The first offshore bank will be established in Kish Free Trade Zone Organization in a month, said an official at KFTZO on Sunday.

“All the documents and guarantees have been sent to the Central Bank of Iran and the authorities told us the operation license will be issued soon,” IRNA quoted Ali Jirofti, KFTZO deputy for economy and investment.

“The bank will be fully owned by Iranian investors,” he said, noting that offshore banks can deal only in foreign exchange deals.

Kish Island is a famous tourist and business resort in the Persian Gulf and has attracted a lot of attention of foreign firms wanting to deal with Tehran in the post-sanctions era.

As per law, foreigners are allowed to own up to 40% of bank shares in the mainland while in the free zones they can open banks with 100% equity. The government is also providing tax exemption and easier visa regulations for work in the special economic and trade zones to facilitate business activities for foreign business and their staff.

The minimum capital required for starting a bank in the FTZs in Iran is €25 million ($28.3 million) and lenders are allowed to trade only in foreign currency.

Jirofti said Bank Melli Iran, Bank Mellat and Tejarat Bank are ready to open letters of credit for foreign traders. “Even for purchasing airplanes we used LCs issued by domestic banks.”

It was reported earlier this month that the CBI is studying 18 applications from Iranian businesses to open banks in the free trade zones.

Iran’s banks have been saddled with soured assets and international sanctions in recent years and the banking system overall is weak. The lenders are in urgent need of recapitalization to survive and move forward in the post-sanctions era.

Although sanctions have been lifted on many banks, they still struggle to find foreign banks willing to work with them. Most major international banks remain reluctant to do business with Iran, for fear of contravening the remaining US sanctions, including a ban on using the greenback when dealing with Iran.

The restrictions still in place include those imposed for alleged terrorism charges and violations of human rights. Tehran has routinely dismissed the lethal charges and says Washington simply does not hold the high moral ground to dictate to other governments how to conduct their affairs.

By Financial Tribune