December 14, 2016 / 5:35 AM / 9 months ago

Iran, Russia explore setting up Islamic bank - TASS

Dec 14 (Reuters) - Russia and Iran are exploring the establishment of an Islamic bank as the two countries expand their economic cooperation, the TASS news agency cited Russian Energy Minister Alexander Novak as saying.

The entire banking system in Iran must abide by Islamic principles such as a ban on interest and gambling, which foreign firms would need to follow if they are to grab business ranging from long-term financing to insurance.

“The creation of a Russian-Iranian Islamic bank was discussed. Our banks are exploring the mechanism, the related decision has not been made yet,” Novak said at a bilateral meeting held in Tehran.

No timeframe or potential size was given for the proposed bank, which would be the first such institution operating in the two countries.

State-linked Russian lenders Vnesheconombank, Sberbank and Tatfondbank have been developing Islamic financial products of their own over the past year.

Iran is keen to diversify funding options for its companies. At present, most financing in Iran is sourced from domestic lenders with only a small portion sourced from foreign sources and the debt capital markets. (Reporting by Bernardo Vizcaino; Editing by Eric Meijer)

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