- TEHRAN — country’s largest private bank bankrupt, defunct
- Founded in 2012, Bank had 270 branches
- including 150 in Tehran alone
- accumulated losses US$5.2b, US$2.9b debts
- state-owned M--li Bank absorbed assets of the Bank
- “bad debts” had prompted the bankruptcy.
- >90% of Bank’s funds allocated to related parties
- or projects managed by bank itself were never repaid
- lavish projects like immense shopping complex
- 5 other banks also face difficulty
My Comments:
- >90% of Bank’s funds allocated to related parties ??
- projects managed by bank itself were never repaid ??
Related parties simply means 'corruption'. Kickbacks. Commissions. Basic banking common sense dictates that commercial banks should stick exclusively to the business of banking and not get involved in managing the businesses the bank is financing.
In the case of bad loans banks usually appoint a professional "receiver" to safeguard their interests. I have been party to such a situation. The "receiver" will usually salvage as much of the business as possible so that the business can be sold off at the best price - often the primary objective of the receiver. It is a salvage operation.
A bank may suffer a certain percentage of bad loans - normal in the banking business. Most certainly a certain percentage of all housing loans, car loans, business loans will turn bad. But if the bank has good credit standards and risk management these can be minimised without bankrupting the bank.
But if 90% of the banks funds have gone bad - that is a systemic failure. The Chairman, the Board Members, the CEO, the Senior Management were all in the game.
It looks like Iran is falling apart in more than one way.
