Iran takes over major private bank to prevent collapse
State-owned lender absorbs Ayandeh Bank, owned by one of country’s richest families
Iran has mounted one of the largest interventions in the country’s financial system in decades after taking over a major privately owned lender that had been pushed to the brink of collapse by years of spiralling debt and alleged mismanagement.
The central bank has reassured the 7.6mn depositors with Ayandeh Bank that their funds remain safe, seeking to calm a financial system already under severe strain. Ayandeh has been folded into state-owned Bank Melli Iran (BMI), whose white banners now cover its branches.
Founded in 2012 by one of Iran’s richest families, Ayandeh offered the highest interest rates on the market. The rates attracted vast deposits that it could service only by borrowing heavily from the central bank, which printed money to prevent the collapse of an institution deemed too big to fail, analysts say.
The central bank’s approach stoked Iran’s chronic inflation and ultimately failed to keep Ayandeh afloat, analysts say. It took over Ayandeh using a mechanism designed to manage a bank failure without disrupting the wider financial system.
Ayandeh owed the central bank an estimated 5,000tn rials ($4.6bn), while customers have missed payments on more than 97 per cent of Ayandeh’s total loans, according to the semi-official Tasnim News Agency.
The central bank, BMI and Ayandeh did not immediately respond to requests for comment.
BMI is taking on Ayandeh’s liquid assets and liabilities. Ayandeh’s deposits were worth 2,500tn rials ($2.3bn) and its registered capital was only 16tn rials ($14.8mn). BMI has pledged to keep employees in their jobs and pay depositors’ existing interest rates until their contracts mature.
“The central bank’s intervention is a good move in principle,” said a Tehran-based banking analyst, who asked to remain anonymous to discuss the sensitive issue. But the analyst said balance sheet issues and mismanagement were a major concern elsewhere in the sector.
Ayandeh and its founders, the influential Ansari family, have long been accused by politicians and analysts of channelling depositors’ money into speculative ventures and affiliated companies. Between 40 and 44 per cent of Ayandeh’s loans went to the bank’s own subsidiaries, according to Tasnim.
Ayandeh founder Ali Ansari disputed the allegations on Friday, saying “the truth will eventually come out” but that he did not want to raise any “hue and cry” at present. He insisted that the bank had “shone” but was impeded by outside actors, saying Ayandeh was “a symbol of smart efforts manifested in huge projects”.
The bank’s largest project was the construction of Iran Mall in Tehran, one of the Middle East’s biggest shopping complexes.
Its non-performing loans, according to the central bank, amount to at least 1,400tn rials ($1.3bn). Analysts say many of these loans were issued either without collateral or against overvalued assets.
Iran’s financial sector has long had low capital requirements and light regulation, which analysts say have led to banks holding bad debts and balance sheet mismatches. Iran’s isolation from the global banking network under US sanctions has compounded the problem.
Both hardline and reformist politicians had been lobbying for Ayandeh’s closure for years, arguing that the central bank’s support for the bank was fanning inflation and weakening the rial.
In a bid to stay alive, Ayandeh’s board changed its management team on October 18 and offered the central bank a 2,000tn rial ($1.8bn) capital increase.
The next day, President Masoud Pezeshkian met Chief Justice Gholam-Hossein Mohseni-Ejei and parliamentary Speaker Mohammad Bagher Ghalibaf, who rejected proposals to recapitalise or restructure the bank, according to Iranian bankers.
Mohseni-Ejei then publicly warned last Tuesday that the judiciary would intervene if the central bank failed to act. On Thursday, central bank governor Mohammad-Reza Farzin announced the takeover.
“The announcement came as a shock,” said one of the newly-hired managers at Ayandeh. “We all expected our capital increase offer to be accepted by the central bank.”
Ayandeh’s non-liquid assets, including large real estate holdings, have been handed to a government body that insures bank deposits, to be sold over the next two to three years. The proceeds will be used to settle Ayandeh’s debts with the central bank and other creditors.
The central bank has previously intervened in similar cases. State-owned Bank Sepah, which was compelled several years ago to absorb three failing banks, is still struggling with their debt, analysts say.
Authorities insist this time will be different, as the economy contracts and a public wearied by eight years of average inflation at 40 per cent bristles at paying another private company’s debts.
Farshad Mohammadpour, the central bank’s deputy for supervision, explained to local media that “our red line is that not even a single rial of Bank Ayandeh’s financial imbalance will be transferred to BMI”. He acknowledged it would be a challenge to repay Ayandeh’s liabilities: “If selling assets like Iran Mall were easy, the bank would not have reached this point.”
The bank’s depositors are nervous. “We put all our savings in Ayandeh because of its higher interest rates,” said Shirin, a 55-year-old in Tehran who earned 28 to 30 per cent annually, compared with the 23 to 26 per cent offered by other banks. “They tell us our money is safe, but we’ll see when our contract ends in five months.”