2024-08-06
After sanctions.. A new American step towards Iraqi banksThe United States of America did not stop at punishing some Iraqi private banks by preventing them from participating in the currency auction held by the Central Bank of Iraq daily to sell the dollar, but the US Treasury Department recently returned and informed it of the need to merge and close some of those banks, thus deciding their fate after many suspicions had been raised about them.
Four Iraqi private banks were subjected to sanctions during the past period, most notably the Middle East Bank owned by businessman Ali Ghulam, who arrived in Iraq on November 19, 2022 and was arrested at Baghdad International Airport, based on an arrest warrant issued against him in accordance with Article 456, and then released on bail.
Informed sources say, “The Iraqi delegation that visited the United States of America a few days ago, headed by Foreign Minister Fuad Hussein, Central Bank Governor Ali Al-Alaq, and Prime Minister’s Advisor Kazim Al-Hassani, discussed with the US Treasury and the Federal Reserve the issue of restricting the dollar from Iraqi banks.”
The sources added that “the US Federal Reserve recently requested from its Iraqi counterpart a plan to reform the banks restricted from using the dollar, which includes closing a number of them and establishing new banks through a coalition of a number of banks among themselves.”
She stressed that “the Federal Bank suggested to its Iraqi counterpart to seek the assistance of an international company to present a broad reform plan for the banking sector, and in the coming months this company will submit its report on the banking sector to the Central Bank and the Iraqi government.”
The sources noted that “the Federal Bank wants to reduce the number of Iraqi banks from 72 to less than 40 banks during the current phase.”
The US Treasury and the US Federal Reserve had previously restricted the dollar’s access to 32 Iraqi private banks, through four stages starting in 2022. The companies restricted from using the dollar in Iraq also reached more than 250 companies, most notably “Fly Baghdad” Airlines.
In turn, a banking official, who refused to reveal his name, explained that “the banking market has become monopolized by five banks, which makes it difficult for other banks to compete with them. Therefore, forming a coalition of five banks, one of which is a foreign bank, will contribute to reducing the monopoly in the banking market and increase competition.”
He stressed that “reforming restricted banks will be through restructuring them, starting with changing ownership, employees, developing risk management departments, combating money laundering and terrorist financing, and others.”
The banking official stresses that “at the end of this year, the Central Bank of Iraq will cancel the dollar transfer platform, and will rely on banks that have intermediary banks. During the coming month of September, a meeting will be held between the Central Bank of Iraq and the Federal Reserve in America, which will include presenting the Central Bank’s plan to reform the sector.”
The United States is working to prevent the Iranian government and private sector companies from using the dollar, so it has begun to restrict its access to some Iraqi banks accused of leaking the dollar.
For his part, economic researcher Mustafa Akram Hantoush believes that “merging banks is a very excellent step, and will contribute to reducing the number of banks operating in the country. Banks that have been in trouble for years must also be closed.”
Hantoush points out that “the Central Bank of Iraq bears part of what happened in the Iraqi banking sector, because it is unable to confront the US Treasury or the Federal Reserve.”
He points out that “there are good banks that have been restricted by the United States of America, and the Central Bank of Iraq must defend them and return them to work because the Iraqi banking sector is being massacred in favor of foreign banks.”
In November 2022, the US Treasury representative met with representatives of 35 Iraqi private banks to warn them of issues of smuggling dollars from Iraq and adhering to instructions regarding hard currency transfers for import purposes, threatening them with sanctions in the event of non-compliance.
It is worth noting that the meeting was held in the absence of the Central Bank of Iraq, and lasted for two hours, according to leaked information.
It is noteworthy that the Iraqi banking sector is also neglected by citizens who have lost confidence in it. According to World Bank figures issued last year, only 23 percent of Iraqi families have an account in a financial institution, which is one of the lowest percentages in the Arab world, especially since the owners of these accounts are government employees whose salaries are distributed to public banks at the end of each month. However, these salaries also do not remain in the accounts for long, as queues quickly form in front of banks from employees who withdraw their salaries in cash and prefer to keep them at home.
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