The following write up highlights the banking sector reform in Iraq. From the time of the war till date, the banking sector reform in Iraq has changed at every step depending on the need of the situation. Many reforms have been adopted to stabilize the financial sector of the economy also for enhancing its growth.
Introduction of the Rafidian Bank and the Rasheed bank:
In the year 1965, nationalization of private commercial banks took place in Iraq. Branches belonging to the foreign commercial banks were also nationalized. The next step taken by the government was that the operations of the nationalized banks were halted.
This was carried out in response to the socialist as well as nationalist policies of the government in Iraq. All client accounts were transferred to the commercial bank Rafidian Bank from the nationalized banks in the country.
The Rafidian bank was owned by the state. Due to the transfer of accounts, the Rafidian bank had to be well equipped to meet the increasing demands of the customers. However, the Rafidian Bank was not able to revamp its system to meet the growing demands of the account holders because the bank did not have enough man power. One more transformation, which took place was that due to the private banks being nationalized , the efficient managers of the bank migrated to other sectors of the industry. This greatly affected the image of the bank in the eyes of the foreign investors.
As a measure adopted pertaining to banking sector reform in Iraq, the Rasheed Bank was established in the year 1988. Thereafter, the Rafidian Bank as well as the Rasheed Bank started looking into matters related to the private sector in addition to the operations of the state owned enterprises. The Rasheed Bank, Central Bank, Rafidian Bank and many other banks started operations immediately after the War. These banks are doing quite well and transactions including check clearance, transfer of money, deposits and loans are being taken care of.
There were several banking sector reforms in Iraq which are given below:
New law for the Central Bank:
The new law was ordained, which improved the norms of the Central Bank law introduced in the year 1976. The main aim of the law was to maintain domestic price stability. Establishing a strong platform to facilitate competitive financial system, which was market based.
Modern payment method:
As per norms of the Central bank law, an interbank payment method is maintained. As a banking sector reform in Iraq, a VisaNet system was being installed.
New law for the Commercial bank:
In the year 2003 (September), the commercial bank law was propounded to control money laundering activities, to levy a minimum standard pertaining to various directives, lending, classification of loans and capital adequacy.
The TBI or the Trade bank of Iraq was established in the year 2003 July. As the name suggests this bank looks after the transactions dealing in trading of various goods and services.
Initiation of International Transfers:
Letters of credit as well as services pertaining to the remittances are looked after approximately by 10 private banks operating in Iraq.
Entry of the foreign banks:
In order to widen the banking sector base of the country, a sound understanding of how the foreign banks function is a must. HSBC or the Hong Kong And Shanghai Bank, Standard Chartered Bank and the National Bank of Kuwait have been granted permission to operate in the country.
Banking sector reform in Iraq was initiated with many goals in mind. The following banking sector reform in Iraq was embraced in order to improve the economic conditions of the country.
Implementation of the new Iraqi Dinars.
Daily auction of currency
Friendly environment for the foreign investors
Interest rates were liberalized.
Several strategies were adopted to make the environment compatible for the individuals looking after personal business or for bigger business houses.
Last Updated on : 26th June 2013