As the June 30 deadline for a nuclear deal between Iran and the six world powers—the US, Britain, France, Russia, China and Germany—draws ever nearer, the prospect of a final accord is raising new hopes for the beleaguered banking system.
Cut off from SWIFT global interbank messaging network, Iranian banks are struggling to remain solvent as costs of raising capital and transferring money have soared in recent years.
As the marathon nuclear talks enter their final leg, the burning question is how the banking system will reap the benefits should a deal be struck. The question becomes all the more critical considering the central role banks play in the Iranian economy as the main financer of manufacturing projects. So, will a lift of sanction mark a U-turn for the economy?
Reduced Costs
Heydar Mostakhdemin Hosseini, a market analyst, tells SMT News that one substantial benefit of the lifting of banking sanctions would be banks rejoining SWIFT, from which Iran was excluded in 2012.
“SWIFT is a tool that facilitates the transaction of foreign currency for exports, imports and manufacturing, and therefore banks can resume their transactions in this area,” Hossseini said. “In previous years, banks had to retain their place in international markets by circumventing the sanctions through limited ways that pushed up the costs significantly.”
He predicted that with the lifting of sanctions, limits on transactions would be eased and most importantly the cost of transactions will drop, which means lower consumer prices and lower inflation.
Hosseini pointed to the role of the central bank in a post-sanctions era, saying that if the sanctions are removed, the CBI should devolve more authority to banks so they can do their business in a more competitive and freer atmosphere.
Iran and the six powers are negotiating to reach a comprehensive agreement that would terminate all sanctions against Tehran in exchange for Iran limiting parts of its nuclear energy program.
Fueling the Economy
Bijan Safavi, another banking analyst, says since banks have been unable to provide sufficient financing to businesses and manufacturers, these sectors have become cash-strapped and therefore a lifting of sanctions can be a shot in the arm for both banks and businesses.
“It is hoped that banks can become a catalyst for an investment boom in the country and emerge stronger than ever in revitalizing the economy,” Safavi noted.
“Placing money transactions on an even keel as well as ordering the economy are among other upsides that are to be anticipated once sanctions are removed,” he said.
Safavi urged banks to “spruce themselves up” quickly when sanctions are eased in order to seize the flow of foreign investment.
