Iran reportedly to close accounts at Woori, IBK

Iran’s central bank has reportedly decided to cancel the use of Korean currency-based transaction settlement accounts opened at two Korean banks due to low interest rates.

Although the banks did not disclose the size of the trade accounts, they are estimated to be somewhere in the region of 5 trillion won ($4.41 billion).

According to the banking industry, the Central Bank of Iran (CBI) recently sent notification that it will close accounts at Woori Bank and the Industrial Bank of Korea (IBK) due to their 0.1 percent interest rates. Additionally, the CBI requested that the Korean government find alternative banks for it to use.

According to the contractual terms, if either side decides to close the account, they have to give 60 days’ notice. Both banks denied having received such notification from Iran.

CBI Deputy Gov. Minou Kianirad reportedly met with Korean Vice Finance Minister Shin Je-yoon on Aug. 2 in Seoul and sought help in convincing the banks to raise their annual interest rates, adding that the CBI was suffering losses on its interest income. Kianirad proposed a separate deposit with a rate of 3 percent, adding that if no solution was found within two weeks, the CBI would cancel its remaining accounts.

The deputy governor was said to have met with Woori Bank President Lee Soon-woo and IBK President Cho Jun-hee during her visit. The banks acknowledged the Iranian central bank had requested an improved rate, but denied that they were demanding 3 percent. The trade settlement accounts were first opened in October 2010 after the U.S. government sanctioned Tehran on suspicion that it is developing a nuclear program. As dollar-based transactions were suspended, the two countries agreed to switch to Korean-currency accounts.

By Lee Ho-jeong [ojlee82@joongang.co.kr]