Iranian Banks Liquidating As Regime Seeks To Avert Panic
Islamic Republic’s officials are in damage control mode over the Central Bank of Iran’s decision to dissolve several banks and financial institutions by October.
Islamic Republic’s officials are in damage control mode over the Central Bank of Iran’s decision to dissolve several banks and financial institutions by October.
The liquidation of Tosse-eh (Development) Credit Institution is in its final stages while the order to dissolve Ayandeh (Future) Bank was given to the Central Bank earlier this week. There are several other financial institutions, such as Caspian and Nour, that are set to dissolve or merge with other banks.
Reports of the liquidation of the unprofitable banks have been circulating in recent years, with Tosse-eh sending messages to its customers asking them to close their accounts until mid-March 2022. The institution has 30 branches all over Iran.
However, like a lot of other decisions in Iran, the liquidation never actualized, perhaps to avoid a mass panic among the population who already distrust the country’s banking system.
Lawmaker Gholamreza Marhaba, a member of the parliament’s economic committee, said Monday that according to the Constitution if a bank or financial institution strays from regulatory oversight and becomes unprofitable, the law outlines a series of measures, with the final step being dissolution or merger of the bank.
“There are unhealthy banks within the country's banking system, with some institutions in the liquidation phase, but we cannot discuss them in detail at present due to the lack of official information,” he explained.
Marhaba, however, said, “I want to emphasize that fortunately, none of the private or state-owned banks are at risk of bankruptcy. These banks have sufficient assets to easily cover their losses and compensate them. Therefore, customers can rest assured that neither Ayandeh Bank nor any other bank is facing bankruptcy.”
The Ministry of Economy seeks to exercise greater oversight over the unprofitable banks to ensure their financial stability, especially the non-state banks that have engaged in non-banking activities, he noted and said that “military organizations” had created institutions and banks that did not perform successfully, and at least five of them have so far merged into Bank Sepah, the official bank of Iran’s Revolutionary Guards (IRGC).
The dissolution of banks should not be sensationalized in the media, and discussions about the fate of such banks should be held behind closed doors “to maintain customers' confidence without tarnishing the reputation of these financial institutions,” he added in remarks typical of regime insiders who prefer to hide negative news.
A similar approach was evident in remarks by ultra-conservative lawmaker Fereydoun Abbasi who called Monday for confidentiality of economic indicators and other statistics, under claims of security risk.
Mashregh News, a hardline website affiliated with Iran's Revolutionary Guard, published an article in July titled “Countdown for Bankrupt Banks,” explaining the threats of such entities for Iran’s economy.
“Bankruptcies among Iranian banks are becoming increasingly prominent due to the country's economic crisis, posing irreversible consequences if ignored,” Mashregh News said, noting that big loans to officials with links to regime insiders – called ‘Major Debtors’ in Iranian media – as well as a lack of transparency in real asset holdings are among the major factors behind the issue.
The Central Bank of Iran issued a warning earlier in the year, giving ultimatum to underperforming banks to rectify their financial situations by late-September, with CBI Governor Mohammadreza Farzin saying that any bank or financial institution that fails may face liquidation.
Government interventions, excessive borrowing, and a lack of accountability in the banking sector are cited as other key factors leading to these bankruptcies. While some banks may be temporarily bailed out by the government, the overall trust in Iran's financial system has been significantly eroded, making it difficult for the economy to recover. Iran’s government has been aggressively borrowing from quasi-public banks to fill its budgetary gap and keep its unprofitable companies afloat.
Abbas Pourkhosravi, a banking analyst, told Mashregh News that changing the current banking structure will help prevent bankruptcies, highlighting that “unless Iran establishes connections with the international banking system, significant transformations in the country's banking system will not occur.”
Bankruptcies in the banking sector have a ripple effect, impacting various industries and causing widespread dissatisfaction among the public, Mashregh News added, warning that restoring trust in the financial system will be a challenging task, as eroded confidence can have long-lasting consequences.
The government is in debt, and the banks are even more indebted, a vicious circle that sees accumulated losses concealed from the public through manipulating financial statements on losses and loans and deferring the losses to the following year.
Official statements from Iranian media on Tuesday reveal that the homemade UAV (unmanned aerial vehicle), has an operational range of 2,000 km and can fly for up to 24 hours.
Reports indicate that the drone is equipped to carry missiles, bombs, and hand grenades. It is also outfitted with electronic warfare and reconnaissance systems.
Iran claims that drone's payload capacity can now accommodate up to 300 kilograms, double that of its predecessor; the Mohajer-6 drone.
The Mohajer-10 was unveiled in the presence of President Ebrahim Raisi, and is part of a new generation of Iranian military drones.
During the same ceremony, the air-launched Arman-1 bomb was also revealed. Concurrently, the release of a large quantity of advanced missiles – the Khorramshahr and Haj Qasem missiles – to the Armed Forces and the Aerospace Force of the Islamic Revolutionary Guard Corps (IRGC) has already commenced.
While US officials have alleged that Iran supplied Mohajer-6 drones, along with other unmanned aerial vehicles, to Russia to aid with their invasion of Ukraine, Iranian authorities have denied such allegations.
Rising tensions in the region have continued to draw global attention. Iran's attempt to seize two commercial vessels in early July was met with a resolute response from the United States, prompting Iran to withdraw, as confirmed by the Pentagon. Over the past two years, Tehran has reportedly harassed or seized more than 15 commercial ships in the broader Persian Gulf region.
In light of these challenges, the White House announced its intention to take decisive actions to safeguard stability in the region. While specific details were not provided at the time, subsequent actions have included a bolstered US military presence. In July, the Pentagon deployed F-16 and F-35 warplanes, and dispatched three naval vessels carrying over 3,000 sailors and marines, underscoring their commitment to maintaining a robust presence in the region.
Addressing the evolving situation, the Pentagon has affirmed its readiness to provide onboard armed protection to commercial vessels in the region, a development that Iranian media described as unprecedented. This move has also ignited discussions about the heightened prospects of potential military clashes in the region.
In recent months, numerous media reports have discussed covert diplomatic initiatives aimed at mitigating tensions with Iran. These efforts include the potential release of Tehran's frozen funds from nations like Iraq and South Korea, contingent upon Iran's commitment not to escalate its uranium enrichment to weapons-grade levels.
However, as of now, apart from a US sanctions waiver granted to Iraq to facilitate a partial fund release, there have been no notable developments. Simultaneously, in addition to the discourse surrounding Iran's nuclear program, the United States is actively pursuing the liberation of several American dual-nationals held captive in Iran. The unlocking of $7 billion in South Korean funds has been proposed as a concession in exchange for the release of these detainees.
Asharq Al-Awsat cited Major General Yahya Rasool, the spokesman for the Commander-in-Chief of Iraq’s Armed Forces, who stated on Sunday that there are no US military movements, despite footage of US military convoys circulating in separate Iraqi locations as shown in local media.
There are unconfirmed reports in local media that the US has deployed additional military forces along the border between Iraq and Syria, possibly preparing for an operation against pro-Iran militias in eastern Syria. The aim would be to disrupt Iranian supply routes to Syria and Lebanon.
Khalid al-Yaqobi, the Security Policy Advisor to the Prime Minister of Iraq, denied reports of the US army increasing its military presence in Iraq, according to the Iraqi News Agency. He claimed that the recent large-scale troop movements are merely “replacements” for the US-led forces in neighboring Syria. Yaqobi stated during a televised interview on Sunday, "There is no mobilization of US forces, but rather a replacement for US units present in Syria."
Three Iraqi officials, including a leader of an armed faction stationed in northwestern Iraq, informed the London-based newspaper that the US was repositioning its troops in the region, possibly preparing for a military operation outside Iraq. Another Iraqi government official told Asharq Al-Awsat that the alleged movements “are limited to locations outside the Iraqi border.”
An unnamed militia leader, likely from the groups backed by Iran, noted that the armed factions believe the strategic objective of the operation was to “change the rules of engagement with the Russians in Syria.” He emphasized that “What we have now is just speculation, based on limited information, as the Americans do not share much with Baghdad about their operations.”
According to the Iraqi figures, “the Americans will also try to cut off the Iranian supply route towards Syria and Lebanon, through Iraqi territory... This is all we know so far.”
Asharq Al-Awsat claimed that factions known for their opposition to the US presence are maintaining calm over the recent US movements, a departure from their usual behavior.
A senior official from the Coordination Framework, a coalition of Shiite parties aligned with Iran, was cited by Asharq Al-Awsat as saying, “The faction leaders recently discussed information about the American moves and received an Iranian message that what the Americans are doing, whatever it is, is not a cause for concern.” Earlier reports said the Shiite factions are “aware of an imminent operation and have been asked to avoid escalation.”
The US-led Coalition to combat the Islamic State (ISIS) also rejected reports of the United States deploying more troops to Iraq, stating it is part of a normal rotation of foreign forces in the country.
Major General Matthew McFarlane, the outgoing Commander of the Combined Joint Task Force-Operation Inherent Resolve (CJTF-OIR), was quoted by Kurdistan 24 as saying during a press conference on Sunday, “I have seen those rumors; they are just rumors. We are in the middle of rotations right now, which are normal routine activities involving bringing in new units with equipment.”
He added, “These rotations are necessary so our troops stay fresh and connected to their families. There was a press release in March from the Department of Defense about it, pending changes.”
Pentagon Press Secretary Air Force Brig. Gen. Pat Ryder stated on August 17 that claims of US forces being engaged in border security between Iraq and Syria are not true, emphasizing that they do not provide such security.
However, Foreign Policy Analyst Walid Phares suggested on Sunday that Iran’s Revolutionary Guards have temporarily suspended attacks on US units in Iraq because American and allied forces are coming close to shutting down most of the Syria-Iraq border.
Over the past few days, American troops have reportedly dispatched armored vehicles and soldiers to the Syrian border, entering from the Iraqi side and positioning near the city of al-Qa’im, adjacent to the border town of Al Bukamal along the Euphrates River. The US-led coalition has also conducted military exercises involving fighter aircraft at the "Koniko" base located in the northern outskirts of Deir ez-Zor, Iraq's Shafaq News Agency reported.
Moreover, the political wing of Iraq's Asa'ib Ahl al-Haq (AAH), an Iranian-backed Shiite militant group led by Qais al-Khazali, said that around 2,500 US soldiers have recently entered Iraqi territory and are now stationed at the Ain al-Assad Air Base.
This deployment coincides with the presence of military vehicles and combat aircraft in the area. Earlier in August, Washington announced that more than 3,000 US sailors and marines have arrived in the Middle East, along with the USS Bataan (LHD 50), an amphibious assault ship, and the USS Carter Hall (LSD 50), a dock landing ship.
The forces from the Bataan Amphibious Ready Group (ARG) and 26th Marine Expeditionary Unit (MEU) have been deployed in response to escalating tensions with Iran and as a show of maritime strength. In June, the Pentagon had already sent additional F-35 and F-16 fighter jets along with a warship to the Middle East to monitor key waterways in the region following Iran's seizure and harassment of commercial vessels. Recent developments in the region, including Iran's seizure and harassment of vessels, have seen tensions rising.
Earlier this week, Iran’s Revolutionary Guard released a video of surveilling and following a US Navy ship in waters off the coast of the Strait of Hormuz in the Persian Gulf. IRGC commanders, such as commander-in-chief Hossein Salami, keep threatening the US forces in the region.
Apparently, the new deal between Tehran and Washington only focuses on a prisoner swap and Tehran’s frozen funds without reducing tensions between the US forces and Iran’s proxy militias, led by IRGC's extraterritorial Quds force.