The collapse of Ayandeh Bank late last year exposed deep weaknesses in Iran’s financial system and intensified an economic crisis that later fueled nationwide protests, according to a report published on Tuesday by The Wall Street Journal.
Ayandeh Bank, which was run by individuals affiliated with the Iranian regime, failed after incurring nearly $5 billion in losses from bad loans.
The government merged the bank into a state-owned lender and printed large amounts of money to cover its debts. The move addressed immediate liabilities but did not resolve broader financial problems, economists told WSJ.
The bank’s failure underscored vulnerabilities in Iran’s banking sector, which has been under pressure from years of international sanctions, weak lending practices, and reliance on money creation. WSJ reported that five other Iranian banks are believed to be in similarly fragile condition.
The crisis unfolded amid mounting political and economic pressure on the government. Iran’s credibility had already been weakened following the 12-day war with Israel and the United States in June, which officials acknowledged showed the country was unable to fully protect its population from attack, the report noted.
Nuclear negotiations remained stalled, leaving sanctions relief out of reach, while Israel and the US warned of further military action if Iran expanded its missile or nuclear programs.
At the same time, the Iranian rial entered a sharp decline. US enforcement actions restricted Iran’s access to dollars from Iraq, reduced foreign currency earnings from oil sales, and limited access to overseas reserves. Longstanding financial workarounds became less effective, leaving the government with fewer options to stabilize the economy.
Public dissatisfaction grew as conditions worsened. Hundreds of merchants in Tehran, a group that has historically avoided protests, joined demonstrations demanding economic relief.
“This was a very well-connected bank, corrupt et cetera, which underscored that the banking system in itself is a channel for enrichment of the well-connected,” Adnan Mazarei, a former deputy director of the Middle East and Central Asia Department at the International Monetary Fund, told the WSJ.
He added that the failure contributed to “a crescendo of the loss of legitimacy of the regime following the Israeli attack.”
Ayandeh Bank was founded in 2013 by Iranian businessman Ali Ansari, who merged two state-owned banks with another institution he had previously established. Ansari, who is considered close to former president Mahmoud Ahmadinejad, was sanctioned by the United Kingdom shortly after the bank’s collapse.
Britain: Ayandeh founder was 'corrupt Iranian banker, businessman'
British authorities described him as a “corrupt Iranian banker and businessman” who helped finance the Islamic Revolutionary Guard Corps. Ansari said the bank’s failure was due to “decisions and policies made beyond the bank’s control.”
Ayandeh attracted millions of depositors by offering the highest interest rates in Iran and relied heavily on borrowing from the central bank, which printed money to support the institution, economists said.
The bank held a large volume of nonperforming loans. Its largest investment was the Iran Mall, a major commercial complex opened in 2018. Iranian officials said more than 90% of the bank’s resources were tied up in projects under its own management.
Calls to close Ayandeh intensified in October after Iran’s judiciary chief publicly urged the central bank to intervene. The central bank announced the bank’s dissolution the following day and merged it into Bank Melli, Iran’s largest state-owned lender. Officials later said several other banks, including Bank Sepah, could face similar action.
The collapse occurred amid a broader financial crisis that intensified after the reimposition of US sanctions in 2018. Lacking funding, Iranian banks increasingly borrowed from the central bank through emergency facilities and invested the money in speculative projects, often involving politically connected borrowers.
By 2019, the government effectively controlled about 70% of Iran’s banking system, according to an analysis cited by WSJ.
“Ayandeh’s collapse set off alarm bells,” Mazarei said. “If something goes wrong, it will come back to the public purse.”
Economic conditions deteriorated rapidly in recent months. In 2025, the rial lost 84% of its value against the dollar, while food prices rose at an annual rate of 72%.
Iran also faced prolonged power outages and water shortages. Then-president Masoud Pezeshkian proposed relocating the capital away from Tehran in response to the severity of the energy and water crisis.
“The Iranian middle class has been destroyed,” said a 43-year-old artist in Tehran. “When you can no longer even try to obtain food, you have nothing left to lose.”
While absorbing Ayandeh’s debts, the government introduced austerity measures that reduced subsidies and public support. Analysts estimated that the proposed cuts totaled $10 billion.
The measures were announced as sanctions tightened further, oil exports increasingly relied on an international “shadow fleet,” and access to dollars through Iraqi banks was curtailed.
Capital flight accelerated during and after last year’s conflict with Israel. Djavad Salehi-Isfahani, an economist at Virginia Tech, estimated that between $10 billion and $20 billion left the country last year.
The government attempted to contain unrest by offering monthly cash subsidies and replacing the central bank governor in late December. Protests nevertheless expanded to dozens of cities, despite internet blackouts and a security crackdown in which hundreds of people were killed, according to human rights groups.
“If they could spend their way out of it, they would have done that before,” Erik Meyersson, chief emerging markets strategist at SEB, told the WSJ. “That really makes things more difficult for the regime."