As Iran pushes to get what it paid for in the landmark nuclear deal it signed a year ago with the six world powers, the country's private banks have taken the lead in rebuilding the financial system with the global network after years of incarceration.
Banking norms and practices have been a sore point for Iranian lenders whose role and influence suffered more during the long sanctions years that cut them off from the global financial system.
Kourosh Parvizian, the chief executive of Parsian Bank and head of the Association of Private Banks, however, is of the opinion that private lenders have made substantial progress to bring their standards in line with international benchmarks.
"Yes, there are some shortcomings, but private banks are on track to meet Basel II rules, especially in the area of capital requirement and enhancing anti-money laundering measures," Parvizian told the Financial Tribune.
Parsian Bank, for instance, succeeded in raising its paid up capital by 60% during the fiscal year that ended in March.
"This fiscal year we are aiming to further plump up our capital cushions and increase it to 50 trillion rials ($1.6 billion at the official exchange rate)," he said.
Only last week the Central Bank of Iran gave the thumps-up to the move which should nearly double the bank's capital. The Iranian banking industry has eight state-owned and 20 privately owned banks with several license requests pending CBI approval.
The bank-based economy has given its lenders a rather elevated status, making them indispensable in achieving the 8% growth target envisioned in the sixth five -year economic development plan (2016-2021). Currently, banks finance 90% of development and infrastructure projects.
Economy Minister Ali Tayyebnia and CBI chief Valiollah Seif have called for transition to a capital-based economy where long-term projects are financed through the equity market.
Referring to Iran's cooperation with the Financial Action Task Force (FATF) – an international group that monitors money laundering worldwide– Parvizian says the private lenders have strived for transparency.
"We never open accounts without access to full and detailed information and always abided by KYC (know your customer) regulations," he said.
"And as for AML and CFT rules, the CBI has instructed all local banks regarding international rules and we follow recommendations from international bodies and suspicious cases are sent to the legal division of the CBI"
Parvizian noted that Iranian banks have upgraded their risk management and compliance departments with international norms and closely monitor their transactions.
Building Networks
According to Parvizian, Parsian has one of the largest networks of correspondent relations with foreign banks. "We have strong ties with banks throughout Asia and Europe, mostly with small and medium-size banks," he said.
Mostly because of unilateral US sanctions (primary sanctions) that remain in place, major European banks and investors are visibly anxious about doing business with Iran.
So far, Iran has secured banking links mainly with smaller financial institutions, and US banks are still banned from doing business with Iran, directly or otherwise.
However, the CBI's vice governor, Akbar Komijani, recently announced that larger European banks are also warming up to Iran.
Italy's Unicredit, Belgum's KBC, Sweden's SEB and Austria's Erste Bank are reportedly some of the European banks that have restored relations with Iran after the easing of sanctions in January.
Parvizian, who also heads the Money & Capital Commission at the Iran Chamber of Commerce, Industries, Mines and Agriculture, says the country's crude oil exports have dramatically increased since the lifting of sanctions and money from oil revenues are being transferred to CBI accounts with European banks.
"But we hoped for the [US] primary sanctions to be lifted as well since they contradict the spirit of trade relations among nations."
Disciplining Financial Markets
Parsian has been a key ally of CBI in regulating financial markets. Only recently, the bank took over as the CBI agent to reimburse depositors of the defunct Samen-al-Hojaj Credit Institution
Samen is one of the several thousand uncertified lending institutions to go bust in recent months. The CBI has mounted an intense campaign to crack down on the unruly institutions which have long undermined the financial stability of the nation by offering unusually high interests and engaging in dicey ventures for higher profit.
The unlicensed banks and lending bodies that started out as tiny cooperatives, snowballed into huge quasi-lenders, a "clear mistake" as Parvizian puts it. He apparently takes relief in the disposition that "These companies did not conduct foreign exchange transactions."
Parsian has initially begun the reimbursement of some 1.35 million small deposits at Samen. Of the 97,000 big deposits, some 40,000 have been reviewed for reimbursement with people receiving their money with interest in multiple tranches.
Parvizian expresses the hope that the long drama of unregistered institutions is coming to a final end after one of their behemoths has been dealt with."I am hopeful that with the strong will on the part of senior officials to stabilize the financial system both for domestic purposes and international reengagement, these unwanted and unhelpful institutions will soon become a thing of the past and financial operations will take place with responsibility and in the open."
