Lebanon’s central bank has revoked the operating license of Bank Saderat Iran, one of Iran’s largest and oldest commercial lenders, as Washington steps up pressure on countries to sever financial ties with the Islamic Republic and Beirut seeks to protect its banking sector from international sanctions.

The decision, finalized this week and formally communicated to the Iranian bank and Lebanon’s Higher Banking Commission, follows repeated violations of regulations issued by Banque du Liban (BDL), according to Lebanese sources cited by Nidaa Al Watan. The Higher Banking Commission is now responsible for taking the administrative and regulatory measures needed to implement the decision.

Bank Saderat has been subject to U.S. Treasury sanctions since 2007. Its continued presence in Lebanon had raised concerns about the potential exposure of other Lebanese financial institutions to sanctions and restrictions on their international banking relationships.

The move is also part of a broader international effort to restrict the activities of financial institutions linked to Iran, amid growing pressure from Washington and tighter controls in other countries.

“This aims to send a clear signal to the outside world that we are determined to protect our banking sector from any entity that might cause it a risk of contamination,” Banque du Liban Governor Karim Souaid told Bloomberg in an interview on the sidelines of the International Monetary Fund’s annual meetings in Bangkok, Thailand.

“We saw that all other bigger, stronger economies like the UAE and Turkey have complied with such requests in order to preserve the relationship of their banks with the international financial system,” Souaid said. “Lebanon can’t sustain such a risk.”

“We have to take decisions sometimes that are politically sensitive because we want to protect our banking sector from any outside sanctions or outside pressure,” he added.

According to Lebanese sources, U.S. officials emphasized the need to address the presence of sanctioned financial institutions in Lebanon during recent meetings in Washington with senior Lebanese government officials, with the aim of ultimately ending their activities.

Risk of Secondary Sanctions

The central concern is that allowing institutions subject to U.S. sanctions to continue operating within Lebanon’s banking system could expose the country’s wider financial sector to serious consequences.

Lebanon’s banks rely heavily on the U.S. dollar and correspondent banking relationships with international financial institutions. Continued dealings with a sanctioned bank could therefore expose other lenders to secondary sanctions, restrictions on international payment networks or the freezing of funds and accounts held with correspondent banks abroad.

The decision reflects Banque du Liban’s determination to protect the sector from these risks, preserve its relationships with international banks and safeguard the credibility of Lebanon’s financial system, the sources said.

The United States has intensified its economic pressure on Iran in an effort to isolate its economy and restrict its international commercial relationships. The campaign has included sanctions against banks and other financial entities that maintain ties with Tehran.

Lebanon’s decision follows a broader tightening of restrictions on Iranian financial institutions in countries including the United Arab Emirates and Turkey. Similar measures involving the suspension of Iranian banks’ activities or the revocation of their licenses have also been reported in Iraq, Germany and Bahrain.

Bank Saderat also faces restrictions in other international markets. The British government announced last month that it would reject new license applications from Iranian banks sanctioned by the United States, a policy affecting Saderat’s operations in London. Its London office is located in the City, near the Bank of England.

Lebanon Seeks to Exit FATF’s Gray List

Souaid said another priority was securing Lebanon’s removal from the Financial Action Task Force’s (FATF) gray list, which identifies jurisdictions with strategic shortcomings in combating money laundering and terrorist financing. Lebanon was placed on the list in 2024, and the FATF was expected to announce a decision the following week in Paris.

Souaid stressed the need to “cleanse the economy of all illicit, illegal or laundered funds.”

To strengthen oversight, Banque du Liban has hired an American specialist firm to map Lebanon’s cash-based economy and identify suspicious financial activity, he told Bloomberg.

Lebanon is seeking to revive its economy after a financial collapse that led the country to default on about $30 billion in Eurobonds in 2020. The government is negotiating with the IMF over a potential loan that could help support the country’s economic recovery.

Souaid said the effort to clean up the financial sector would be important to those negotiations, even if it was not an explicit condition for a potential IMF support package.

“This is going to be an important issue,” he said. “It is an unwritten rule that the lender and the donors who will join the program will insist on having a clean financial sector.”

Bank Saderat’s Long History in Lebanon

Bank Saderat opened its Lebanese operations in 1962, a decade after its establishment in Iran.

According to the Association of Banks in Lebanon’s directory, the institution is listed as No. 67 among Lebanese banks.

The bank began expanding its local network in 1986, when it opened a branch in Ghobeiry. It subsequently established branches in Baalbek in 1990, Verdun in 1995, Burj al-Barajneh in 1997 and Sidon in 2001.

Its activities have declined in recent years as sanctions and regulatory restrictions have prompted Lebanese financial institutions to avoid dealing with it.