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The Legal Framework for Foreign Investment in the Iranian Banking Sector

In: Yearbook of Islamic and Middle Eastern Law Online
Authors:
M.A. Ansaripour Associate Professor, Faculty of Law, University of Tehran Tehran Islamic Republic of Iran

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Ahmad Mohammadi PhD Student, Faculty of Law, University of Tehran Tehran Islamic Republic of Iran

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Abstract

The banking services are heavily regulated in the Islamic Republic of Iran. The regulatory framework is based on the Monetary and Banking Act 1351 (1972) which was supplemented with the Interest-Free Banking Operations Act 1362 (1983) in post-revolutionary period. The Council of Money and Credit of the Central Bank of Iran performs the regulatory functions. Iran has tried to attract foreign investment in its banking sector under the Promotion and Protection of Foreign Investment Act 1381 (2002). The current regulatory regime provides four channels to foreign investors for investment in the banking sector. First is partnership with the existing Iranian banks; second is establishing a development bank, third is to establish foreign banks, and fourth is to establish branches of foreign banks. Iran is likely to attract foreign investment in its banking sector especially after its accession to the Shanghai Cooperation Organization on September 22, 2021. This however will require reforms in the current regulatory regime that is stringent and ambiguous in many aspects related to the establishment, functions, operations, winding up of banks.

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