EDBI Post-Sanctions Correspondent Ties Hit 120

The Export Development Bank of Iran, the country’s exim bank, established a total of 120 correspondent relations with foreign banks in the previous fiscal year to March 20, 2017, the bank’s chief executive said.

“In Europe, we are now in contact with 70 banks from 24 countries while such relations were non-existent when sanctions were in place,” Ali Salehabadi was also quoted as saying by the official news website of EDBI.

The Joint Comprehensive Plan of Action, as Iran’s nuclear deal with world powers is officially known, came into effect in January 2016 and allowed Iranian lenders to come out of the cold and resume ties with their international counterparts.

In Asia, 41 banks from 19 countries have resumed correspondent relations with EDBI while in Africa, 10 banks from nine countries have restored such ties.

“The export development bank has the largest number of correspondent relations with banks of Italy, Russia and Germany,” Salehabadi said.

According to the chief executive, during the fiscal 2015-16, the bank had issued 450 counts of guarantees while the number rose to 803 in the previous fiscal year.

The bank had issued a total of 22 foreign exchange guarantees in the same year, which more than doubled to reach 46 last year.

However, foreign exchange guarantees grew much more in terms of value. In 2015-16, the total worth of foreign exchange guarantees stood at $6 million while it experienced a 542% increase to reach $38.50 million.

“In the case of rial guarantees, we registered a 76% rise in terms of value and a 78% increase in terms of numbers,” Salehabadi added, noting that by the end of the fiscal 2015-16, the bank had issued 1.074 trillion rials ($28.6 million) worth of rials guarantees but managed to boost it to 2.253 trillion rials ($60 million) in the year after that.

The CEO also provided statistics on the letters of credit issued by EDBI, putting their total worth two years ago at 860 billion rials ($23 million) and at 3.061 trillion rials ($81.6 million) during the previous fiscal year, indicating a 255% increase.

However, in the case of import LCs, the export development bank has experienced a decline, as the value of LCs stood at $2.160 billion while it has now shrunk to $858 million.

Salehabadi said the reason for this decrease is that in 2015-16, EDBI was handling a portion of LCs for projects in the Bushehr Province, which entailed high volumes.

“We witnessed the same situation in the exports sector where our LCs plummeted from $618 million to $84 million,” he added.

He then pointed to the release of blocked Iranian assets in 32 international banks and the lower cost of foreign operations as other benefits of the nuclear accord, but pointed out that major banks are still not working with their Iranian counterparts.

For instance, he added, Deutsche Bank has very limited ties with EDBI, but the situation indicates an improvement compared with the time when the sanctions were in place.

 Absence of Resources

Salehabadi announced that in the previous fiscal year, his bank has absorbed a total of 8 trillion rials ($213.3 million) from the resources of the National Development Fund of Iran.

In a meeting held on Tuesday in the Kermanshah Chamber of Commerce, the official noted that EDBI has one of the lowest number of branches among all Iranian lenders with just 40 branches in provincial centers and free trade zones.

The CEO further said, “We are the only bank whose deposit rates do not exceed 15% and therefore we do not have much power to absorb people’s deposits.”

The bank can only get capital from three other sources. It can rely on the government to raise its capital, look to the Central Bank of Iran for a line of credit and expect support from the national development fund.

According to Salehabadi, it has been nearly a decade since an administration increased the capital of EDBI while the bank has paid out 1.7 trillion rials ($45.3 million) in loans last year and is looking for new ways of boosting its finances.

The EDBI chief said facilitating export is the foremost goal of his bank but also has to pursue profitability in some small capacity because it does not wish to suffer losses.

In conclusion, he said an €18 million line of credit is to be opened with the Iraqi Al Bilad Islamic Bank for Investment and Finance.

Salehabadi had previously talked about the credit line without naming the Iraqi lender, saying the credit line will expand Iran’s exports to the neighboring Arab country and that EDBI is ready to allocate more lines of credit to that country if other Iraqi banks meet the capital adequacy ratio.