ZURICH, Oct 3 (Reuters) - The number of banks in Iran should at least halve over the next six years, with closures and mergers needed to modernise an industry laden with toxic loans, one of the country’s top bankers said on Tuesday.

Parviz Aghili, chief executive of Middle East Bank, estimated at a conference in Zurich that a full re-organisation of the Iranian banking sector’s roughly $700 billion balance sheet would cost $180 billion to $200 billion.

“And we cannot afford it,” he said.

Instead, Aghili, a former HSBC banker, favours a multi-step programme to eventually bring Iran’s banking industry in line with new Basel III global standards.

Management would get three years to improve their balance sheets. After that, banks whose trading book assets remain less than 6 percent of total risk-weighted assets would be “completely shut down,” he said.

By contrast, banks whose ratios range from 6 percent to 10 percent could merge and seek new capital to survive, with dividends forbidden until they have stocked their balance sheets with adequate capital.

“Over the course of six years, we would get - at least out of the 35 banks we have - about 13 to somewhere around half of them surviving,” Aghili told more than 200 people at the Europe-Iran Forum, an annual event to promote closer economic ties.

“The government has to be gutsy, whether we like it or not, and shut down some of those banks,” he said. “They are really not in acceptable shape.”

Iran's banks do not currently have to conform to Basel's international standards, but its central bank may eventually require it. [reut.rs/2x22Cpy ]

The Zurich conference comes just before mid-October’s deadline for U.S. President Donald Trump to re-certify if Iran is complying with its 2015 agreement with world powers.

Under the deal, Tehran agreed to curb its nuclear programme in exchange for lifting most economic sanctions that crippled its economy. Trump has called the deal “an embarrassment”, suggesting he could scuttle it, though Iran expects Washington to stick to the agreement.

During the sanctions era, Iran’s banks struggled with bad debt exacerbated by the hamstrung economy and exposure to a property market downturn.

Strengthening banks that continue to struggle to raise international capital will be crucial as energy-rich Iran seeks to step up major cross-border dealmaking.

An industry restructuring that avoids chaotic bank collapses is critical to ensuring international partners do not lose faith, said Jorn Fredsgaard Sorensen, of Denmark’s EKF export credit agency, which helps Danish companies do business with Iran.

“Seen from abroad, we would become very insecure if that was to happen,” Sorenson told forum participants. “There’s clean-up to be made, but in an orderly way.” (Reporting by John Miller; Editing by Mark Potter)