Half of Iran’s banks should close or merge, top banker says

REUTERS: The number of banks in Iran should at least halve over the next six years, with closures and mergers needed to modernise an industry laden with toxic loans, one of the country’s top bankers said.

Parviz Aghili, Chief Executive of Middle East Bank, estimated at a conference in Zurich that a full re-organisation of the Iranian banking sector’s roughly US $ 700 billion balance sheet would cost US $ 180 billion to US $ 200 billion.

“And we cannot afford it,” he said. Instead, Aghili, a former HSBC banker, favours a multi-step programme to eventually bring Iran’s banking industry in line with new Basel III global standards.
Management would get three years to improve their balance sheets. After that, banks whose trading book assets remain less than 6 percent of total risk-weighted assets would be “completely shut down,” he said.

By contrast, banks whose ratios range from 6 percent to 10 percent could merge and seek new capital to survive, with dividends forbidden until they have stocked their balance sheets with adequate capital.
“Over the course of six years, we would get - at least out of the 35 banks we have - about 13 to somewhere around half of them surviving,” Aghili told more than 200 people at the Europe-Iran Forum, an annual event to promote closer economic ties.

“The government has to be gutsy, whether we like it or not, and shut down some of those banks,” he said.