Truck Fleet Renewal to Fast-Track Iran-Sweden Banking Relations

EghtesadOnline: Iran is yet to fully regain its status in the global banking industry following the implementation of the 2015 nuclear deal that provided sanctions relief, and in case of Sweden, it hopes that joint ventures in the auto industry would prove a turning point.

News ID: ۷۴۵۱۲۰

07 April 2018

On Wednesday, a host of high-level officials with the Central Bank of Iran met with their counterparts in Tehran to discuss ways of improving banking relations, the official website of CBI reported.

"The participation of Swedish truck manufacturing companies in the megaproject of renewing Iran's fleet can mark the resumption of correspondent banking relations between the two countries," CBI Governor Valiollah Seif told Stefan Ingves, governor of Sveriges Riksbank, the central bank of Sweden.

"Renewal and development of Iran's fleet has the capacity of about €5 billion in investments during the next three years and if the Swedish side finances this project, it would also open the way for banking links in addition to developing bilateral business cooperation," Financial Tribune quoted him as saying.

Renewing Iran's truck fleet is part of a bigger fleet renewal plan envisioned by the administration of President Hassan Rouhani to reduce air pollution and fuel consumption. Scania and Volvo, two major Swedish manufacturers, are involved in the plan.

Volvo Trucks has made its comeback to Iran through a joint venture deal with SAIPA Diesel, a subsidiary of SAIPA that produces heavy and light vehicles. The Gothenburg-company and the Iranian automaker have a three-decade history of collaboration.

Scania has been one of the few international heavy vehicle manufacturers that did not walk away when Iran was slapped with sanctions and continues its collaboration by delivering trucks to Iran.

During his meeting with Ingves, the CBI chief outlined the achievements of Iran's economy in the past few years, predicted a 4% GDP growth rate for the current year, pointed out that CBI is actively pursuing massive banking reforms and referred to reviving dead assets as one of the most important future goals of the monetary regulator.

"Fortunately, conforming Iranian banks with the International Financial Reporting Standards, and anti-money laundering and combating the financing of terrorism efforts are underway," Seif said.

The CBI chief pointed out that Iran's standing with the Financial Action Task Force has improved and said Iran remains hopeful of normalizing its status. He added that the country will strive to reduce its risk rating by another notch to reach 4.

The intergovernmental organization in charge of setting global standards on AML/CFT in its latest plenary meeting in February decided to renew the suspension of countermeasures until its next meeting in June. The Organization for Economic Cooperation and Development upgraded Iran's risk rating from 6 to 5 in January.

Seif invited the Swedish Bankers' Association to visit Iran and negotiate with Iranian banks to expand banking ties.

Iranian Banks' Progress

Ingves reportedly referred to his delegation's negotiations with Iranian banking executives as positive and hoped that they will strengthen banking ties.

"The path on which Iran's banking system is moving is correct and Iran's banks have taken positive steps in complying with modern banking standards and I hope they will also be successful in executing them," he said.

The Swedish banker said stability, economic growth and adhering to international regulations and standards are prerequisites for interacting and doing business with the world and added that Sweden is ready to cooperate with Iran in terms of transferring banking know-how concerning monetary and financial stability, organizing workplaces and standardizing monetary regulations.

In another meeting at CBI attended by Iranian banking executives, Ingves recommended that Iran increase its supervision on banks, reform the structure of its state-owned lenders and implement a managed floating foreign exchange system after unifying its current dual rate system.

The central banker referred to the 2008 Great Recession and Sweden's own experience in overcoming a national crisis when the Swedish National Debt Office began issuing treasury bonds, Sweden's Ministry of Finance supported credit institutions by issuing guarantees and injecting capital and the Sveriges Riksbank focused on establishing stability.

"A key issue in crisis management is to restore and empower public trust. However, the best crisis management is to present the solutions for preventing a crisis," he said.