0929 GMT February 18, 2020
The plans were part of an array of reform measures designed to bolster the country’s economy presented by a senior central bank official at the Financial Times’ inaugural Iran summit in London on Wednesday, reported by IRNA
Peyman Ghorbani Aghilabadi, vice-governor of economic affairs at Iran’s central bank, said: “We are committed to lowering bank non-performing loans and, if necessary, we will establish an asset management company.”
He said the central bank would unify its official and market exchange rates in a bid to make Iran more attractive to overseas investors and “take all necessary measures” to recapitalize the banking system.
Aghilabadi hailed the progress in lowering the interbank lending rate from 25 per cent to 17 per cent and said more action would be taken to lower interest rates in line with falling inflation, which is down from over 40 per cent three years ago to just over 12 per cent.
The central bank official also revealed that Iran was considering raising money from overseas investors in the Eurobond market.
The plans come only months after Iran and six leading powers — the US, Britain, France, Russia, China and Germany — put into force the agreement reached last July after Tehran agreed to scale down its nuclear activities in return for the lifting of sanctions.
The deal boosted hopes in the country’s financial and business community that they would be swiftly reconnected to the global financial system after many years of isolation.
However, there remain deep concerns that weakness in the banking system, which provides 90 per cent of funding to the economy, could hold back badly needed investment, FT said.
Parviz Aghili, managing director of Middle East Bank, said: “A number of Iranian banks would have negative capital under Basel III and the central bank is definitely aware of it and trying to help them.”
Bashar Al Natoor, global head of Islamic finance at Fitch Ratings, said Iran needed its banks to fully disclose their level of bad loans, which account for more than 15 per cent of their balance sheets according to official figures — well above the international average of about 4 per cent.
“The first step must be to know the size of the problem and then you can deal with it,” he said.
Majid Zamani, chief executive of Kardan Investment Bank, said the guarantee provided on all bonds by commercial banks was a “bottleneck” in the development of Iran’s nascent capital market as it prevented risk from being transferred to end investors.
There is also frustration among Iranian bankers at the slow progress in finding western lenders to handle international payments for them.
Some US clearing banks have warned banks in Europe, Asia and the Middle East that their US-based dollar accounts would face close scrutiny if they did business with Iran, according to Iranian and US bankers in the region. The warning, echoed by US Treasury officials in meetings in the Persian Gulf, has prevented banking transactions with Iran starting up again despite the removal of many sanctions.