Bank Ayandeh has been dissolved, and its 5.4 quadrillion rial (approximately 4.7 billion dollars) debt owed by Ali Ansari, along with its outstanding commitments, has been transferred to Bank Melli, which itself has a negative capital adequacy ratio. According to official data, only nine banks in the country are not bankrupt. On Thursday, October 30, the UK Foreign Office announced on its official website that Ali Ansari, the owner of Bank Ayandeh, has been sanctioned under new UK measures for supporting the hostile activities of Iran’s regime. Bank Ayandeh was established in November 2009 during Mahmoud Ahmadinejad’s presidency with the support of his government. Later, due to insufficient capital, the process of its merger was initiated.

The Scale of Bank Ayandeh

According to the bank’s most recent audited financial report, Bank Ayandeh has 275 branches run by 4,274 employees, while 3,474 more work in its subsidiary companies. The bank owns 40 subsidiary firms, including Iran Mall International Development Company (which owns the Iran Mall project), and 13 affiliated companies, such as Razi Insurance. The bank’s seven million customers have deposited 2.55 quadrillion rials (approximately 2.217 billion dollars).

The Banks of Iran: Serving the Economy or Corrupt Capitalism?

The bank’s share of total public deposits in Iran’s banking system rose from 3.2% in its first year to 8% after about six years, although this upward trend stopped and reversed after 2019. Through money creation—using public deposits as credit—Ali Ansari issued massive loans to his own subsidiary companies. For instance, for every deposit of 10 million rials (approximately 1,000 dollars), Ansari issued a 9 million rial (approximately 900 dollars) loan to another company. This increased the total money supply to 19 million rials (about 1,900 dollars). Such a process can grow exponentially and is a normal practice in global and Iranian banking, provided the loans go to healthy, profitable businesses. However, in Bank Ayandeh’s case, Ansari directed most of the loans to his own subsidiaries. Moreover, under Iran’s current banking regulations, banks must keep about 10% of deposits as legal reserves. Ansari exceeded this limit, effectively overdrawing. The newly created money entered the economy, increasing liquidity and fueling inflation. Bankruptcy—The loan recipients, all subsidiaries of Bank Ayandeh and Ansari’s companies, were not profitable and struggled to repay their loans. Meanwhile, Ansari had to pay interest on deposits, so he attracted new deposits to cover old interest payments while issuing even more loans. The latest evaluations show that Bank Ayandeh generates 60 trillion rials (about 52.173 million dollars) in annual revenue but has 760 trillion rials (about 660.869 million dollars) in expenses—meaning its annual deficit is 700 trillion rials. After years of such losses, the bank now faces accumulated losses of 5.4 quadrillion rials (around 4.695 billion dollars) upon its dissolution. Now, seven million individual and corporate depositors who had 2.55 quadrillion rials (approximately 2.217 billion dollars) in Bank Ayandeh have been transferred to Bank Melli by decision of the Central Bank. Although the Central Bank emphasized from the beginning that the “financial imbalance” of Bank Ayandeh would not be transferred to Bank Melli, at least the responsibility for paying deposit interest now falls on Bank Melli. The latest financial report of Bank Melli, dated March 2024, shows it already had accumulated losses of 760 trillion rials (approximately 660.869 million dollars), a figure that has likely grown since. Structurally, all of its board members and decision-makers—except for one representative from private banks—are state officials. Since Iran’s banking network has broadly issued loans far beyond actual deposits, and many borrowers cannot repay due to recent economic challenges, any mass withdrawal by the public would collapse the economy. This risk was especially felt in the early 2010s. Ultimately, since no one is willing to purchase the bank’s assets—including the Iran Mall—the remaining deficit will be covered by other funds and once again by the Central Bank. In other words, Ansari’s debts will be paid from public funds, meaning taxpayers will bear the cost. The dissolution of Bank Ayandeh, therefore, effectively erases Ansari’s debts at the expense of the Iranian public. But Bank Ayandeh is not the only bankrupt bank in Iran. In fact, Bank Melli—the institution now absorbing Ayandeh—also faces serious problems. Its total non-performing loans, resulting from 2,163 large unpaid credits, amount to 365.49 trillion rials (approximately 317.817 million dollars). These debts affect the calculation of a bank’s capital adequacy ratio. According to the Basel standard—referred to in Iran as the “Basel Committee”—the minimum acceptable capital adequacy ratio for a bank is over 8%. Across Iran’s banking network, only nine banks have a capital adequacy ratio above 8% (and are thus not classified as bankrupt). The remaining seven banks have ratios that have fallen below zero.

With The Debt of a Single Bank in Iran, 120 Specialized Hospitals Could Be Built

The average capital adequacy ratio across Iran’s banking system is around negative 18%. These figures are based on published financial statements, but since many banks have not released updated reports, the real situation is likely even worse. For instance, according to Bank Ayandeh’s last financial statement, its capital adequacy ratio was around negative 295%. However, at the time of dissolution, the Central Bank declared that the ratio had fallen to negative 600%, indicating that the system-wide average has likely deteriorated further beyond negative 18%. Bank Melli, now positioned as Bank Ayandeh’s savior, itself has a capital adequacy ratio of negative 5%, according to the most recent data. After Bank Ayandeh, Bank Sarmayeh’s condition is particularly dire. The situation is also alarming for banks such as Sepah—which handles military salaries—and the privately owned Bank Shahr and Bank Parsian, both of which have large customer bases.