Once a symbol of state banking power, Bank Sepah now faces deep financial imbalance, exposing years of structural mismanagement and politically driven mergers.
Bank Sepah Among Five Banks Flagged for Structural Reform
Iran’s Central Bank has placed Bank Sepah among the five institutions requiring structural reform, signaling a severe financial imbalance within one of the country’s oldest state-owned banks. On October 28, 2025, Farshad Mohammadpour, Deputy for Regulation and Supervision at the Central Bank, announced that Bank Sepah is one of the five “non-compliant” banks with excessive overdrafts from the Central Bank.
Ayatollah Ebrahimi, CEO of Bank Sepah, defended the bank’s position, claiming that the imbalance stems not from mismanagement but from “a 320 trillion toman debt owed by the government” and the costs of mandated loans. He asserted that the bank has remained profitable over the past three years and valued its assets at over 300 trillion tomans, citing a vast operational network of 2,900 branches and more than 40,000 employees.
Ebrahimi added that Bank Sepah provided 400 trillion tomans in loans during the past year, of which 12 percent were mandatory government-directed credits for social programs such as marriage, childbearing, and housing.
Mounting Debts and Negative Capital Adequacy
Despite these claims, the figures point to a dire situation. Ebrahimi admitted that the bank’s capital adequacy ratio stands at a staggering –23, meaning it has far more liabilities than assets. He further acknowledged that the Central Bank imposed 340 trillion tomans in additional mandated loans, of which 160 trillion have already been disbursed.
While the CEO describes Bank Sepah as a profitable state bank, the reality is that its government owner is also its biggest debtor—owing more than 320 trillion tomans. This contradiction lies at the heart of Iran’s banking crisis, where political decisions, not economic rationality, dictate financial management.
The Costly Legacy of Military Bank Mergers
The roots of Bank Sepah’s crisis trace back to a politically motivated merger in 2018. Under the approval of Iran’s Money and Credit Council and the Supreme Council for Economic Coordination, five military-affiliated banks and credit institutions—Ansar, Ghavamin, Hekmat Iranian, Mehr Eqtesad, and Kosar—were merged into Bank Sepah.
These banks were all owned or controlled by Iran’s armed forces:
- Ansar Bank – Linked to the IRGC’s Cooperative Foundation
- Ghavamin Bank – Owned by the national police
- Hekmat Iranian Bank – Controlled by the Army
- Mehr Eqtesad Bank – Belonged to the Basij organization
- Kosar Credit Institution – Tied to the Ministry of Defense
Each of these institutions had been facing bankruptcy and corruption scandals before the merger. Their debts and toxic assets were absorbed by Bank Sepah—a move framed as a “reform,” but in practice, a bailout for military financial networks.
Today, Bank Sepah operates under management dominated by former IRGC figures, turning what was once a commercial bank into a political-financial arm of the regime.
The Man Behind the Crisis
Ayatollah Ebrahimi’s career illustrates the militarization of Iran’s banking system. As reported by the fintech outlet Rah-e Pardakht in 2018, Ebrahimi is a lifelong member of the Islamic Revolutionary Guard Corps (IRGC), having joined at age 14. He led Ansar Bank from its creation and oversaw the rapid, unregulated absorption of the bankrupt Thamen institution in 2010.
That same pattern—merging insolvent entities under the banner of “reform”—has now reached Bank Sepah. Under Ebrahimi’s leadership, the bank has joined the list of Iran’s “non-compliant” and financially distressed institutions, reflecting a systemic failure rather than an isolated case.
The Broader Banking Meltdown
The collapse of Bank Sepah mirrors that of other state-linked banks such as Bank Ayandeh, whose debts surpassed one quadrillion tomans (1,000 trillion). According to Jomhouri Eslami, these massive overdrafts alone account for around 7 percent of Iran’s inflation.
Following the announcement of the troubled banks list, the Central Bank Governor emphasized that Iranian banks must return to their core mission of commercial banking and avoid business ventures that distort their balance sheets. But as analysts note, such calls ring hollow in a system where banks serve as vehicles for political patronage and regime financing rather than genuine financial institutions.
The Inevitable Burden on the Iranian People
Bank Sepah’s predicament epitomizes the corruption and mismanagement that plague Iran’s financial sector. The state continues to transfer the debts of failed military banks onto public institutions, masking insolvency through accounting tricks and forced mergers.
Ultimately, the cost of these failures is borne by ordinary Iranians—through inflation, devalued savings, and dwindling access to credit. As Bank Sepah joins the ranks of the regime’s “non-compliant” banks, it becomes clear that Iran’s financial system, much like its ruling elite, is collapsing under the weight of its own corruption and political interference.
