Economy, Business And Markets

Banks on Track to Fill the Void

Banks on Track to Fill the VoidBanks on Track to Fill the Void

Even though Iran’s banking system was entirely shut off from the global network in the past years, Iran was abreast of what was transpiring on the relevant global scene, says a senior banker.

Calling Iran’s banking system “flexible”, Ali Ashraf Afkhami, CEO of the Bank of Industry and Mines, is of the opinion that it is possible to plug the gap that was created during the sanctions era.

“To be fair, many European banks are unaware of what is happening in Iran”, he said, suggesting that the rules and practices in the banking industry are reasonably modern and not as backward as some westerners prefer to claim.

Speaking at a conference in Tehran on the sidelines of the Ninth Exchange, Banking and Insurance Exhibition, aka Finex 2016, Afkhami said the international banking system expects Iran’s banks to improve its standards. Executing rules and regulations related to money-laundering and counter-terrorist financing is “one of the most important challenges we face,” the news website of the Monetary and Banking Research Institute quoted him as saying.

“The parliament has approved regulations regarding this matter and Iran’s banking system is now better placed than it was months ago” in tackling these two important issues.

Financial transparency and interest rates are among other important issues for developing Iran’s banking system, he said. “With the government’s assistance, measures were devised to ensure that banking regulations conform to international norms. I can now say that Iran’s banking system is ready for collaboration on the international level.”

Iran took a meaningful step toward upgrading its banking and financial laws and bringing it closer to international standards in  March with the Guardian Council ratifying a long-pending bill to counter money laundering and financing terrorism.

Earlier this month, the Financial Action Task Force –an international body mentoring money laundering – suspended its counter-measures against Iran for 12 months in response to Iran’s progress in AML-CFT.

  Left in the Lurch  

Also speaking at the panel, SACE’s (Italy’s export credit agency) Mark Fiorelli noted that in January when President Hassan Rouhani was in Rome, the agency he represents started negotiations with its Iranian counterparts and commenced investments in the energy sector.

“However we suffer from a lack of information on Iran’s banking system and its conformity to international standards,” he told the conferees.

Pointing to the difficulty of adopting Iran’s internal standards in international collaborations, he reiterated the need for support from within Iran. “We are in the midst of a process; on the one hand rules are changing, negotiations have begun and various projects are operational. But on the other, regulations are still in place that restrict our ability to do business with Iran.”

  Need for Training

The representative for Herbert Smith Freehills – an international law firm co-headquartered in London and Sydney – said Iran and the international banking system could have managed their communications in a more effective manner after the JCPOA, calling for better education and training to be taken up in Iran’s banking sector that has often come up for criticism by the mass media and seasoned economists in Tehran over its performance.

Thomas Kessler added that all parties involved are unanimous in the decision that training a work force and upgrading software programs are among the things that must be done.

“Everything should not be expected from Iran regarding the rekindling of the country’s dealings with the international banking system. We must also pay attention to what Iran expects of the international community,” he said.