A professional critique of Mr. Madanizadeh's performance

A professional critique of Mr. Madanizadeh's performance as a candidate for the Ministry of Economy in the field of banking modeling, marking his first operational role within the country's economic system:

In recent months, the name of Dr. Madanizadeh, professor of Economics and Finance at Sharif University of Technology, has become increasingly prominent in the public and policy-making arenas of the country. He has been introduced as one of the serious candidates for the position of Minister of Economic Affairs and Finance of the Islamic Republic of Iran. Contrary to the common perception that he has long held influential high-level positions, the reality is that his media presence and political standing are relatively new developments. Previously, he was mainly active as a university professor and researcher in the field of economics. However, it should not be forgotten that Dr. Madanizadeh previously served as the head of the Banking Modeling Unit at the Monetary and Banking Research Institute of the Central Bank. This position was not only research-oriented but also highly operational and critical within the domain of monetary policy and banking supervision in the country. Evaluating his performance in that role can serve as an important criterion for judging his capability to manage a ministry as large and sensitive as the Ministry of Economic Affairs and Finance.
One of the chronic and structural weaknesses in Iran’s banking system, which persisted during Dr. Madanizadeh’s managerial tenure, was the failure to design reliable operational models for assessing banks' capital adequacy. While international regulations, particularly the Basel II and III frameworks, emphasize the use of internal models for precise risk evaluation, Iran still relies on static, non-specialized, and standardized coefficients that do not even correspond appropriately to banks’ portfolios. The absence of a dynamic analytical model for measuring risk-weighted assets (RWA) has led banks to appear as if they maintain adequate capital ratios, whereas in reality, they face capital shortages, accumulated losses, and rising defaults. This deviation stems from the very area where it was expected that the Modeling Unit at the Monetary and Banking Research Institute—under the expert guidance of Dr. Madanizadeh—would identify and rectify these issues.
In the field of credit risk, the models developed in the country lack the capability to predict defaults. The significant volume of non-performing loans (NPLs) in banks is evidence that no model has been implemented for the proactive identification of high-risk customers or for designing a risk-based classification framework for loans. A model capable of accurately estimating indicators such as Probability of Default (PD), Loss Given Default (LGD), and Exposure at Default (EAD) based on historical data, macroeconomic conditions, and customer behavioral analysis was never developed at the banking system level during his management tenure. As a result, the country’s banking system not only lacks effective risk control tools but also, due to the absence of early warning models, extends loans solely based on customers' apparent creditworthiness and is consequently confronted with a large accumulated volume of doubtful receivables.
In the area of liquidity risk, banks, lacking a coherent supervisory model, engage in off-framework and sometimes high-risk investments without effectively matching the maturities of their obligations with liquid assets. This structural weakness is particularly alarming when the ratio of investments to the bank’s core capital exceeds the 20% threshold. At the international level, indicators such as the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) have been designed to assess liquidity risk. However, in Iran, the absence of similar models and the lack of action by the Monetary and Banking Research Institute in this regard have left banks ill-prepared to face liquidity pressures.
Alongside these issues, the lack of scientific and technical oversight on income recognition in banks has led to significant distortions in financial statements. Banks have created a non-transparent and misleading structure by manipulating the ratio of resources to uses, reallocating the share of depositors, and presenting an overly optimistic picture of their income. While operational net profit analysis models and the separation of depositors’ profit share from the bank’s actual earnings should be employed to provide an accurate picture of banks’ returns, such tools have neither been designed nor has any independent authority been established to verify the accuracy of this data during the period in question.
It is important to note that all these technical and structural weaknesses occurred during the period when Dr. Madanizadeh was directly responsible for policy-making related to the design of banking models at the Monetary and Banking Research Institute. Given this background, a serious question remains: can his performance in this limited domain—with outcomes that have relied more on impractical simulations than on real-world data—serve as a basis for commendation and the assignment of responsibilities at the level of the Ministry of Economy?
Ultimately, a record in which no precise credit risk assessment models have been designed, no liquidity risk measurement indicators have been implemented, no transparent mechanisms exist to control fabricated bank revenues, and capital adequacy ratios have not been realistically assessed, reflects less the capability to manage macroeconomics and more the continuation of an impractical and non-applicable research approach within the policymaking body. At a time when the country is more than ever in need of reforming its financial, regulatory, and banking structures, appointing an individual with such a track record—without thorough accountability for past performance—would be less a step forward and more a repetition of failed experiences in a new guise.
Given Dr. Madanizadeh’s academic and executive background, if appointed as Minister of Economy, some serious weaknesses and challenges at the macro level of the country are likely to become evident. The most significant issue is the lack of extensive executive experience in key areas of the country’s economic policymaking. The Ministry of Economic Affairs and Finance is responsible for overseeing and managing highly diverse and complex structures such as the Treasury, Tax Affairs Organization, Customs, Capital Market, Insurance, and Public Debt Management. However, his experience is primarily limited to banking modeling within a specialized research institute framework, rather than a high-operational executive institution. In such a context, the main concern is that decision-making may overly rely on theoretical and abstract models, while Iran’s economic structure suffers from severe institutional inefficiencies, conflicts of interest, and executive constraints that cannot be resolved merely through analytical frameworks.
On the other hand, fundamental weaknesses in his past record—such as in the design of capital adequacy models, bank income recognition, liquidity risk analysis, and the lack of reliable supervisory tools—reinforce the perception that despite his theoretical knowledge, he lacks the necessary capability to implement effective policies in the real world. These inefficiencies emerged during his tenure at the research institute at a time when credit crises, accumulated losses in the banking system, and structural manipulations in banks' financial reporting had reached their peak, yet no effective model was introduced to control or rectify the situation.
Additionally, although his academic background in Electrical and Telecommunications Engineering demonstrates intellectual and technical capability, it reveals a clear disconnect from the institutional, historical, and political foundations of Iran’s economy. Many key concepts that play a decisive role in economic policymaking pertain to structural relationships, medium-term balances, and institutional reforms—issues that go beyond purely mathematical or algorithmic abilities and require direct executive experience. Such a disconnect may lead to decisions being made as a minister with an incomplete understanding of the real economic environment in the country, resulting in outcomes that fall short of expectations.
Overall, there is a possibility that if such a responsibility is entrusted to Dr. Madanizadeh, decision-making will become overly theoretical, lacking practical implementation, and misaligned with the country’s political, institutional, and social realities. This issue could lead to policy gridlock, conflicts among various economic sectors, and ultimately failure in managing existing crises. Such a risk is particularly significant given that Iran’s economy is currently facing unprecedented challenges in areas such as the budget, inflation, the banking system, and international relations, and therefore cannot be overlooked.