Banking reform moves up the agenda

Iran's banking sector is dominated by five large state-owned commercial banks, accompanied by five smaller ones, which are required to conform to Islamic banking principles. As a rule, the public banks post weak profits, are undercapitalized and over-staffed, and are run by risk-averse managers. James McCormack at Fitch Ratings says the sector's weakness is state induced. "Sectoral credit allocations, deposit rates and lending rates are prescribed by the authorities based on economic development objectives as opposed to credit risk or monetary policy considerations," he says. The banks are thus "direct instruments of public policy". New licences