Iran Considers ‘Bad Bank’ to Mop up Toxic Loans

By John Lee.

The Financial Times reports that the Central Bank of Iran (CBI) is preparing to set up a “bad bank” to absorb a vast pile of toxic loans.

Peyman Ghorbani Aghilabadi, the bank’s vice-governor of economic affairs, said:

“We are committed to lowering bank non-performing loans and, if necessary, we will establish an asset management company.”

He said the central bank would unify its official and market exchange rates in a bid to make Iran more attractive to overseas investors and “take all necessary measures” to recapitalise the banking system.

Parviz Aghili, managing director of Middle East Bank, added:

“A number of Iranian banks would have negative capital under Basel III and the central bank is definitely aware of it and trying to help them.”

Bashar Al Natoor, global head of Islamic finance at Fitch Ratings, said Iran needed its banks to fully disclose their level of bad loans, which account for more than 15 per cent of their balance sheets according to official figures — well above the international average of about 4 per cent.


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