Banks gearing up to enter Iran, India

KEB Hana Bank CEO Ham Young-joo, third from left, poses with Central Bank of Iran (CBI) Deputy Governor Gholamali Kamyab, second from left, after their meeting at CBI headquarters in Tehran. / Courtesy of KEB Hana Bank

By Nam Hyun-woo

A growing numbers of commercial banks here are accelerating their efforts to tap into markets in Iran and India, both of which are emerging as attractive trade partners for Korea.

Iran is one of the most promising markets after trade sanctions on the country were lifted. According to data from the World Bank, Iran’s economy is expected to grow 5.8 percent this year.

The country is emerging as an attractive partner for Korea as well, following President Park Geun-hye’s landmark visit to Tehran earlier this month. Park and her counterpart Hassan Rouhani oversaw the signing of a number of memoranda of understanding (MOUs) aimed at boosting economic cooperation.

KEB Hana Bank is swift in coming up with plans for when Iran-bound transactions in euros become possible.

CEO Ham Young-joo visited the Central Bank of Iran (CBI) and Bank Melli Iran early this month to discuss a euro-based settlement system linking Iranian banks, KEB Hana Bank and European institutes.

Woori Bank CEO Lee Kwang-goo, fourth from left, cuts tape with dignitaries to open the bank’s Tehran office this month. From left are Daelim Industrial Vice Chairman Lee Hae-wook, Financial Supervisory Service Senior Deputy Governor Park Sae-chun, Central Bank of Iran Deputy Governor Gholamali Kamyab, Lee, and Financial Services Commission Vice Chairman Jeong Eun-bo. / Courtesy of Woori Bank

The euro-based settlement system is an assignment Korea’s banks and government have been grappling with, because the U.S. dollar is still banned in trading with Iran, while Korea’s business leaders prefer the euro in making settlements.

To meet such a preference, building a euro-based substitute settlement system is being discussed among governments, but the priority is to get acknowledgement from the U.S., because won-euro exchanges require U.S. dollars.

“The euro-based settlement system is a government decision,” said an official at the bank. “However, Ham has visited the Iranian banks to come up with swifter measures for when this becomes possible.”

Woori Bank is also expanding its overseas network to enter the Iranian market.

The bank announced, May 2, that it has opened a liaison office in Tehran, a first for Korean banks, after receiving approval from the CBI, April 12.

Currently, Woori Bank operates a won-based settlement system and a center for supporting trade and investment with Iran. As the dollar-based settlement system was suspended after Iran was slapped with sanctions, the CBI has opened won-based accounts at Woori Bank and the Industrial Bank of Korea for payments between the two countries’ companies.

The bank said it will upgrade the office into a branch or a subsidiary so that it can provide financial transaction services.

“We initially planned to turn the liaison office into a branch at the end of this year, but the situation is rapidly changing,” said an official. “To confirm the opening date, we are closely watching whether sanctions on Iran can be lifted further and how many Korean companies will make an entrance into the market.”

According to the bank, it is seeking to build a “financial belt” linking its branches in Dubai and Bahrain so that it can provide smooth financial services to Korean companies looking for an entrance into Middle Eastern countries,” an official at the bank said.

Shinhan Bank is making bold moves in India. The bank said Monday it has received regulatory approval for two branches in the Ahmedabad and Ranga Reddy districts near Hyderabad.

Shinhan seeks to open the branches before the end of this year. Should this happen, Shinhan will have six business channels in India, the most among Korean banks.

The regions are emerging as clusters for the automobile, petrochemical and IT industries; while foreign banks are fiercely competing to open branches in the region, Shinhan said.