Iran Missing Advantages of Foreign Banks’ Presence

EghtesadOnline: Tehran Chamber of Commerce, Industries, Mines and Agriculture has conducted a study on the presence of foreign banks in different countries and its economic impact, underscoring the lack of such a presence in Iran and the missing advantages.

News ID: ۷۸۰۵۶۸

25 November 2017

The private sector institution employs data and research provided by World Bank and Stijn Claessens, a Dutch economist who currently serves at the International Monetary Fund’s Research Department.

“Recent statistics on the presence of foreign banks in 113 countries indicate that only 11 countries are bereft of foreign banks, including Iran and Saudi Arabia,” the study published on TCCIM’s website announced.

Romania boasts the highest number of foreign banks on its soil, with these lenders making up 82% of all financial institutions in the southeastern European country, Financial Tribune reported.

Poland’s share of foreign banks at 76%, Czech Republic at 62% and Singapore and UK each at 58% complete the top five.

This is while a significant number of Asian countries, some of whom neighbor Iran, are present on the list: Foreign banks take up a 48% share in Indonesian banking system while the shares of Turkey, UAE and India stand at 38%, 22% and 12% respectively.

According to the study, in light of the development of south-south cooperation – denoting exchange of resources, technology and know-how between developing countries, especially following the Great Recession of 2008, a number of foreign banks entering emerging economies belonged to developing countries.

“However, the fact remains that a majority of foreign banks in developing economies are institutions belonging to advanced economies,” the TCCIM report notes.

About 42% of Malaysian banks consist of foreign institutions, but only 9% of those are institutions originating from developing countries. The meager share is highly evident in China, where one-fifth of the country’s banks are foreign ones, but only 2% of those are from developing countries.

Untapped Boon

TCCIM enumerates the various economic boons the presence of foreign banks can entail for the host countries: from development and expansion of financial technology and fintech startups to wide-ranging trade and investment benefits.

“Considering changes in the structure of financial systems after the financial crisis, international banking is still regarded as one of the major sources of finance for developing countries,” the study said.

The report noted that the important and positive effects of the presence of foreign banks on funding businesses and boosting the efficiency of resource allocation have caused developing economies and emerging markets to benefit from them, even though the global financial crisis had a negative impact.

“Lack of foreign banks’ presence in Iran on the scale witnessed in other similar developing economies shows that the country has been unsuccessful in utilizing funding resources, especially when it was not subject to sanctions,” the study writes.

It added that based on an article in the Sixth Five-Year Development Plan (2017-22), all executive bodies and the government have been obligated to do what is necessary to prepare the ground for the presence and cooperation of foreign financial institutions in Iran.

TCCIM, therefore, calls on all parties involved to allow foreign banks to enter Iran for the benefit of domestic economy.