Iran refusing licences to new lenders amid concern over lost savings driving social unrest

Iran refusing licences to new lenders amid concern over lost savings driving social unrest
Savings lost to suspect credit institutions were probably one factor that sparked the Iran protests which even spread to the diaspora, some of which are seen here protesting outside Iran's embassy in Berlin.
By bne IntelliNews January 25, 2018

Iran’s central bank has stopped granting permits and licences to new private banks or commercial lenders, local media outlets reported the Iranian president’s office as confirming on January 24.

The collapse of several major institutions that caused the freezing of the savings of hundreds of thousands of depositors is believed to have been a factor in the anti-establishment unrest that swept the country in late December and early January. Much ire has since the middle of last year been focused on credit institutions or funds that have in the past decade or more expanded rapidly on the back of high interest rates offered on savings. Several have in the past year shut or staggered on thanks to government bailouts.

Earlier this week in a television appearance, President Hassan Rouhani said: “I’ve ordered the central bank not to issue any permits to any new private banks.”

He added: “We’re determined to solve the problems encountered by depositors at financial credit institutions, which have affected around two to three million families.”

Rouhani, a centrist and pragmatist who trounced the hardliners to get re-elected in May last year, has blamed his predecessor, populist hardliner Mahmoud Ahmadinejad, for allowing unregulated lenders to spread in an unchecked fashion.

Bloomberg reported on January 22 that some Iranians who face losing their life savings, have run into an unresponsive state. “People have complained to parliament, to the courts, to the prosecutor’s offices, they’ve done everything they can but still can’t get anywhere,” Majid, an office worker, who requested his full name be withheld because of the sensitivity of speaking with foreign media in Iran, told the news service. Majid had reportedly deposited what he could spare with Iran’s Fereshtegan Credit Institute, but the lender ran into trouble and closed its branches, with Iran’s judiciary accusing it of inaccurate and poor accounting.

Iran’s central bank governor Valiollah Seif has previously warned credit institutions were operating in a similar way to pyramid schemes, cyclically using the deposits of new clients in offering to pay older clients what would logically prove to be unsustainable interest rates in the longer run.

Some 25 people were killed amid the street protests that began on December 28. Following the turmoil, a row broke out between the hardliners and Rouhani supporters as to how much of the unrest could be attributed to economic hardship and how much to slow progress in providing people with greater civil rights in the theocratic republic. Iran’s clerical leadership has, meanwhile, accused foreign powers of fomenting the demonstrations with a plot.

Related Articles

Latvia’s new anti-money laundering chief pledges to step up fight against financial crime

The incoming head of Latvia's anti-money laundering agency said on May 17 she will step up efforts to track and combat financial crime and called on banks to improve cooperation. Ilze Znotina, a ... more

Turkey's central bank lowers forex reserves upper limit for banks in bid to help embattled lira

Turkey's central bank moved to buttress the battered Turkish lira (TRY) on May 7 with the currency having lately fallen to a series of record lows against the dollar. The regulator lowered the upper ... more

Weakest ever rates for Iranian rial given on banned free market

Iranians still looking for free market rates on the Iranian rial (IRR) to the dollar—despite ... more