Banks withdraw

01 February 2006

UBS and Credit Suisse First Boston (CSFB) have said they are not seeking new business with Iran because of the countries' increased risk profile as a result of rising international pressure. The decision coincided with the Iranian government's ban on ABN Amro from operating in the Islamic Republic. In view of recent developments, London-based rating agency Fitch is expected to issue a new rating for Tehran within the next two months, although it is unclear how the international crisis will affect its existing BB- rating. It is understood that UBS is stopping all current and future work with the two countries, while CSFB has said it will continue its work with existing clients but not take on any new business. Other foreign banks working in Iran say they are not preparing to take similar measures but agreed Iran's political risk profile is higher than before.Tehran banned ABN Amro from working in the country after the company blamed an $80 million penalty from the US financial regulator on irregularities with Iranian clients. Iran says its reputation is being tarnished by the bank.

There are unconfirmed reports that Iran has started transferring money from European banks and is investing heavily in gold. Tehran will not comment on the reports, but if true, the move would reflect a heightened concern that financial sanctions could be imposed over Iran's nuclear programme. EU countries are trying to refer the Islamic republic to the UN Security Council because of its refusal to suspend a uranium enrichment programme and it is possible that sanctions could be imposed on Iran this year. The two banks are also understood to be stopping any new business with Syria.

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