Reasons why Iranians don’t trust financial institutions in Iran

[A report about why Iranians do not trust financial systems and withdraw their money from banks.]

–Losses of financial and credit institutions, lack of accountability to compensate losses of depositors, and also embezzlement of billions of tomans are the most important reasons for Iranian people distrusting financial system and banking system in the country. Due to this distrust, many people have withdrawn their money from banks in recent months and have transferred it to foreign currency or gold market.

But what is the economic justification for this decision? From mid-November, the maximum interest on deposits has become 15%. For example, the bank interest for 20 million tomans is 3 million tomans annually. But the price of euro has increased from 4,900 tomans in mid-November to 6,100 tomans in mid-February.

It means that if someone had spent that same 20 million toman on buying euros and had sold them in mid-February, he would have made 4.9 million tomans. This means 1.6 times more gain than depositing one’s money in the bank.

It can be concluded that with an increase in inflation, collapse in the value of the national currency and numerous stories about the bankruptcy of banks, people are in fact saving their savings from this sinking ship.