Iran’s Banking Sector: Dark Days Loom

1 Jun 2018 Issue: 61 / 22 By: Basim Itayim

Iran’s banking crisis poses a bigger threat to the country’s economy than the re-imposition of sanctions post-US withdrawal from the nuclear deal – though, of course, the two are not unrelated. Can Tehran deliver substantial reforms amid infighting and vested interests?

After years of endemic corruption, government interference and economic mismanagement, Iran has accumulated tens of billions of dollars of bad debts. These debts are exerting unsustainable pressure on the balance sheets of the country’s banking sector, which is dominated by state and state-linked institutions. Tehran had been struggling with the mammoth task of trying to reform the sector even before the US pulled out of the nuclear deal last month (MEES, 11 May). Already an uphill task, the job has now gotten a whole lot tougher.

Many of the country’s 35 licensed financial institutions are desperately trying to repair their books after offering deposit rates as high as 22% back in 2014 before the oil price crashed later that year. (A substantial premium over inflation which was around 15%.) (CONTINUED - 1938 WORDS)