Good and evil in Iranian banking

While we are in Iran and having a meeting with one of our clinets, outside a huge mass of peple flooded the streets. The financial institution "Caspian Credit Institution" declared default. No prewarning, no communication and a lot of people on the streets, fearing about their money. Or at least rumor says, they will declare default....


In April 2015 news where announced that the Caspian Credit Institution which was renamed from Arman Iranian Credit Institution, will be listed as the fifth certified financial institution in Iran on the Central Bank of Iran’s website. In the last days of the fiscal year the bank managed to get a license. As reported on Financial Tribune, Caspian Credit Institution was formed through the merger of several credit institutions and cooperatives based in Khorasan Razavi Province including Fereshtegan, Ferdowsi and Badr Toos. Tose’eh, Noor, Asgarieh and Kowsar are the other credit institutions registered with the regulator.

These unlicensed financial and credit institutions have been a major source of trouble for the banking system in recent years.


Caspian down

Now in 2017, two year later the problems seemed not to be tackled down. Radio Farda reports, that "hundreds of people who have not been able to withdraw their deposits from Caspian credit institution staged a protest gathering in front of the Central Bank of Iran in the capital, Tehran, chanting angry slogans, on Monday morning, May 29. A day earlier, in a similar protest in the city of Khorramabad, capital of Lorestan province, 490 km (305 mi) southwest of Tehran, several protesters had attacked Arman credit institution with stones and smashed its windows. Police forces used water bombs to disperse them. Videos of the gathering in Tehran also show a number of the angry protesters were shrouded, a symbolic gesture to show they were ready to die for their cause. The protesters were shouting “Allah Akbar” and “Death to Seif”, referring to the Central Bank governor, Valiollah Seif."


 Another source,  NCRI Iran, is claiming that "there is news among the depositors about the merging of Fereshtegan (Angels) finance institution with the Caspian institution. For this reason, the depositors fearing their assets might be wiped out (plundered) visited branches of Caspian institution to take out their assets and demanded their deposits be returned to them."


Bank system is the crucial point

And with these scenes Iran has really to discuss internally how to manage the banking system. If a bank run starts, as we have seen in Great Britain recently, the shockwaves can cause severe damage. Even it can bring Iran back to old times. It may be any fault, which leads to the default of Caspian Credit Institution. Right now, no confirmed information is available. But for sure, this shakes the confidence of any investor heavily. A economy is only as good as the banking systems. And here we see much more room for development as this evidence proofs.


Stay tuned


Yours K-Street6 Team