Iran could consolidate non-performing loans (NPLs) in one asset management company, Peyman Ghorbani Aghilabadi, vice-governor of economic affairs at Iran’s central bank told the Financial Times Iran conference in London, the paper has reported.

Iran had a 12.2 per cent non-performing loan ratio as of September 2015, according to Central Bank figures.

This is down from 15.1 per cent in March 2012. However, the real problem is thought to be larger due to different reporting methods.

Iran has studied the way other countries such as Sweden, South Korea and Japan dealt with bad loans.

They took various approaches in the 1990s to banks selling off bad loans at a discount, often to a specialised state-owned institution. Distressed companies were then classed as viable and restructured, or failed and liquidised.

Aghilabadi also committed to unifying official and market exchange rates and recapitalising the banking system.

He added that interbank lending rate had fallen from 25 per cent to 17 per cent. The Central Bank is working on further reducing interest rates as inflation comes under control. Consumer price index inflation has fallen from 34.7 per cent in the year ending March 2014, to 15.6 per cent in 2014/15, Central Bank statistics show.

The release of frozen foreign assets is expected to revitalise a struggling financial sector. The Central Bank will also use a proportion of its estimated $28bn in foreign assets to recapitalise overstretched state banks.

The Central Bank has also prepared a draft Monetary & Banking law to reform the Iranian banking system and bring it closer to Basel III standards.

Iran ratified its first combatting the financing of terrorism (CFT) law on 3 March. This is one step towards bringing the country in line with the global financial sector, and helping Iranian banks establish correspondent banking relationships internationally.

Foreign banks have been reluctant to deal with Iranian banks due to continuing US sanctions.