Iran's banks need to adjust to international regulations

Iranian banks will have to adjust to tougher international regulations and may need to offload non-performing loans into a "bad bank" to pick up where they left off when sanctions were imposed almost four years ago.

Ali Sanginian, chief executive of privately owned Amin Investment Bank said banks will be crucial to deal-making and cash flow as Iran seeks to win business from foreign firms and attract investment to upgrade its infrastructure now that curbs have been lifted on its banking, insurance, shipping and oil sectors.

They are expected to be able to link up with international lenders to process transactions within a matter of weeks following a deal with world powers earlier this month curbing Iran's nuclear programme.

But restrictions preventing US banks dealing with the country will remain in place and Iran's banks will have to contend with a financial world very different from when they were cut off in 2012.

"Isolation of Iran's money market from international markets resulted in the inability of the Iranian banks to coordinate with international developments," said Ali Sanginian, chief executive of privately owned Amin Investment Bank.

"This has led to these banks severely lacking in the areas of investment quality, capital adequacy, internal control and other safeguarding regulations in comparison to international standards," said Sanginian, whose institution is Iran's biggest investment bank with more than $1 billion of assets under management.

Many of Iran's banks struggled with bad debt during the sanctions era. The situation was compounded by several banks having exposure to the country's property market, which turned sour in 2012 leaving problem loans in the system. Official data showed the ratio of non-performing loans to total loans was 13.4 percent in the Iranian month ending June 21, 2015.