Mohammad Reza Hosseinzadeh, the head of the Association of State-Owned Banks, announced after the meeting on Saturday that prominent leaders of the banking system, including his counterpart in the Association of Private Banks and Credit Institutions, Kourosh Parvizian, have reached a compromise with the municipality.
"Reviews and negotiations in the meeting led to a decision to form two workgroups between the banking system and TM," the banker, who is also CEO of Bank Melli Iran, the nation's biggest bank, was quoted as saying by the official news portal of the municipality.
The first workgroup is specifically tasked with identifying and clearing TM debts to banks while based on the second, the banking system pledges support to urban development projects, Financial Tribune reported.
Hosseinzadeh said the first workgroup will devise "an orderly payment system" to settle TM liabilities to the banking system and the other will commit banks to support construction, environmental and transport projects, and "anything that is a priority for the municipality".
The banks have agreed to work as part of a consortium that has Tehran's rampant pollution in its sights as a major issue.
BMI's chief executive said the goal is to create a healthy Tehran that conforms to international standards.
There are varying reports on the exact amount of TM debts to banks. According to semi-official Fars News website, the entity is indebted to nine banks with the biggest volume belonging to Shahr Bank.
According to the website's report which could not be independently verified by Financial Tribune, the lender was owed more than 105.2 trillion rials ($2.5 billion) by late August 2017.
An agreement was reached with Shahr Bank around the same time, based on which major real-estates in Karaj plus 20 trillion rials ($473.6 million) were conceded by TM, reducing its liabilities to 25.47 trillion rials ($603.13 million).
BMI was reportedly one of the municipality's biggest debt-holders with around 25.63 trillion rials ($606.91 million). Tejarat Bank was owed 28.71 trillion rials ($679.84 million) while Bank Saderat with 8.13 trillion rials ($192.51 million), Bank Mellat with 4.81 trillion rials ($113.9 million), and Bank of Industry and Mine with 4.5 trillion rials ($106.56 million) came next.
Banks Sepah, Sarmayeh and Saman were also reported owed 1.65 trillion rials ($39 million), 1.67 trillion rials ($39.55 million) and 70 billion rials ($1.67 million) respectively.
That brings the total volume of remaining TM debts to banks to 100 trillion rials ($2.37 billion).
The debts are mainly a legacy of former mayor, Mohammad Baqer Qalibaf, who finished his controversial and much-criticized 12-year tenure at Tehran Municipality in September 2017. He also challenged centrist President Hassan Rouhani before his second landslide reelection last year and withdrew in favor of Ebrahim Raisi, a senior cleric and former prosecutor-general.
One of Qalibaf's populist mottos during the elections was that only the ultra rich or the top "4 percent" use macro banking resources. That prompted Central Bank of Iran Governor Valiollah Seif to say "TM is currently one of the biggest banking debtors" and implemented many of the urban projects he boasts proudly.
Qalibaf was replaced with pro-reform Mohammad Ali Najafi who also resigned earlier this year due to health problems. Afshani, the new Tehran mayor, is also a reformist and previously served as governor general of Fars Province in addition to having experience with municipalities. He seems to have struck a much-anticipated compromise with the banks that could prevent further indebtedness of the ailing TM.
Afshani was well-received by the bank executives in their meeting this week as a professional leader with relevant experience, who expressed hope that in addition to the debt clearance workgroup, the second workgroup will be able to play a significant role in developing the metropolis, especially since "a majority of economic and construction projects have been or are implemented with the participation of banks".