At his swearing-in ceremony this month, Iran’s president Hassan Rouhani promised to embark on an “economic revolution”, creating jobs for the Islamic republic’s army of unemployed youth.
But one huge obstacle stands in his way — the country’s ailing banking sector. For decades isolated from the rest of the financial world, many Iranian banks struggle to comply with international banking norms. After years of populist policies, many are beset by high levels of bad loans.
With more than a quarter of Iranian youth unemployed, reform of the sector is seen as central to the revitalisation of an economy desperate for foreign investment. Mr Rouhani, who is beginning his second term after winning a landslide victory at elections in May, has described it as his “biggest challenge”.
Akbar Komijani, deputy governor of Iran’s central bank, agrees that reforms are needed across the board.
“The Central Bank of Iran is seriously seeking to tackle existing problems and improve [the banking sector] to secure and guarantee the implementation of international standards for entrance and presence of top international banks and [to encourage] more competition in the country’s monetary market,” Mr Komijani said in a written response to the Financial Times’ questions.
The landmark nuclear agreement with six world powers — which was implemented in 2016 — led to the lifting of many sanctions on Iran and paved the way for some Iranian banks to join global financial messaging networks such as SWIFT. Mr Rouhani is hoping to use the accord to attract foreign investment to the republic, but the problems in the banking sector are a large barrier.
Chinese, Russian and Turkish as well as tens of second- and third-tier European banks now handle small transactions with some Iranian companies. But, so far, no leading international bank is ready to deal with any Iran-related businesses. This is partly because there are still US and European sanctions, related to…