LONDON, Jan 25 (Reuters) - British regulators are considering whether to allow two Iranian banks in London to resume operations after years of sanctions, two sources familiar with the matter said.

Melli Bank and Persia International Bank will only be able to operate in the UK once they have met Bank of England criteria for financial firms, the sources told Reuters on Monday.

A nuclear deal with Iran earlier this month led to the removal of European Union curbs on its banks. This could bring Iranian banks in Britain, which less than 10 years ago boasted surging profits and growing European ties, out of isolation.

Iran is set to re-engage with the banking world within weeks as international lenders link up with their Iranian counterparts using global transaction network SWIFT, Iran’s Middle East Bank and a senior central bank official told Reuters on Friday.

Melli Bank and Persia International have been in talks with the regulator and the Treasury about restarting operations in Britain for months and have been placed in the New Bank Start-Up unit, unveiled last week by the Financial Conduct Authority and the Bank of England’s Prudential Regulation Authority (PRA) to help new banks enter the market, the sources said.

The Iranian banks are now working with regulators to get up to speed with new regulation such as capital requirements, risk management and governance, before restarting operations.

Melli Bank and Persia International did not respond to requests for comment. The Bank of England declined to comment.

The UK said in a statement:

“The UK Government fully supports expanding our trade relationship with Iran and encourages UK businesses to take advantage of the commercial opportunities that will arise... However, some sanctions remain in place so UK businesses should continue to ensure they are compliant with all sanctions regimes.”

Iran has had bank branches in London since the 1960s. In the early 2000s they began spinning off as subsidiaries, making it more difficult to prove a direct financial link to Iran.

Charged by the West in 2010 with helping to finance an illicit weapons program and militant groups, the banks’ assets were frozen and they were barred from making new loans, and allowed only to service those loans made before EU sanctions. (Reporting By Anjuli Davies; Editing by Rachel Armstrong and Alexander Smith)