Bank Melli Iran

Background

The formation of a modern national bank that would keep foreign influence in check became a topic of debate in Qajar Iran during the last quarter of the 19th century, following similar debates in the Ottoman Empire following the establishment of the foreign-controlled Ottoman Imperial Bank in 1863. In 1879, a proposal along such lines was made to emperor Naser al-Din Shah by Tehran business leader Haj Muhammad Hassan Amin al-Zarb. During the Persian Constitutional Revolution, the aspiration to financial independence became a major political issue, leading to the publication of a manifesto promoted by a group of prominent merchants in December 1906.

On 23 November 1906, Abolqasem Naser ol-Molk, the Minister of Finance of the time of Mozaffar ad-Din Shah Qajar, reported to the National Consultative Assembly about the country's financial crisis and suggested a loan from European countries to deal with it, but the deputies rejected that option and, on 9 December, agreed to establish a national bank instead. But the abrupt changes in the political environment and the Anglo-Russian Convention of August 1907 prevented that vision from becoming reality until after the 1921 Persian coup d'état and the establishment of the Pahlavi dynasty in 1925. Soon after cementing his rule, Reza Shah started considering a revival of the national bank project, intended as a departure from Persia's previous dependency on foreign finance embodied by the Imperial Bank of Persia.

National bank of issue

The bank was initially established as Banque Nationale de Perse (lit. 'National Bank of Persia') in 1928, based on a law approved by the National Consultative Assembly on 14 May 1927. The bank's statute was approved by the National Consultative Assembly's Finance Committee on 14 July 1928. The bank started operations on 8 September 1928, originally located in the former building of the Persian Tobacco Régie. Its initial capital was 20 million Rials, of which 8 million were paid. It soon opened two branches in addition to its head office, in Tehran's Grand Bazaar and in Bushehr, the country's most important commercial port.

Due to the fact that there were no bank specialists in Iran at that time, the law allowed the recruitment of Swiss or German nationals for the administration of the bank. The first CEO of the National Bank, Kurt Lindenblatt, and its vice-president, Otto Vogel, came to Iran together with other experts from Germany. The number of bank employees on the opening day, including Iranian and German, did not exceed 27.

On 22 March 1931, the National Consultative Assembly granted Bank Melli Iran a monopoly on banknote issuance for 10 years, automatically renewable for another ten years if not formally canceled in the meantime. The BMI's first banknotes were originally intended to be introduced on 20 June 1931, but due to delays in issuance, they were eventually issued on 21 March 1932, the day of Nowruz; they coexisted for several months with those of the Imperial Bank of Persia, which were officially withdrawn in September 1932. Also in 1932, the bank's long-term credit operations were spun off as the Iranian Agricultural and Industrial Bank (French: Banque Agricole et Industrielle de l'Iran), later known as Bank Keshavarzi Iran.

In 1936, Bank Melli Iran moved into a purpose-built modern head office on Ferdowsi Street, designed by German architect H. Heinrich, whose construction had started in 1933.

In 1938, the bank's mortgage credit operations were similarly spun off as the Mortgage Bank of Iran, or Bank Rahni Iran. In 1939, the saving fund of Bank Melli Iran was established under a law to encourage people to save money.

In the early 1940s, Bank Melli Iran open several regional branches that shared the same monumentalist style, all designed by architect Mohsen Foroughi, in Tabriz (1940), the Tehran Basaar (1941), Isfahan (1941), and Shiraz.

Staff

Serving condition table of BMI employees by gender:

Sadad data company

In 1999, Sadad Data Company was registered at Companies Registration Office and Non-commercial Enterprises.

National Development Group

The National Development Group is an investment company, which is listed on the Tehran Stock Exchange.

Islamic banking

All banks in Iran must follow the banking principles and practices described in the Islamic Banking (Sharia) law of Iran passed in 1983 by the Islamic Majlis of Iran. According to this law, banks can only engage in interest-free Islamic transactions (interest is considered as usury or riba and is forbidden by Islam and its holy book the Quran). The permitted commercial transactions involve exchange of goods and services in return for a share of the assumed profit. All such transactions are performed through Islamic contracts, such as mozarebe, foroush aghsati, joale, salaf, and gharzol-hassane. Details of these contracts and related practices are contained in the Iranian Interest-Free banking law and its guidelines.

Controversies

Civil lawsuit

Following the September 1997 suicide bombing in Jerusalem, five American students who had been wounded were awarded $251 million in compensatory and punitive damages against the government of Iran and the Iranian Revolutionary Guard Corps by Judge Ricardo M. Urbina, under the Flatow Amendment of the Foreign Sovereign Immunities Act, in accordance with Section 201a of the Terrorism Risk Insurance Act of 2002, which states that "in every case in which a person has obtained a judgment against a terrorist party on a claim based upon an act of terrorism... the blocked assets of that terrorist party... shall be subject to execution". Since most Iranian assets in the United States had been withdrawn after the embassy hostage crisis, the only substantial monetary asset left was approximately $150,000 in the Bank Melli's account in the Bank of New York. Before turning over the funds to the five students, however, the Bank of New York sued for a legal decision regarding its responsibilities in the case. The United States Department of Justice, speaking as amicus curiae in support of Bank Melli, advised that the bank had no responsibility for turning the funds over to the students; in March 2006, Judge Denise Cole ruled against them, and was upheld by the Second Circuit Court in April 2007. Bank Melli then withdrew the funds from Bank of New York.

On 5 March 2018, Bank Melli lost an appeal "related to credit card use in Iran" concerning "roughly $17.6 million that Visa Inc and Franklin Resources Inc" were holding for Bank Melli.

United States sanctions

On 25 October 2007, the United States imposed unilateral sanctions against Iran. These sanctions include new measures to reduce Iran's ability to conduct financial transactions between the state-owned banks of Iran and United States citizens or private organisations. Bank Melli was included in these sanctions, on the grounds that, besides its other customers, Bank Melli provides financial services to Iran's nuclear and ballistic missile programmes. A fact sheet released by the US Treasury Department also asserts that between 2002 and 2006 Bank Melli sent at least $100 million to Hamas, Palestinian Islamic Jihad, Hezbollah and other groups, via the Quds Force, a branch of the Iranian Revolutionary Guard.

In a statement published on its website, BMI refuted the US allegations and denied that it has ever been involved in any "deceptive banking practices".

European Union sanctions

On 16 June 2008, the European Union imposed further unilateral sanctions against Iran. These sanctions include the European Union freezing the assets of Bank Melli, in response to Tehran's refusal to suspend its uranium enrichment program.

After the lifting of sanctions, BMI was the first Iranian bank to be reconnected to Swift.