principles by systems it does not operate and it should have the ability to carry out this oversight.

II

There is insufficient information publicly available as to Iran's compliance with this principle.

D. The central bank, in promoting payment system safety and efficiency through the Core Principles, should cooperate with other central banks and with any other relevant domestic or foreign authorities.

II

There is insufficient information publicly available as to Iran's compliance with this principle.