With the Persian year coming to an end, a variety of analyses of critical economic sectors have been offered by economic newspapers and websites. The state-run Taadol newspaper reported, “This wasn’t a good year for many of the shareholders in the stock market. A year which started with optimism and hope, though it doesn’t sound like it’s going to have a good ending.”
The newspaper reported that market liquidity is trapped in inactive symbols, the longtime absence of bank stocks and their reopening with heavy falls, losses by big companies, high interest rates, asset freezing and even the political risks being taken by the government have all impacted the market’s momentum.
Assessment of the market liquidity has actually led to a deeper recession, and that has been raised as a serious issue. At the end of the trading day on March 8, 2016, the Iranian Mellat Bank stock fell 45% and the likelihood of bankruptcy of Bank Sarmayeh was strengthened. According to the state-run Entekhab website, the stock market dropped 514 points and fell 76,285 points. Iranian Copper Industries with 73 points, Shabriz with 69 points, and Webmellat (Bank Mellat) with 60 points had the most negative effects on the falling stock market index.
The Bank Mellat shareholders sold 61 million shares, which indicated a fall of more than 45% of the bank’s share value since July of last year.
While there is not conclusive report on the situation of the money market or the banks, the regime’s Minister of Industry said earlier this week that “money-lending and interest-receiving have crippled the banks.” Nematzadeh explained that banks around the world set their profits based on the services they offer, “whereas we want to move ahead just through money-lending and interest-receiving.”
The banks have also reached the point where their non-current receivables reveal that the share of doubtful and unrecoverable receivables, which are considered a red light for banks, have reached more than 60%. Capital adequacy, per international standards, needs to be at least 8%, whereas the average amount of capital adequacy in Iran’s banking network is 5.5%, and it is even negative for some commercial public banks.
Other officials have noted that the corruption within the system allows individuals to get loans from Iranian banks and then transfer the funds to international banks, where they earn a larger amount of interest on the money, and may not pay back the loans.
Asghar Abolhassani, head of the Expediency Council’s monetary and banking committee, said, “The amount of banks’ debts to the Central Bank are so high that the Real-Time Gross Settlement system of some banks has been interrupted, with their accounts in red state.”
There is a fear that the debt has been inflated to the point that it is turning into a significantly large market that could become uncontrollable. Despite the sanction relief that began in 2016, Iran’s economy has not seen a significant upswing. For many Iranians, the economy continues to be marred by inflation and unemployment. Overall industrial productivity is significantly reduced throughout the country, while funds continue to get diverted to regional hotspots, as Iran backs various regimes and rebel causes.