Rare confessions from within the Iranian regime expose the structural rot of banking under the clerical dictatorship.
In recent years, the collapse of banking credibility under Iran’s regime has become impossible to conceal. What once appeared as “financial reform” and “privatization” has revealed itself as a vast mechanism for corruption, elite enrichment, and the plundering of public wealth. The creation of so-called private banks—implemented under the banner of financial liberalization—has produced not efficiency or growth, but systemic fraud and institutional bankruptcy.
A striking and revealing moment came on December 10, 2025, when Sadeq Amoli Larijani, head of the regime’s Expediency Discernment Council, publicly acknowledged the scale of failure in the banking sector during a Student Day event. His remarks were not merely technical criticisms; they amounted to an unprecedented admission that the regime’s financial architecture is fundamentally broken.
Larijani bluntly declared that the policy of establishing private banks was “100 percent wrong” and that the Central Bank had failed in its supervisory role. He traced the origins of this disastrous policy to the Khatami era, noting its expansion under Ahmadinejad, and conceded that Iran never lacked banks—only rational management of the people’s capital. Banks, he admitted, became “safe havens for corrupt activities.”
These statements raise a critical question: if private banking was a known failure, why was it allowed to continue unchecked for decades? The answer lies not in miscalculation, but in design. Under the rule of the regime supreme leader and his subordinate governments, privatization did not mean accountability or competition. It meant transferring public assets into opaque networks controlled by regime insiders, security institutions, and loyal businessmen.
Larijani further revealed that the Central Bank itself had, at various points, directly managed troubled banks such as Bank Ayandeh, only to quietly replace managers afterward without any public accountability or disclosure of outcomes. He also pointed to the severe imbalance at Bank Sepah, exacerbated by the forced merger of military-affiliated banks—another politically driven decision that deepened financial instability.
Following the implementation of Article 44 of the Constitution, successive governments under Ali Khamenei pushed to reduce the state’s visible role in the economy while preserving real control through loyal institutions. Private banks established in the 1990s and early 2000s were presented as complements to state banks, tasked with mobilizing private capital and expanding credit. In practice, they became vehicles for reckless lending, insider deals, and systemic abuse.
By 2023, private banks had absorbed more than $8 billion in deposits. Yet attracting deposits is not evidence of financial health. Core indicators of sound banking—capital adequacy, transparency, and risk management—were conspicuously absent. This imbalance culminated in outright collapse. Bank Ayandeh, one of the largest private banks, was officially dissolved in November 2025 after years of financial distress and regulatory failure.
International assessments confirmed that Bank Ayandeh faced severe insolvency, forcing intervention by the Central Bank and the government. Officials rushed to reassure depositors, not out of responsibility, but out of fear that public anger could ignite broader unrest. The priority was regime survival, not justice or reform.
Effective supervision, transparency, and financial sustainability are the foundations of any credible banking system. Under a clerical dictatorship saturated with corruption, the Central Bank has functioned as an enabler rather than a regulator. Banks and financial institutions operated with minimal oversight until their collapse inflicted massive losses on depositors and the broader economy.
Even regime-affiliated economists have warned that widespread imbalance across both private and state banks demanded urgent resolution. When a senior insider openly labels a major state bank as structurally insolvent, it signals that the crisis has spread beyond peripheral institutions into the very core of the banking system. This is not a temporary shock; it is a systemic breakdown.
Larijani’s admission that the Central Bank fueled the crisis through liquidity injections and monetary expansion further underscores the depth of mismanagement. Yet his sudden candor is itself deeply cynical. He is no outsider. His name has long been linked to corruption scandals, including allegations—surfacing in the notorious Tabari case—that he received at least 1,000 billion tomans in bribes from Ali Ansari, the former owner of Bank Ayandeh.
What is unfolding is not reform, but exposure—an exposure driven by infighting among rival factions of the ruling system. Each revelation pulls back the curtain on a structure built on looting, impunity, and deception. The crisis of Iran’s private banks is merely one window into a far broader pattern of institutionalized corruption and structural bankruptcy.
What lies behind the curtain is far more than mismanaged banks. It is an economic order sustained by theft, shielded by repression, and defended through lies—until the curtain finally falls.
