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Iran’s Failing Banks

By Amir Taghati

In a relatively healthy economic system, banks play an extremely crucial role, with monetary intermediation, creating money, providing extended loans and aggregating deposits being among the banks’ major functions.

By extending credits, banks actually turn their clients’ relatively short-term deposits into long-term loans, and by aggregating deposits, banks accumulate depositors’ relatively small savings into huge loans, capable of creating economic capacities.

In short, banks could significantly improve economic growth by aggregating small deposits into huge loans to fund economic and production units. In Iran under the rule of mullahs, however, banks have themselves turned into the economy’s super challenge, and places for regime’s thieving and plundering.

Financial statements of Iran’s major banks show that they are insolvent, with embezzlement cases in banks being even more serious than the ones related to credit institutions.

Due to sanctions, the regime is incapable of providing funds. Besides, pension funds are themselves part of the country’s super economic challenges as they’re too low on funds to pay the retirees. And as for the insurance companies, they, too, are unable to pay the workers who have lost their jobs due to factory closures. These entire factors have joined hands to force Rouhani government to withdraw from the country’s banking system.

Regime’s embezzling from banks is carried out with first the banks offering huge interests on savings to attract deposits and then accumulating them into huge loans to be given to regime-linked figures, who in turn transfer the received loans out of the country without bothering to pay them back. That’s how the banks are going bankrupt.

According to the Article 141 of the country’s Trade Law and based on banks’ financial statements, many of Iranian banks are actually broke.

“A corporation is considered bankrupt if its losses exceed half of its capital, in which case the corporation’s board of directors have to either dissolve the company or increase its capital with the help of its shareholders,” says Article 141 of the country’s Trade Law.

According to the law, it could be seen that with regard to Iran’s Day, Sarmayeh and Tejarat banks, the debts are even higher than the banks’ assets, and as for Saderat and Melli banks, the amount of debt is nearly equal to the banks’ assets, which by itself proves that the banks have actually gone insolvent.

But what’s the reason behind Iran’s banking failure?

The first cause is the government, using the banking resources to fill its budget deficit while failing to fulfill its commitments.

Deferred payments, also referred to as poisonous assets, are the second factor leading to Iran’s banking crisis. While the banks’ balance sheets show an estimated 200 billion thousand tomans of such assets, they actually don’t exist.
Simply put, the amount has been provided to loan receivers who are not going to pay it back.

The third factor is huge investments made in real estate sector, with hundreds of billions of tomans being locked up and unrealizable due to a recession in the housing sector.

Where are the banks’ unreturned loans?

The term ‘super debtor’ is now quite a familiar one among regime’s media. Being entirely affiliated with the regime, it’s difficult to find out the names of such super debtors, with a few exceptions popping up every once in a while during clashes between regime’s rival bands.

Mohammad Rostami, referred to as M.R. in regime’s media, is one of the super debtors who has received 6,500 billion tomans in bank loans and facilities, including a 1700-billion-thousand-toman loan from Parsian Bank alone.

Rasoul Danialzadeh, a close friend to Rouhani’s Brother ‘Hossein Fereidoon, has a 2,300-billion-toman bank debt. Being closely connected to Hossein Fereidoon, Danialzadeh and another person named ‘Shabdoost Malamiri’ are the two who are behind many of Iran’s bank embezzlement cases.

According to regime media, 20 super debtors –reportedly including the son of former mayor of Tehran ‘Bagher Ghalibaf’ as well as the son of Chief of Police– are close to 7,000 billion tomans in debt to Sarmayeh Bank,.

Insolvency of banks means increased inflation, recession, unemployment, poverty and social harms, and collapse of an already destroyed economy, with Iranian people having to pay the price out of their dwindling food basket.

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