Economy, Business And Markets

Banks Move Rapidly in Rebuilding Correspondent Relations

Banks Move Rapidly in Rebuilding Correspondent Relations  Banks Move Rapidly in Rebuilding Correspondent Relations

The governor of the Central Bank of Iran said after the easing of sanctions in January, the number of correspondent relations between Iranian banks and their foreign peers has increased. According to Valiollah Seif, some 5,862 letters of credit were opened to facilitate trade between Iranian and overseas Banks firms.

"Since the implementation of the landmark nuclear deal between Iran and world powers, 472 banking correspondent relations have been sealed and 5,862 letters of credit have been opened," Seif said.  

He said "several major European banks" have also started dealings with Iranian lenders, which would herald a better future for the economy and pave the way for closer international collaboration, the CBI website reported.

Seif did not name any banks but Kourosh Parvizain, the head of the Association of Private Banks recently told the Financial Tribune some of the European lenders which are doing business with Iran include Italy's Unicredit, Belgum's KBC, Sweden's SEB and Austria's Erste Bank.

While the big international banks continue the 'wait and see'  approach because they fear being penalized by remaining US sanctions, Tehran has begun making a dent in its financial isolation by forging banking channels via smaller institutions, many of which do little or no business in or with the United States.

SME Funding and Rate Unification  

During the fifth meeting of the Administrative Council for West Azarbaijan Province on Monday, Seif referred to the CBI's special attention toward small and medium-sized enterprises in the current fiscal year, saying that due to their small size, "allocating loans to these enterprises entails low risk and high value regarding job creation."

Earlier, Seif had referred to the allocation of 160 trillion rials ($ 5.16 billion) to struggling SMEs, saying the banking system "has no limitation" in offering these loans.

Designating the end of the current fiscal year (March 2017) "the starting point of foreign exchange rate unification process", the CBI head pointed to the banks' non-banking businesses, emphasizing that they are not allowed to delve into non-banking activities with the people's deposits.

On the central bank's resolve in addressing the plight of non-performing loans, Seif said the judiciary has created a new department for banking cases. The success of the department has led to "a very fruitful collaboration" between the judiciary and the CBI with the goal of recovering the troubled assets.

Stressing the need and importance of predictability in the economy, the top banker said with improved predictability more long-term investments will be possible that in turn will contribute to decent growth rates "Otherwise, speculative activities will rule.'

On preventing the operations of unregistered banks and credit institutions within the informal money market, Seif said since taking office, President Hassan Rouhani's government has followed up on these institutions with added resole "because not doing anything will only add to the problems."