IslamicFinance.de

Financial experts are warning that Iran’s banking sector is at risk of a collapse due to toxic assets. It is no secret that over the past decade all Iranian banks were negatively affected by sanctions, internal mismanagement and corruption. Another disturbing factor in the financial sector has been the presence of unlicensed financial institutions. Government interference has led to the accumulation of tens of billions of dollars of bad debts that will continue to put pressure on the balance sheets of Iranian banks for some time to come. Besides the high ratio of nonperforming loans, Iranian banks have a high portion of overvalued and illiquid assets on their balance sheets that need to be adjusted. Now several Iranian banks are following government instructions and have started to sell their noncore assets. The Central Bank of Iran (CBI) will have no choice but to push for bank mergers and also to impose and implement tough regulations on the country’s banks in order to prevent a deeper crisis.