Economy, Business And Markets

CBI’s Green Light for International Banks

CBI’s Green Light  for International Banks CBI’s Green Light  for International Banks

Finally Iran's financial industry is opening up to foreigners, as Iran moves to increase competition in the sector. The government is preparing a bill to allow foreign ownership of banks in Iran, the governor of the central bank said on Monday.

"Foreign banks can actually start operations in Iran," Valiollah Seif told the press.

The bill, which will soon be sent to the parliament for review, will allow foreign investors to hold a higher stake in Iranian banks.

"Current regulations allow foreigners to hold a 40% stake in an Iranian bank, be it a newly established one or an existing one," Abdolmahdi Arjomandnejad, director general of banking regulations, licensing and anti-money laundering at the central bank, told Financial Tribune in a phone interview.

"The allowable stake is irrespective of the number of foreign owners, meaning even a consortium of foreign investors cannot raise their stake beyond 40%," Arjomandnejad said. "It does not matter whether there is one buyer or 1,000."

The shares can be bought through the two Iranian stock markets—Tehran Stock Exchange and Iran Fara Bourse, "but the central bank has to approve the sale."

The nuclear agreement signed between Iran and the UN Security Council in July, will lift financial sanctions, opening the way for foreign business with Iran. However, global giants have expressed reluctance toward entering Iran too early, for fear of breaching the restrictions imposed by the US on Iran's financial sector. High penalties were leveled against European banks by US regulators for breaching them in recent years.

"There's a real hesitancy for the right reasons," said Washington lawyer D.E. Wilson, former acting general counsel at the US Treasury, whose Office of Foreign Assets Control enforces the legislation. "The banks don't want to get into trouble."

But once the sanctions are removed, the country with its $400 billion economy will become one of the most lucrative markets for consumer and commercial finance.

Iran's banking industry has been depressed due to sanctions, bad management and financial turmoil. The central bank sees foreign lenders as conduits for investment and transfer of expertise. So, it is removing barriers to the entry of foreign companies to the Iranian financial sector.