Pressure on Iran’s banks raises chances of collapse

Significance

However, the signs of strain are becoming more marked. On December 15, the Central Bank of Iran (CBI) issued an official warning to all financial institutions, threatening legal penalties for bank managers who try to compensate for rising inflation by offering savers higher interest rates than is legally permitted.

Impacts

• If US sanctions are not lifted, further economic deterioration will increase pressure on the banking system.
• Iran’s blacklisting by the Financial Action Task Force will be an ongoing burden for the banking sector.
• Tight credit will make it hard for consumers to get even small loans, such as those for which newlyweds used to be automatically eligible.
• There are no reliable data, but comprehensive restructuring of the banking system would likely cost hundreds of billions of dollars.