Iran is to establish an offshore bank on one of its Persian Gulf islands “within a month” as it continues to seek ways around restrictions on international payments, according to the Islamic Republic News Agency (IRNA).
The IRNA report stated that the new bank will be set up on Kish Island, which has been developed as a tourism destination and a free trade zone over several decades.
The aim is to tap into rising demand for cross-border banking transactions, commented Ali Jirofti, deputy head of the Kish Free Zone Organisation, who told IRNA that the new, unnamed offshore bank will be able to transfer money and facilitate domestic and foreign investment activities.
Jirofti added that the plan is for the bank to be established next month. If that does happen, he said it could play a useful role for a country which is still searching for ways to tap into the international financial system.
Iran’s banks have struggled under sanctions in recent years and although they have been lifted on many banks since January – when the country agreed to scale back its nuclear activities – they still struggle to find counterparts willing to work with them.
Most major international banks remain reluctant do business with Iran out of fear of contravening the remaining US sanctions, including a ban on the use of US dollars in dealing with Iran.
A recent news report however suggested that the US government is considering a change in its rules to permit Iran to transact in dollars using offshore financial institutions.
Meanwhile, Iran is attracting large amounts of foreign direct investment (FDI). A recent report from fDi Intelligence showed that there were 22 FDI projects collectively worth US$3.5bn in the first quarter of 2016, the highest level of investment in a single quarter since it began tracking the Iranian market in 2003.
Iran has been the third largest recipient of foreign investment in the region so far this year, behind the United Arab Emirates (UAE) and Saudi Arabia. The main sources of investment into Iran were South Korea and Germany, which together accounted for US$2.2bn of the total.
The international trade deal is described as the most significant since the formation of the World Trade Organisation in 1995.
Finance ministers back further moves to prevent multinationals from exploiting differences in tax rates between EU member countries and those outside the region.
The European Banking Authority said that its proposed rules for stronger customer authentication would be relaxed for payments under €10.
A relatively small population and take-up of the latest technologies makes the country a testbed for payment innovation, according to an ANZ Group report.