STATUS OF THE RV
The “fuel swap” saga continues.
Like I always say the show is not over until the fat lady sings….
More on the White Paper (Banking sector)
Has Iraq really accomplished it goals with the three prong financial world, namely in the Banking, Stock Market and Insurance Sectors?
As we analyze the in the former prime minister Kazemi’s White Paper, he clearly defined these three sectors of the Iraqi economy that needed work.
So today once again, as in the past the CBI is defining the problems within the banking sector that still exist.
So are they ready to reinstate?
You think maybe this has something to do with the stalling?
On Thursday, the economic advisor, Ziyad Al-Hashemi, considered that the Iraqi banking system is unwilling to adapt to the requirements of disciplined work.
He said in an interview that “private banks are working on a strategy of maximizing profits through one main activity related to dollar purchases through the central bank’s window, without diversification in other banking services, and this has led to banking practices that have a lot of financial greed, represented by:
1. Transferring dollar cash blocks to the parallel market (through intermediaries).
So this is how the dollars are leaking out to the parallel market; and then taking advantage of price differences,
2. In addition to exploiting the network of relations with external banks and even international money transfer companies, then to conduct fraudulent operations to transfer dollars and circumvent the recommendations of the Central Bank of Iraqi and US federal controls.
These efforts of these banks focus clearly on searching for loopholes and weaknesses in the Iraqi monetary, banking and legal system to take advantage of them to sustain their operations and reap profits in a way that violates central controls and has a lot of damage to the Iraqi economy.
So, on Thursday, the Central Bank of Iraq issued instructions to all licensed banks and non-bank financial institutions not to deal in dollars with 14 of the Iraqi banks.
I can see that if these illegal dollar cash transactions continue the CBI will close down these banks.
It’s coming and this will help tremendously in bringing down and keeping down the value of the dollar against the dinar.
This may be the last step in the banking sector that needs to be addressed.
The diversification of banking practices to make profits with products outside of currency exchange spreads, will come naturally once the free market economy kicks in.
The 3 year budget is now open and the money is being dispersed to the districts for projects.
A financial researcher identifies 4 reasons for the failure of private banks.
In his interview with Al- Jarida , Al-Janabi says reasons for that “failure”:
1. The first of which is the dependence of those banks on quick profits by relying on the currency auction, without significant financial risks.;
2. That the second reason is the inability of private banks to achieve the financial goals for which these banks were established, as well as their inability to attract and develop deposits;
3. The third reason is the failure to achieve investment goals due to the failure of private banks to attract real capital and employ it in the economic fields;
4. The fourth is the failure to achieve real profits, because more than 85% of its net profits depend entirely on the currency window.
Al-Janabi pointed out to the failure of private banks to achieve development goals and innovative goals, especially their abject failure to innovate new financing formulas and their inability to open branches for them in solid countries, and thus, these banks have become a burden on the Iraqi economy, rather than being a help to it, and the regulatory bodies bear responsibility for this decline in the performance of those banks because there are 1000 question marks about the sources of funds for those banks, most of which do not rise to the name of “bank”.
I can tell you this – fool me once and never again.
I will remember what I was told these past weeks that the U.S. should expect the new rate, the once we are looking for shortly that week.
It did not happen.
When I raised a series of questions to my CBI contact as to why I was told it was the US Treasury to signed off then reneged once the process began.
I was told that they too were very surprised.
There was no sound reason give this time by the U.S. as to why it was stopped.
The CBI does need assurances that the U.S. will faithfully follow up on promises made.
So all I can tell everyone today is we must settle down and sit and wait.
I know we are right at the cusps of this event happening.
I know for a fact that Iraq is now a full member of the WTO yet they hold back the news and officially announcing it.
Could it be they want Iraq to coordinate this event with the reinstatement of the dinar?