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Three Iranian Banks to Open Branches in Germany

25 Sept., 2016

Vistar Business Monitor

Germans, from the very beginning after the JCPOA went into effect, vigorously started visiting Iran. Now, these visits have made Germany the fifth trade partner of Iran.

Germany is an old partner of Iran and was once the top trade partner of the country before sanctions were imposed on Iran. Being pioneer among its European neighbors in trades with Iran, Germany now seeks to seat on the first place in terms of banking transactions with Iran as well. To this end, Germany’s experts from its Central Bank took the lead to help Iran upgrade its banking system which has undergone tough days for at least six years. After that, Germany invited Iran’s governor of Central Bank to shape the transactions between the two countries more concrete.

Ilse Aigner, the Bavarian State Minister of Economic Affairs, has also announced that three private Iranian banks have received approval to set up branches in Germany. These Iranian banks include Middle East Bank, Parsian Bank and Sina Bank. She, however, mentioned that barriers in payments still remain, adding that it has been several months that negotiations between Iran Central Bank and Germany’s big banks are underway to address the issue and these talks are at the final stages.

If negotiations bear tangible results, then it would be a turning point not also in in trade relations between Iran and Germany, but also in banking transactions between the two countries. Another benefit that lies in this case for Iran is that it triggers the process for other Iranian banks to set up branches in other European countries as well.

The fact is that the dire condition resulting from sanctions forced Iran to bring its banking relations with the global banking system to the minimum level. At the same time, the world’s banks were, at a good pace, moving toward expansion of use of modern systems. This created a yawning gap between system of Iranian banks and that of global banks. This means that even if the problems in way of banking relations with the outside world are solved, the lagging banking system of Iran will need more time to catch up with the system of world’s banks. Iranian banks will have to undergo more pressure, compared to pre-sanctions period, to reintegrate with the international banking system. This calls for Iranian banks to level with modern systems rapidly and compensate years of lagging behind global banks. Now, Germany has stepped in to help the Iran’s banking system with this dilemma. Germany intends to train Iranian bankers and upgrade their banking system and beside that, it intends to become the first country to attract Iranian banks despite tough regulations Germany has for foreign banks to set up branch in Germany.

Now, situation seems read for Iran’s banking system to make a considerable improvement. If Iranian banks successfully pass the litmus test of setting up branches in German, then the path would be paved for them to cooperate with other international banks, and thus get connected to banking system of other European countries as well, especially the UK and France.

Germany has taken the lead to help Iran take further step to get integrated with global community and trade relations. Germany also seeks to revive its past level of trades with Iran and aims at seating on the second place among Iran’s trade partners after China. For this, they need eased banking relations for. Thus, the more they help Iran upgrade its banking system and consistent with the world’s banking system, the more they can reap from trade relations with Iran.

Now, there is an opportunity for Iran to reconnect to global banking system. The banking system is the base for all transactions and transportations which are requisite for all sort of trades. However, it remains to be seen how determined Iranian bankers are to interact with the world’s banks in practice. This depends on the bankers on one side, and on Iran Central Bank from the other side.


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