Economy, Business And Markets

Small UK Banks, Energy Firms Seek Iran Business

Small UK Banks, Energy Firms Seek Iran BusinessSmall UK Banks, Energy Firms Seek Iran Business

Larger UK banks may keep on avoiding business with Iran as long as the US sanctions program remains in place, but smaller and middle-sized banks and businesses are keen on commercial engagement with the country, according to an analysis by the Morning Risk Report.

“The big global exporters are taking their time to get into those deals…But [the small and medium-enterprises] market is really keen to reestablish relationships with Iran,” said Justine Walker, the British Bankers’ Association director of financial crime (sanctions and bribery).  

“My fear is that they are the ones who will find the access to banking the most challenging,” Walker said this week during a panel discussion on sanctions in London organized by Dow Jones Risk & Compliance and The Wall Street Journal.

 The deal among Iran, the US, the European Union and members of the United Nations’ Security Council to lift nuclear-related economic and financial sanctions against Iran became effective in January. But business hasn’t picked up among the nations because sanctions concerning alleged terrorism financing and human rights violations remain in place and are still a crucial risk-management consideration. “It’s not the gold rush everybody expected it to be,” Walker said.

 She said she gets asked whether UK banks will get back into Iran “every day, 10 times a day,” but although risk appetites across the BBA—about 270 financial firms—is diverse, the risk of breaching any sanctions is still high. “The absolute predominant view is that it remains very challenging whilst the US primary sanctions are still in place,” she said.

Energy companies have also been exploring ways to rekindle business with Iran, and some asset managers have expressed “quite a lot of interest” in setting up new funds there, said Roger Matthews, a senior director at Dechert LLP’s international trade and government regulation practice, and also a panelist at the sanctions event.

Their activities are quite restricted, though, and Matthews said caution may prevail until there is greater clarity about US foreign policy after the November presidential elections.