Despite the lifting of international sanctions against Iran earlier this year, the United States government intends to continue denying Iranian companies access to the US financial system. This highlights how the US financial system is viewed not as a market-based system in which private companies are free to do what they want, but rather as a tool of the federal government used to carry out the government’s policy aims. For the banks, it’s a mixed bag. On the one hand, US banks have to comply with the federal government’s edicts, now matter how draconian. On the other hand, they continue to benefit from high barriers to entry that keep out competitors, as well as from subsidies such as deposit insurance and access to the Federal Reserve’s discount window and bailout facilities.
But this continued refusal to allow Iranian access to the US financial system also does just as much to hamper US trade abroad as it does to harm Iranian industry. Even dollar-denominated trades made in Europe could not be made through European subsidiaries of US banks, but would have to be made wholly through European banks. That is of course harmful to US banks, who stand to lose out on potential business with Iranian firms.
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