German banks see no quick pick up in Iran business

Berlin / Reuters

Restoring German banks’ financial ties with Iran will take time given debt owed to Berlin and transparency concerns, the head of the German banking association said, dampening expectations before a business summit in Tehran.
Iran owes Germany about €500 million ($569 million) under so-called Hermes covers, a German government arrangement that protects German companies if foreign debtors fail to pay.
“Rebuilding ties with Iran requires patience,” Michael Kemmer, head of banking association BDB, told reporters. “To begin with, the transactions regimen has to work again before the next step of financing projects can take place.”
German industry has been hoping for a surge in exports to Iran after international sanctions were lifted in January in return for the Islamic Republic complying with a deal to curb its nuclear ambitions.
German Economy Minister Sigmar Gabriel will co-chair an economic conference with Iranian counterpart Ali Tayyebnia in Tehran on May 2-3, and German companies see the event as a potential catalyst for doubling exports to Iran to 5 billion euros.
But the German government has said guarantees for exports to Iran will not be renewed as long as Tehran’s debt is not paid.
A spokeswoman for the German economy ministry said both sides were holding “in-depth talks” on the issue and these could soon be concluded.
She added companies could apply for Hermes export guarantees and a decision could be made immediately after an agreement.
Credit insurer Coface said this week there was a lack of reliable information for doing risk assessments on Iranian corporate partners but medium-term prospects were good.
Another barrier for German banks is transparency.
Kemmer mentioned a recommendation by an international anti-money laundering group that government financial intelligence agencies give extra scrutiny to transactions and business relationships involving Iran and North Korea.
The Paris-based Financial Action Task Force (FATF) said in February it remained concerned about what it called Iran’s failure to address the risk of terror financing and the serious threat this poses to the global financial system.
“It is really important for banks that the FATF re-evaluates the situation in Iran,” Kemmer said. “The supervisory standards require that business ties with banks that have high risks lead to higher capital and liquidity requirements.”