December 17, 2015 / 8:43 PM / 2 years ago

Asian banks seen taking pole position in post-sanctions Iran

LONDON (Reuters) - Asian banks are expected to be among the first institutions to venture into Iran once sanctions are removed, with Western financial players remaining cautious for some time to come, banking officials said on Thursday.

Iran and world powers reached a deal over Tehran's nuclear programme in exchange for sanctions relief, which is expected to come into effect next year, pending the Islamic Republic meeting its obligations, known as "implementation day".

Many Western companies, including European businesses, remain concerned about initiating trade with Iran, fearing that they could still fall foul of the complex layers of sanctions and potentially face fines or be cut off from the U.S. financial system. Existing U.S. sanctions will remain in place.

"We will see the Asian banks going back in," said Justine Walker, of the British Bankers' Association (BBA) lobby group, without giving further details.

"When that will be? When is implementation day?" she told a post-sanctions Iran conference in London.

Amr Aboushaban, of emerging markets investment bank Renaissance Capital, said that Western banks would tread carefully, having experienced multiple fines in recent years for sanctions violations.

Aboushaban said that smaller players and Asian banks are most likely to lead the return to the Iranian finance sector.

"The Gulf banks -- a couple of countries -- will be doing, especially, short-term lending (in Iran)," he added.

Iran is struggling with capital constraints after years of financial freezes. So far, no banks have publicly announced plans to return to Iran.

'CAUTION AND HESITANCY'

Last week top U.S. Treasury official Adam Szubin told a briefing in London that there would be "caution and hesitancy" by international banks initially when approaching Iran.

Wider U.S. regulations, part of a tougher regime introduced since the financial crisis, include anti-money laundering rules.

The United Arab Emirates wants authorities in the United States to clarify regulations for U.S. banks doing business with UAE banks, which have held up transactions via the U.S. dollar clearing service.

The BBA's Walker said that the key issue for members of the association -- the chief executive of which visited Tehran as part of a UK trade delegation this year -- involved arrangements with the Iranian financial sector.

"The first questions are who will give correspondent banking and who will facilitate trade finance and when that will happen," Walker said.

"I would hope that some of that will start to happen in the summer ... I just don’t know. It could be quicker."

Nicola Bolton, managing director for trade at the UK Trade & Investment ministry, said it was working with the United States and the European Union over the issues but acknowledged the difficulties ahead.   

"We understand that some in the financial services sector are concerned about the U.S. sanctions that will remain in place even after the first phase of sanctions relief," Bolton told the conference.

"We have to also recognise that even after sanctions lift Iran is still going to be a really challenging place to do business."

Editing by Alex Smith and David Goodman

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