Executive By

8/8/2019 Executive By

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Monetary & Banking Operations in

Free Trade - Industrial Zones (FTZs) .As Amended

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EXECUTIVE BY-LAWS OF MONETARY & BANKING OPERATIONS IN

Free Trade - Industrial Zones (FTZs) AS AMENDED

Official Gazette No. 18707, dated May 25, 2009 (04.03.1388)

No. H40409T/45624 Date: May 23, 2009 (02.03.1388)

To: The Presidency, Ministry of Economy and Finance and the Central Bank of

Islamic Republic of Iran

The Council of Ministers in the course of their Session dated May 13, 2009,

pursuant to a proposal that had been made by the Ministry of Commerce through

Letter No.1/12070 dated July 14, 2008 and by virtue of Article 18 of the Law on

the Mode of Administration of Free Trade-Industrial Zones of Islamic Republic of

Iran as Amended in 1999 approved that Decree No.H22623T/2368 dated May 17,

2000 known as the Executive By-Laws of Monetary and Banking Operations in

Free Trade-Industrial Zones of the IRI shall be amended. The full amended text

follows:

Chapter One - Definitions

Article 1- The following terms as used in the instant Executive By-Laws shall

have the meanings designated below:

Law: The Law on Administration of Free Trade-Industrial Zones of the IRI, as

amended.

Executive By-Laws: The Executive By-Laws of Article 18 of the Law on

Administration of Free Trade-Industrial Zones of the IRI.

CBI: The Central Bank of Islamic Republic of Iran

High Council: The High Council of Free Trade-Industrial Zones of the IRI.

Free Zone Authority: The Organization governing each Free Trade-Industrial

Zone of the IRI.


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Free Zone/Zone: Each of the Free Trade-Industrial Zones of the IRI, as specified

in compliance with the Law on Administration of Free Trade-Industrial Zones of

the IRI, as amended

Bank: The banks which are authorized to operate within a Free Zone

Branch: Iranian and/or foreign banks, institutes and their branches that are

authorized to operate within a Zone

Extra-Territorial Banking: The various types of banking operations that shall be

conducted utilizing exclusively foreign currencies

Representative Office: The representative offices of banks and credit institutes

that shall be established in a Zone.

Chapter Two-Requirements for the Establishing a Bank or Institute

Article 2- The establishment of a Bank or an Institute, engagement in banking

operations, and using the name of a Bank or of an Institute within a Zone shall be

authorized exclusively in compliance with the relevant rules and regulations, fully

observing the provisions stipulated in the Law and the instant Executive By-Laws.

Note- Banks obtaining the required license to engage in Extra-Territorial Banking

shall be required to use the term Extra-Territorial along with the name of their

bank.

Article 3- Banks and institutes registered in a Free Zone having Iranian, foreign or

Iranian-foreign shareholders and whose principal place of business shall be located

in the same Zone shall be considered as an Iranian Bank or Institute, registered in a

Free Zone.

Article 4- Establishment of a Bank or an Institute as well as the opening Branches

of Iranian or Foreign Banks or Institutes in the Zones shall depend upon a proposal


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to be forwarded by the Free Zone Authority that will be approved and authorized

by the CBI.

Note 1- The articles of association of banks and institutes as well as the subsequent

changes in and/or amendment to them shall be proposed by the Free Zone

Authority to be subsequently confirmed and endorsed by the Monetary and Credit

Council (MCC).

Note 2- The establishment of a Bank or an Institute in the form of a public or

private joint stock company with registered shares shall comply with the provisions

stipulated in both the Law, the present Executive By-Laws, as well as the

stipulations specified in the Commercial Code of Iran as Amended in 1968 (1347).

Note 3- The Central Bank of Islamic Republic of Iran shall be under the obligation

to adopt certain measures that permits for the establishment of banks in free trade-

industrial zones will be issued within one month after the date of receiving a

proposal in this regard from the free zone Authority concerned. If, in accordance

with the provisions of a law or regulation, the required permit may not be issued,

CBIRI will inform the said free zone Authority of any such reasons and

justifications. The time required for the procurement and payment of the required

initial capital by the applicant of establishment of bank and fiscal institute, after the

date of issuing permit by CBIRI, shall not be included in the above one month

respite.

Article 5- Registration of a Bank, Institute or the branch of a foreign bank in a

Free Zone shall depend upon issuance of a license mentioned in Article 4 of the

instant Executive By-Laws. The forum in charge of registration in the relevant

Zone shall request for the submission of the said license before it shall proceed to

register Bank Units.

Note- Establishing of Representative Offices of Iranian or foreign Banks and/or

Institutes shall depend on the confirmation and approval by the Free


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Zone Authority concerned as well as registration of the same in the Zone. Such

Offices shall not be authorized to engage in any banking operations and/or

transactions of any kind or nature.

Article 6- It shall not be required for Banks' branches that were established in a

Zone before approval of the instant Executive By-Laws, to obtain a new license.

However, the activities and operations of such branches shall fully comply with the

provisions of the present Executive By-Laws as well as the relevant rules and

regulations.

Article 7- The minimum capital required for Bank Units in a Free Zone shall be as

follows:

a. Bank- A minimum of Rls.35,000,000,000 (thirty five billion Rls.) one hundred

percent of which shall be deposited, in cash, with the CBI.

b. Institute- A minimum of Rls.15,000,000,000 (fifteen billion Rls.) one hundred


c. Branch of a Foreign Bank or Institute- A minimum of Rls.10,000,000,000

(Ten billion Rls.) one hundred percent of which shall be deposited, in cash, with

the CBI.

d. Extra-Territorial Bank Units-

1. Bank- A minimum of US$10,000,000 (ten million US dollars) one hundred


2. Institute- A minimum of US$5,000,000 (five million US dollars) one hundred

per cent of which shall be deposited, in cash, with the CBI.

3. Branch of a Foreign Bank or Institute- A minimum of

US$3,000,000 (three million US dollars) one hundred percent of which shall be

deposited, in cash, with the CBI.

Note 1- Issuance of establishment licenses to Bank Units with foreign capital,

mentioned in Clauses a, b, and c shall depend on the presentation and submission


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of a certificate to the effect that foreign exchange, equal in amount to the capital

owned by foreign nationals, was sold to one of the Bank Units in the relevant

Zone.

Note 2- The sums that shall be deposited with CBI may be utilized and withdrawn

by Bank Units after they shall be registered and after the relevant documents and

evidences shall be presented.

Note 3- Any change in the minimum required capital of banks shall be possible

upon proposal to be made in this regard by CBIRI for approval by the Money and

Credit Council.

Article 8- Banks and Institutes shall be active and operational in a Free Zone shall

be authorized, with prior approval by the Free Zone Authority and with

confirmation by the CBI, to set up branches.

Chapter Three - FTZ Foreign Currency System

Article 9- Exchange of foreign currencies with Rls and/or other foreign currencies

as well as foreign exchange transfers and transactions by natural persons and legal

entities in Free Zones shall be authorized.

Article 10- Transfer of foreign currencies from abroad to the Zones and vice versa

by natural persons and legal entities shall be authorized.

Note- Transfer of foreign currencies from inside the country to the Zones and vice

versa by natural persons and legal entities shall be in accordance with the laws and

regulations governing foreign currency in Iran.

Article 11- Foreign currencies exchange rates in the Zones and exchange of the

same with Rls shall be on the basis of supply and demand.

Chapter Four - Conditions for Activities and Operations


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Article 12- After having obtained the establishment license mentioned in Article 4

of the present Executive By-Laws and having registered with the registration

forum stationed in a Free Zone, Banks, Institutes or their branches shall be

authorized to start their activities and operations, provided that they fully observe

the provisions of the present Executive By-Laws and submit to the Free Zones

Authority concerned the documents and evidences specified below: - Registration

Notice in the Official Gazette - A copy of the Registered Articles of Association -

Notification of the Legal Address.

Article 13- Regulations governing the activities of Bank Units in Free Zones shall

be as follows:

a. Bank Units in the Free Zones shall be subject to the provisions stipulated in the

present Executive By-Laws as well as the relevant applicable rules and regulations.

b. The transactions in Iranian Rls. which shall be carried out by Bank Units in the

Zones shall be subject to the provisions of Islamic banking. However, the Bank

Units shall be authorized to observe international banking rules and regulations in

their transactions in foreign currencies.

Article 14- The monetary and credit regulations adopted by the CBI for Bank

Units in the Zones are aimed at facilitating and promotion of investment in Free

Zones and to render the Zones internationally capable of competition.

Note 1- Iranian Commercial banks shall adopt the required measures in order that

at least one of their branches in free zones shall be elevated to the rank of an

independent branch or any higher rank to operate with the maximum authorities

given to them to supply the vastest range of services to domestic or foreign

investors. The free zone Authority concerned shall be under the obligation to report

the good implementation of the provisions of this Article, once every six months,

to the government.


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Note 2- Free Zone Authorities, in draft agreements for the supply of land shall

include a condition to the effect that the said free zone Authority shall cancel the

agreement and shall transfer the land to the bank that supplied credit facilities to

the applicant in order to develop the land, in case the applicant shall be found in

breach of his obligations towards the bank. In such case, the bank shall dispose of

the land in order to collect the amounts paid to the applicant as loan. Details

regarding such arrangements shall be according to the accords reached by and

between the bank concerned and the free zone Authority.

Article 15- Extra-Territorial Bank Units shall not be authorized to embark on

banking operations in Iranian Rls..

Article 16- Bank Units shall be required to obtain CBIs license for their foreign

currency transactions. Hence, such units shall be authorized to simultaneously

apply for the required license for their foreign currency transactions when they

forward their application for establishment license.

Article 17- Bank Units that obtain the required licenses for their foreign currency

transactions shall be authorized, in conformity with the type of the license which

shall be issued to them, to proceed to render the following

services and operations, fully observing the provisions stipulated in the instant

Executive By-Laws as well as the relevant regulations:

1. Establishment of agency relations with other banks,

2. Transfer of money for themselves and/or for their customers,

3. Transactions in foreign currencies on their own account and/or on account of

their customs,

4. Opening and keeping current and/or saving accounts,

5. Keeping time deposits with various maturity dates,

6. Receiving various forms of credit facilities,


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7. Circulation, purchase, sale, subscription to and retention of contribution bonds,

debentures and bonds,

8. Granting various credit facilities,

9. Purchasing and giving guarantees on various commercial instruments and

papers,

10. Carrying out all affairs concerning letters of credit (L/Cs), bills, drafts,

promissory notes and letters of guarantee (L/C's),

11. Managing and supervising the assets and rendering investment services on

account of their customers,

12. Rendering trustee services and carrying out managerial affairs,

13. Other authorized banking operations.

Note- It shall not be authorized for Institutes to keep current accounts in foreign

currencies for their customers.

Article 18- In international banking operations, the commission, the interest rate

of the facilities received against various deposits, as well as the interest rate for the

granted facilities shall be determined on the basis of the conditions prevailing at

free market.

Article 19- The Bank Units, excluding Extra-territorial Bank Units, shall be

authorized to procure their required financial resources in Rls., in compliance

with the Law on Usury Free Banking Operations as well as other relevant laws and

regulations, through the means and options specified below:

1. Accepting interest-free current and saving deposits

2. Accepting time investment deposits

3. Circulating contribution bonds

4. Receiving credit facilities from natural persons and legal entities.

Note- Credit Institutes shall not be authorized to accept interest-free loan current

deposits.


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Article 20- Bank Units, excluding Extra-territorial Bank Units, shall be authorized

to grant credit facilities in Rls., in compliance with the provisions stipulated in the

Law on Usury Free Banking Operations.

Article 21- Bank Units, excluding Extra-territorial Bank Units in Free Zones, shall

be authorized to embark on authorized banking operations in Rls., in compliance

with the provisions stipulated in their articles of association.

Article 22- Banks and Institutes in the Zones shall not be authorized to increase

their capitals through re-assessment of their assets and properties.

Article 23- Foreign Banks and Institutes in Free Zones as well as the branches of

foreign Banks and Institutes in the Zones shall be bound to pay to the CBI, as legal

deposit, a part of the deposits that shall be made with them. The amount and the

type of the foreign currency of such deposits shall be specified by the CBI. The

amount as well as the type of foreign currency of such legal deposits may vary,

depending on the type of the deposit as well as the scope of activity of Banks and

Institutes, as the case may be.

Note- The CBI, at its own discretion, shall pay interest in foreign currency on the

said statutory deposits made by the above Banks and Institutes.

Article 24- Foreign Banks and Institutes in the Zones as well as the Branches of

foreign Banks and Institutes in the Zones shall be bound to retain and keep as

statutory reserve a part of their annual net profits. However, the statutory reserve

shall not be less than fifteen percent (15%) of the annual net profit. After the

amount of the statutory reserve shall become equal to the amount of the capital, it

shall be optional to make further reserves.

Article 25- The foreign currency assets and/or liabilities of Bank Units in Free

Zones shall be converted and exchanged, on the basis of the rates prevailing at the

free market, at the end of every fiscal year. The difference resulting from

conversion and exchange of the assets and liabilities which shall fall due one year


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or less than one year after the exchange date, shall be carried into profit/loss

account.

Article 26- Bank units in Free Zones shall not be authorized to accept their shares

as security for the bank facilities they grant.

Article 27- Banks and Institutes in Free zones shall not be authorized to take the

following actions:

a. Procurement and sale of commodities on their own account for trade and/or

commercial purposes, unless it shall be meant to implement the Law on Usury Free

Banking Operations, or to meet their own requirements and needs.

b. Immovable transactions, except for Banks and Institutes that are basically meant

to engage in immovable transactions, exceeding in amount the ceiling approved by

the CBI.

c. Procurement of shares, partnership in the capital of one and/or more than one

company, procurement of negotiable instruments and/or securities on their own

account, exceeding in amount the ceiling approved by the CBI.

d. Granting credit facilities to the managing director, members of the board of

directors as well as the companies in which the above individuals are beneficiaries,

exceeding in amount the ceiling approved by the CBI.

e. Granting credit facilities to members of the board of directors, the managers and

directors of the Free Zone Authority concerned, members of the said FZ Authority,

directors and inspectors of the CBI, unless the particular rules and regulations to be

approved by the CBI for such purposes, are fully observed and complied with.

Article 28- If the capital of a Bank or Institute shall decrease beyond the minimum

specified in Article 8 of the instant Executive By-Laws, due to losses sustained, the

Bank or the Institute so affected shall be bound to compliment its capital within but

not later than six (6) months.


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Chapter Five - Regulations Governing CBIs Supervision over Bank

Units in Free Zones

Article 29- Foreign Banks and Institutes as well as the Branches of foreign banks

and institutes shall be under the supervision of the CBI. In order to meet their

requirements, they shall be bound to provide CBI with the required information,

fully observing the provisions specified below. Hence, they shall be required to:

1. Fully observe monetary and credit policies approved by the CBI.

2. Deposit their statutory reserves with the CBI at the intervals and in the forms

determined by the CBI.

3. Prepare and determine the headings of the accounts as well as the financial

statements in a manner that shall be confirmed and approved by the CBI.

4. Observe and comply with the rules and regulations stipulated by the CBI,

including CBIs requirements as to sufficiency of capital.

5. Dispatch and submit to the CBI the information and statistical data, in exact

conformity with the form as well as the intervals specified below:

- a summary of ledger as well as the statement of statutory reserve,

- financial statement including the balance sheet, and profit & loss account to be

certified by CBI- confirmed by independent auditors.

6. Provide and submit to the CBI other information and statistical data whenever

they shall be requested by the CBI. Evidently, such information and data shall be

considered confidential and therefore; they shall not be severally published.

7. Fully cooperate with CBI-dispatched inspectors who shall have an order in

writing, and to put at their disposal the required data and information.

Article 30- If, at the discretion of the CBI, perpetuation of the activities of a Bank

Unit in a Zone shall be risky, CBI shall be authorized to appoint an inspector who

shall be stationed in the Bank Unit concerned.


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Chapter Six - Miscellaneous Regulations

Article 31- The expertise and professional knowledge of the members of the board

of directors, the managing director, the deputy managing director and/or the

members of the managing board of Banks and Institutes, as well as that of the

directors of Branches of Iranian and foreign Banks and Institutes in the Zones shall

be confirmed by the CBI.

Article 32- Bank Units in Free Zones shall be responsible to indemnify and

compensate the damages caused due to their operations that shall be sustained and

incurred by their customers. The managing directors and members of the board of

directors of Banks or Institutes in the Zones shall be responsible to indemnify and

compensate the damages caused due to their violation of the present regulations or

infringement of the relevant articles of association to their shareholders and/or

customers.

Article 33- In order to facilitate the clearing of checks and bank documents, acleaning chamber shall be set up by Bank Units in Free Zones, which shall be

approved and confirmed by the CBI. Expenditures for its operations shall be met

by the Bank Units concerned.

Article 34- The manner of keeping documents, papers and accounts books, the

manner of considering the violations and infringements, as well as the manner of

dissolution and declaration of bankruptcy of Bank Units and the instances andcases that are not explicitly stipulated herein shall be according to the provisions of

the Monetary and Banking Law approved 1972.


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Article 35- Directives and circulars relating to the monetary and banking matters

in free zones shall be drawn up and distributed for enforcement by CBIRI through

coordination with the secretariat of Free Trade-Industrial Zones.

Parviz Davoodi,

First Assistant of the President

Documents

Executive By