Information about Middle East Oriente Medio

Chapter 2: The Financial Sector - Issues and Reforms

International Monetary Fund
Published Date:
March 2007
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The Iranian financial system has evolved through a number of stages since the 1979 revolution. After widespread nationalization in the 1980s, reform of the financial system in the 1990s and 2000s focused on improving the regulatory environment and streamlining controls to enhance efficiency, while more limited steps were taken to open the system to private sector participation and foster competition. These efforts, however, have not significantly altered the structure of the financial system, which remains underdeveloped and exhibits several weaknesses that are typical of countries in transition to a market economy. These weaknesses include ownership of and dominance over financial institutions by the public sector (even though a number of private banks have started operations in recent years), widespread use of administrative controls on credit allocation and rates of return (equivalent to interest rates), a lack of competition among banks, relatively weak bank supervision, shallow and weakly regulated capital markets, and an underdeveloped insurance industry (Table 7). Financial system reform must continue in line with the gradual opening up of the economy to foreign trade and capital inflows, the increasing role of the private sector in economic activity, and the need to enhance bank supervision and improve monetary policymaking.

Table 7.Comparative Financial Development Indicators, 2000–01(Comprehensive index, scale 0 – 10)
Comprehensive IndexBanking SectorNonbank Financial SectorRegulation and SupervisionMonetary Sector and PolicyFinancial OpennessInstitutional Environment
MENA average5.
Finacial development levels (average scores)1
Source: Creane and others (2003).

Within overall scale of 0–10, intermediate scales are as follows: high, above 6; medium, 4–6; and low, below 4.

Source: Creane and others (2003).

Within overall scale of 0–10, intermediate scales are as follows: high, above 6; medium, 4–6; and low, below 4.

State-owned banks, including the specialized banks, continue to be the major providers of financing to the corporate sector, even though their lending is rationed and highly concentrated on a small number of large companies or priority sectors (notably agriculture) to which they lend at subsidized rates. Despite its increasing capitalization (24 percent of GDP), the stock market has a relatively low level of liquidity and provides little fresh financing to the corporate sector.

The financial system has operated in a volatile macroeconomic environment. Between 1989/90 and 2003/04, real GDP growth varied considerably around an average of about 5 percent, with standard deviation amounting to 3¾ percentage points. Also, average annual CPI inflation fluctuated in a range of 11–49 percent, and the official exchange rate vis-à-vis the dollar depreciated from Rls 80 to Rls 8,400. More recently, large unsterilized purchases of foreign exchange and the relaxation of credit policy led to high rates of growth of credit and money (with annual average growth rates of 36 and 29 percent, respectively) in the three years leading into 2003/04. This led to the persistence of inflation at 15½ percent for the last two of those years.

The Iranian financial system lags behind those of other MENA countries in many respects. According to an overall index of financial development prepared by the IMF staff (see Creane and others, 2003), Iran ranks low among MENA countries, with particularly low scores for financial openness, monetary policymaking, and development of the banking and nonbanking financial sectors (see Table 7).1

This chapter reviews key issues and reform challenges in the financial sector in Iran. The following section provides information on the evolution of the size and structure of the banking system, capital markets, insurance sector, and foreign exchange market. The section on governance and regulatory oversight discusses issues of regulation and governance of Iran’s financial system and highlights the reasons behind the relatively low level of financial intermediation. It also provides an update on the implementation of FSAP recommendations. The section on the reform agenda presents links between financial sector reforms and the performance of the real economy, drawing on cross-country experience, and outlines the reform agenda in selected areas based on earlier FSAP recommendations. The last section in this chapter summarizes and offers some recommendations.

Overview of the Financial System

Banks and Nonbank Credit Institutions

Following the 1979 revolution, all commercial banks were nationalized, and foreign participation in banking was banned. At the time of nationalization, the banking network included 36 banks with various degrees of government and foreign ownership, comprising 7 specialized banks, 26 commercial banks, and 3 regional financial institutions. Only since 2001 have private banks been reauthorized to operate in Iran.

The structure of the banking system has not changed substantially since the nationalization, which reflects the continued dominance of the public sector in the economy in general. Currently, the banking system consists of six state-owned commercial banks, four state-owned specialized banks (see Box 1), a state-owned Postal Bank (licensed in 2004), six recently established small private banks, and one nonbank private credit institution. State-owned commercial and specialized banks dominate the banking system, holding about 98 percent of deposits. At end-March 2004, the consolidated assets of banks amounted to 49 percent of GDP, and broad money, excluding foreign currency deposits, represented 45 percent of GDP.2 These ratios are below those recorded in the 1990s and those of most comparable MENA countries (Figure 4). Lack of progress in deepening financial intermediation is largely attributable to high inflation (about 20 percent on average over the 10 years ending in 2004) and various administrative controls on banking operations (see the following section).

Figure 4.Selected MENA Countries: Broad Money/GDP Ratio, 1990–2002

(In percent)

Source: IMF, World Economic Outlook (WEO) database.

The financial position of the banking system is relatively weak. Despite a recapitalization of state-owned banks in 2002 amounting to Rls 5,000 billion (0.7 percent of GDP) and the reinvestment of postunification foreign exchange gains in equity capital of state-owned banks in 2004, the risk-weighted capital adequacy ratio, at 7.2 percent, is below the 8 percent recommended by the Capital Adequacy Framework in the Basel Capital Accord. In 2003/04, the return on assets was estimated at 1 percent, and the ratio of nonperforming loans was reportedly 5.2 percent (Table 8).3 Private banks, however, have a much stronger financial position than implied by the banking system’s average ratios.

Table 8.Financial Soundness Indicators, 2003/04(In percent)
Banking SystemState-Owned Commercial BanksState-Owned Specialized BanksPrivate Banks
Risk-weighted capital adequacy of banks7.25.515.419.5
Ratio of nonperforming loans of banks5.
Return on average assets of banks1.
Return on equity20.416.723.935.0
Net open position in foreign exchange to capital30.
Source: Iranian authorities.
Source: Iranian authorities.

Box 1.Specialized Banks

There are four specialized banks: housing (Bank Maskan), agriculture (Bank Keshavarzi), export development (Export Development Bank), and industry and mining (Bank Sanat-OMadan). These banks also take deposits, but the great majority of their loanable funds comes from commercial banks, the central bank, and other public sources, including the central government.

Bank Keshavarzi (Agricultural Bank) is by far the largest of the specialized banks; it is comparable in size to other state-owned banks, except Bank Melli. Its loan portfolio amounted to Rls 29 trillion (2.5 percent of GDP) as of end-March 2004, accounting for about 60 percent of banking system loans to agriculture. The resource base is composed of government contributions, central bank loans, deposits of other banks, and a growing number of deposits by nonbanks. Bank Keshavarzi offers a wide range of Islamic finance instruments for agricultural financing and has set up an Agricultural Insurance Fund covering 63 commodities. Such an insurance system is more common in developed countries and rare in developing countries because of the high risks associated with agricultural activity. However, the government has provided large financial support to the bank to compensate for drought-related losses.

The degree of concentration in the banking system remains high, with the state-owned Bank Melli controlling about one-third of assets. There is also substantial loan concentration in individual state-owned banks. On a weighted average basis, the 20 largest exposures of each of the state-owned banks accounted for 24.3 percent of their total committed financing facilities in 2000. This suggests a lack of diversification in the asset portfolios of banks. Furthermore, following the exchange rate unification in March 2002, the extent of dollarization of the banking system has increased, albeit from a low base.

The recently licensed private banks, which emerged from private nonbank credit institutions that were authorized in the mid-1990s, are mainly active in some market niches, such as short-term bridge financing of medium-size enterprises,4 mortgage lending, and retail consumer lending. Private banks have started to exert competitive pressure on state-owned banks.

Iran’s financial system also includes a number of small banking institutions and informal financial intermediaries. About 6,000 Qarz-ul-Hasanah funds, which raise zero-interest funds and provide interest-free loans, operate on a small scale. Almost 1,000 registered credit cooperatives are also in operation, but these are very small, with total assets well below Rls 1,000 billion (0.1 percent of GDP). Moreover, some bonyads (charitable foundations) run quasi-banking institutions, one of which has recently received a credit institution license. Finally, informal finance is common with high rates of return, reflecting lack of access to bank financing by small and medium-size enterprises.

Capital Markets and Insurance

Following the 1979 revolution, the activities of the Tehran Stock Exchange (TSE) came to a standstill. The TSE was reopened in 1989 when the government listed many state-owned companies in an effort to start a divestiture program and develop the private sector in the context of the First Five-Year Development Plan. Since then, TSE activity has continued to grow, despite some volatility that reflected uneven progress in macroeconomic stabilization and structural reforms, as well as the variations in the price of oil.

Since 1998, the size of the capital market has been increasing rapidly. By end-April 2004, the capitalization of the TSE reached $37.5 billion (24 percent of GDP), mainly owing to a more than 600 percent increase in the TSE share price index since the last downturn of late 1998, but also owing to the increased number of listed securities (Figure 5). Capitalization of the TSE relative to GDP, however, remains below that of comparable exchanges in Egypt and Jordan. Despite the increase in capitalization, little fresh financing has been provided to the corporate sector.

Figure 5.Selected MENA Countries: Share Price Indices, 1998–2003

(1998 = 100)

Sources: Iranian authorities; IMF staff estimates.

The recent increase in the stock market’s capitalization has been driven by a number of factors. First, the market is recovering from the low level of 1998, when the average price-earnings (P/E) ratio was about 3. Second, business confidence has strengthened as a result of recent reforms and liberalization measures, rapid economic growth, and high oil prices, thereby significantly improving investors’ expectations of future profit growth. Third, a relaxation in the monetary policy stance during 2002–04 may have contributed to portfolio adjustment away from bank deposits, which carry negative real rates of return, in favor of investment in the stock market. Fourth, anecdotal evidence suggests that unrecorded portfolio investments from Iranians living abroad also may have contributed to the stock market rally. Finally, the opening of new regional branches of the TSE has attracted a growing number of investors from the provinces, increasing demand for equity investment. Although the average P/E ratio is still moderate compared with those in other equity markets (about 9), its level might be understated given possible weaknesses in accounting and reporting rules (Table 9).

Table 9.Selected Emerging Markets: Price-Earnings and Turnover Ratios, April 2004


Sources: International Finance Corporation; Tehran Stock Exchange.
Sources: International Finance Corporation; Tehran Stock Exchange.

Most listed companies are parastatal enterprises with varying degrees of direct and indirect government ownership. The ongoing divestment program has been modest so far (1 percent of GDP per year).5 The largest sectors in TSE capitalization are automotives, mining, petrochemicals, and financial services (primarily intermediaries).

Despite the stock market rally in recent years, market turnover remains low. At about 0.2 for 2003/04, it is substantially lower than the turnover ratios for other emerging markets (Table 9). This reflects the relatively large presence of a few institutional investors that do not engage in active trading. A large share of capitalization is reportedly accounted for by cross-shareholdings of some companies and insufficiently regulated investment companies.

The insurance sector is still very small. The Central Insurance Authority (Bimeh Markazi) is regulator and supervisor, as well as a market participant in its own right through reinsurance. Five companies owned directly or indirectly by the government collected about 1 percent of GDP in premiums in 2002/03. The recent authorization and licensing of private insurance companies is expected to enhance the development of this sector.

Foreign Exchange Market

After years of tight restrictions, Iran has largely liberalized current account transactions and made progress in trade liberalization. On March 21, 2002, the exchange rate was unified, most exchange restrictions on current account transactions were eliminated, and import-related transactions in the financial system were liberalized.6 At present, there are no derivative instruments to hedge against exchange rate risk, and all transactions are carried out in the spot market. The central bank remains the main seller in the domestic and offshore foreign exchange markets (mainly the Kish Island market).

Some capital account liberalization measures have recently been taken. A new law approved in 2002 established a clear legal framework for FDI in Iran and contributed to the increase in FDI commitments, excluding oil and gas, to $1.8 billion in 2003/04 from about $70 million in 2001/02. Other forms of capital inflows are subject to restrictions—mainly through limitations on non-Iranian nonresidents’ investment in the stock market and real estate. It appears that nonresident Iranian nationals have recently increased substantially their portfolio investment in Iran; this is legally authorized but not statistically recorded.

Regarding outflows, following the exchange rate unification, two important avenues have been opened for legal (but largely unregulated) access to foreign exchange for current and capital account transactions. First, unregulated transfers of rials can be made to offshore zones (subject to compliance with anti–money laundering (AML) regulations), where they can be converted into foreign exchange without restrictions. Second, the use of foreign exchange initially originating from export proceeds, short-term capital inflows in the form of banking deposits, and remittances of Iranians abroad is not subject to restrictions in the offshore or onshore markets.

Governance and Regulatory Oversight

The Iranian financial system operates under Islamic finance principles (i.e., consistent with Sharia) based on the 1983 Law on Usury-Free Banking. Under these principles, ex ante preset interest rates are prohibited and the return on financial instruments must be linked to purchase and resale of goods (and services) or to profit and loss sharing on projects. However, in practice, little uncertainty exists on future rates of return in Iran. Commercial banks achieve this by smoothing the returns (that is, implicitly building up and drawing down reserves to equalize returns over time) and through implicit or explicit government guarantees on returns and principal of financial instruments issued by state-owned banks.

Box 2.Financial Repression: Definitions and Cross-Country Evidence

Financial repression is defined as the set of policies, laws, regulations, taxes, qualitative and quantitative restrictions, and controls imposed by the government that do not allow financial intermediaries to operate at their full potential (Roubini and Sala-i-Martin, 1995). These public policies artificially increase demand for base money of banks (for example, through high required reserves) and households (for example, via constraints on financial innovations and the imposition of ceilings on a range of return-earning instruments). Given this artificial increase in demand for base money, revenue from inflation tax is increased. This revenue is “spent” indirectly through subsidized directed credits and directly via financing of the government. Even though it is possible in the short run to generate a higher inflation tax under financial repression than under a liberal financial system, the many distortions and inefficiencies created by financial repression impede growth in the medium and long term. The empirical research on the relationship between financial repression and growth (Roubini and Sala-i-Martin, 1992; Levine, 1997; and Demetriades, Devereux, and Luintel, 1998) suggests that financial repression affects growth in three ways. First, the productivity of investment is reduced (low and declining TFP). Second, overall savings and investment are lower. Third, intermediation costs of allocating savings to investment are higher. The last two effects are associated with disintermediation and financial system weakening.

The Iranian financial system is subject to “financial repression” (Box 2), through various forms of control, in particular on the banking system. These controls have contributed to low profitability and undercapitalization of state-owned banks. The banking system in its present form largely fulfills quasi-fiscal functions in the context of a public-sector-dominated economy. It channels financial resources to priority sectors as defined by the government rather than to the projects with the best risk-return opportunities. Moreover, full transparency in relations between state-owned banks on the one hand and public enterprises, charitable foundations (bonyads), and influential large private companies on the other appears to be lacking. Anecdotal evidence suggests that this lack of transparency manifests itself in long waiting lists and rationing in loan applications at negative real rates of return.

Low profitability and undercapitalization of state-owned banks are interconnected problems. The former mainly stems from administrative controls on rates of return on deposits and loans (Tables 10 and 11), sectoral credit allocation, directed credits, high reserve requirements, government interference in management, and high operating costs. Some forms of administrative controls have recently been eased, in particular those related to sectoral credit allocation, but other controls continue to hinder competition and profitability. In turn, low profitability contributes to a slow buildup of equity capital.

Table 10.Rates of Return on Deposits, 1999/2000–2003/041(In percent per year)
Source: Iranian authorities.

Iranian fiscal year ends March 20.

Rates effective from May 12, 2001.

Long-term deposits over one year introduced in 1990/91 and 2000/01.

Source: Iranian authorities.

Iranian fiscal year ends March 20.

Rates effective from May 12, 2001.

Long-term deposits over one year introduced in 1990/91 and 2000/01.

Table 11.Rates of Charges on Bank Loans, 1999/2000–2003/041,2(In percent per year)
Industry and mining17–1917–1916–181616.0
Trade and services22–2522–2523522521.05
Source: Iranian authorities.

Iranian fiscal year ends March 20.

Announced rates representing minimum payable return. May be lower or higher than the actual ex post rates of return.

Rates effective from May 12, 2001.

Only for Bank Maskan (housing bank).

Minimum rate.

Source: Iranian authorities.

Iranian fiscal year ends March 20.

Announced rates representing minimum payable return. May be lower or higher than the actual ex post rates of return.

Rates effective from May 12, 2001.

Only for Bank Maskan (housing bank).

Minimum rate.

The four private commercial banks are not subject to controls on rates of return and do not benefit from implicit guarantees of deposits. As a result, their costs of funds, including deposit rates, are higher, which tends to be reflected in higher lending rates compared with those of state-owned banks. Despite this pricing disadvantage, private banks have been able to increase their market share, owing to their superior customer services, including faster processing of applications and more customer-tailored banking products, and to credit rationing by state-owned banks.

Banking supervision is undergoing major changes but is still focused on compliance with government directives rather than risk assessment. The central bank is in charge of supervising banks and large credit institutions. However, small nonbank credit institutions, including credit unions and Qarz-ul-Hasanah, are not subject to supervision by either the central bank or the ministry of finance and economy. These institutions have been authorized by the ministry of interior, which is also responsible for their oversight and that of other nonprofit organizations. Legislation bringing these institutions under central bank supervision is under consideration.

A comprehensive program to develop and implement a risk-based regulatory and supervisory framework for the banking sector is currently under way, in line with FSAP recommendations. Some regulatory reforms are in place, including licensing, net open positions in foreign exchange, the definition of statutory capital, capital adequacy, large exposures, connected lending, and AML regulations for banks. Supervisory functions have been unified under a single department at the central bank. Onsite and offsite inspections have begun, using risk-based criteria. Finally, reporting forms and supervision manuals are being developed. Despite this progress, a full-fledged, risk-based supervision framework has not been established yet, and the supervision of state-owned banks continues to rely on tight monitoring of credit allocation and compliance with administrative restrictions.

Regulatory oversight of publicly traded securities and stock exchange operations is relatively underdeveloped. The TSE operates according to the 1966 Stock Exchange Act: it is managed by a TSE board headed by the governor of the central bank, and no independent supervisory entity exists to oversee issuance and trading of securities. With few laws covering stock market operations, the TSE has itself introduced bylaws to cover insider trading, market manipulation, and disclosure and transparency requirements. However, these regulations are difficult to enforce without proper legislation. A draft law covering AML activities in the entire financial system, including trading in securities, awaits legislative approval.

The insurance regulatory framework is also outdated. Compulsory reinsurance, government control on tariffs, and the “specified proportions” approach to achieving prudent investments tend to result in excessive premiums and limit innovation and development of this predominantly state-owned industry.

Reform Agenda

The reform of the financial sector in Iran is incomplete, and further progress is needed to promote efficiency and facilitate the development of a dynamic and competitive financial sector that can meet the demands of an increasingly open and liberalized economic environment. Although reforms are needed in almost all segments of the financial system, the banking sector should be a high priority because of its size and role in allocating savings in the Iranian context.

Banking System

The reform agenda in the banking sector covers virtually all aspects of banking activity. Appropriate sequencing of reforms is important to their success in deepening financial intermediation. The highest priority is to complete the establishment of a risk-based supervisory framework; this should take precedence over steps in banking sector deregulation. Subsequently, state-owned banks will need to be restructured and their operational environment liberalized. Finally, state-owned banks might need to be recapitalized in connection with their possible privatization.

The reform of banking supervision has to be accelerated in connection with the ongoing liberalization and opening up of banking to private sector participation. This reform will help protect the banking system against the risks associated with the rapid credit growth that has occurred in recent years. The remaining reforms include the preparation, passage, and implementation of essential regulations pertaining to liquidity risk, asset classification, provisioning, and investments. The Banking Act should be amended to incorporate the concept of bank soundness among the objectives of bank supervision, to enlarge the range of sanctions to banks that do not comply with the regulations, to define banking and other services that banks and other financial entities are allowed to deliver, and to define the role of external bank auditors. Staff training and information technology development will be essential for successful implementation of these reforms. Finally, smaller deposit-taking institutions need to be brought under the supervision of the central bank as envisaged in the draft law on these institutions submitted to parliament.

Banking restructuring involves managerial, operational, and financial reorganization. Reforming the corporate governance of state-owned banks is key. As a first step, management of commercial banks should focus more on improving performance and strengthening the financial position of the banks. The undue influence by large public companies and bonyads on the management of banks has to be eliminated. Under the current system, managers of state-owned banks have little incentive or expertise to manage risks effectively; it will be important to provide adequate training in risk management, particularly in the area of credit risk.

Once risk-based banking supervision has been established and corporate governance of banks has been improved, further steps in deregulating the banking environment can be implemented. Rates of return on loans and deposits should be gradually liberalized, and the share of loans subject to sectoral allocation limits should be gradually reduced to zero. This will foster competition in the banking sector, improve pricing of risks, and contribute to more efficient allocation of financial resources. A reduction in administrative controls will also stimulate more effective use of existing Islamic finance instruments and development of new ones in line with recent international experience in this area (Sundararajan and Errico, 2002).

With respect to financial restructuring, the degree of undercapitalization of individual state-owned banks must be assessed on the basis of international norms, and the high lending concentration on large borrowers should be discouraged through strict implementation of the recently approved regulations on large exposures. Moreover, restructuring of banks will only be effective if accompanied by a restructuring of the large state-owned companies that are the major debtors. The program of restructuring and privatization of public companies will have to go hand in hand with banking system restructuring plans.

Capital Markets and Insurance

In light of the rapid increase in equity valuation, the reform agenda for capital markets needs to focus on tightening the supervision of securities issuance and on facilitating the market entry of properly supervised intermediaries. Efforts are under way to introduce a new capital market law that will cover securities issued inside and outside the TSE. This law intends to ensure the efficient functioning of securities markets and protect investors against unfair and fraudulent practices by requiring that adequate and timely information is provided to investors and the general public on companies that issue securities, and by regulating the activities of market intermediaries. Another key reform should be to establish an independent securities and exchange commission. The development of market infrastructure (such as electronic trading, registration, and settlement of transactions) is also important and should go hand in hand with progress in regulatory oversight.

Similar to the other segments of the financial system, a risk-based insurance regulatory framework will need to be put firmly in place, and the Central Insurance Authority should divest itself of its reinsurance business and concentrate on regulation and supervision.

Capital Account Liberalization

The authorities have adopted a gradual approach toward capital account liberalization. The approach focuses mainly on attracting FDI, as reflected in the recent FDI law. Short-term flows, including portfolio investment, would be liberalized gradually. The draft portfolio investment law, which rightly takes a gradualist approach to liberalizing short-term inflows, is expected to authorize limited portfolio investment of nonresident institutional investors, with time limitations on the repatriation of principal capital.

Experience with capital account liberalization in developing countries indicates that the emphasis should be on reforms that help meet key preconditions for liberalization and enhance its benefits (Ishii and Habermeier, 2002; and Prasad and others, 2003). These preconditions include macroeconomic stability; an appropriate exchange rate regime; a strong and well-supervised financial system with developed and liquid capital markets; and significant improvements in key institutions, including legal framework and corporate governance.

Although Iran has made progress in all these areas, more work is needed to meet the preconditions for capital account liberalization. Macroeconomic stability must be firmly established—currently, inflationary pressures persist and the economy is vulnerable to sudden large changes in oil prices. Although a managed float exchange rate regime has been established, increased flexibility in the exchange rate is needed to deal with potential volatility in capital flows and fluctuations in oil revenue. Hedging instruments would need to be developed to increase the resilience of the financial system to exchange rate risk. As noted earlier, banks and the capital markets need to strengthen their capacity to monitor and assess the risks associated with volatile capital flows.


Although Iran has made progress in reforming its financial system, important challenges remain. The reform agenda for the period ahead should focus on restructuring the financial system and reducing its vulnerabilities. Reform of the banking system is of paramount importance; the highest priority is strengthening the supervisory framework and corporate governance of banks, which would ensure that a reduction in controls on credit allocation and rates of return will result in better financial intermediation. Managerial and organizational restructuring could be followed by recapitalization, privatization, and greater openness to foreign participation in domestic banks. Banking sector reform will need to be supported by the restructuring of the large state-owned companies that are the banks’ major clients.

Proper supervision of the rapidly growing stock market is also needed, along with progress in developing the market infrastructure. The new capital market law is expected to address these issues and create a sound legal framework that will help foster the development of capital markets. Further capital account liberalization could be considered in step with progress in reducing inflation, reforming the financial sector, and introducing other supporting reforms.

Note: This chapter draws on the IMF’s Financial Sector Assessment Program (FSAP) undertaken in 2000 and provides updated information and analyses on several aspects of the Iranian financial system. It was prepared by Vitali Kramarenko.
1Monetary policy issues are discussed in Chapter 3.
2These ratios do not include the Postal Bank and some other banking institutions, which are not covered by the monetary survey.
3These ratios are not fully comparable to those in other countries owing to differences between Iran’s accounting standards and the International Accounting Standards, as well as a lack of proper regulations on loan classification and provisioning.
4Because there are long waiting lists for loan applications in state-owned banks, many companies in urgent need of liquidity apply for bridge loans from private banks; these loans are subsequently refinanced by state-owned banks.
5The divestment program mainly offers large blocks of shares to strategic institutional investors.
6A more detailed historical account of the evolution of the exchange rate regime is provided in Chapter 4.

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