Iran’s isolated banks may have slow, painful return to global system

Iran may be about to restore banking links with the rest of the world after years of separation, but the process won’t be easy as its Islamic financial system has evolved in ways that will complicate ties with foreign banks. Smothered in bad debt and shut out of the global system by sanctions, Iranian banks badly need to resume business with foreign lenders, for whom this would be a huge opportunity. Iran’s Islamic banking assets totalled 17,344 trillion riyals as of March 2014, or $523 billion at the free market exchange rate. But the Iranian banks’ shaky finances and close ties with their government will increase the risks of dealing with them. And during their years of isolation, they have developed a version of Islamic finance that is in some ways markedly different from that practiced in other Muslim-majority states.