The debate is raging about the steps of the Central Bank of Iraq towards the US Federal Reserve and the American Treasury, and doubt that they are incorrect steps in the management of monetary policy. In fact, other opinions have gone to warn of a bank collapse as a result of these agreements and what will result in early next year from the association of Iraqi/Arab banks with American correspondent banks, which these opinions described as a confusion and error in following monetary policies that are not suitable for the current economic situation.
Therefore, we say in this regard and we warn of the inauth of these opinions if we carry them in good faith, as the aforementioned steps and procedures are nothing but a reflection of the Central Bank’s policy of supporting the national economy in its directions towards establishing relations with Arab and international correspondent banks and the gradual transition of the processes of strengthening the pre-balance of the accounts of these banks. This is in line with what the Central Bank of Iraq announced in 2023 in its plan to gradually reduce dependence on the electronic platform until its ends work during the year 2024 and limit it to the processes of recording financial transfers for the purposes of control, auditing and analysis. The Governor of the Central Bank stressed in many places that the Central Bank is determined to support Iraqi banks, enhance their capabilities and prepare them to work in accordance with international practices and agreements that are aimed at building and strengthening the capacities of our banks internationally.
Monetary policy measures to link the six Iraqi and Arab banks with prestigious, capable and capable international banks, is the right eye that conflicts with the reality of international activity and practice in import operations, currency conversion and the movement of money through prestigious international banks. The application of this procedure is expected to contribute to the following:
Adjusting the money transfer operations and the diagnosis of the final entities that will reach, from which the pre-transfer stage control will be detailed as an alternative to the post-control joint.
The aforementioned link supports a number of our qualified banks towards raising their banking status and increasing their acceptability and access globally, especially as most Iraqi banks suffer from administrative and regulatory problems at the operational and investment levels.
Limiting banks that fall under the blacklists that practice informal activities that are about smuggling or selling the dollar at the parallel price, at the expense of their practice of banking activity within the limits of lending and investment. And motivate them to rebuild their activities within the limits of real banking.
Based on the achievement of the above points and in light of the improvement in the international position of Iraqi banks after following the policy of linking and compliance and the resulting control and scaling of dollar smuggling and money laundering, it is expected to be a nucleus to attract new financial investments that can work on the development paths of leading economic sectors, which will generate stability in the demand cycle for the dollar, including the stability of price levels at the medium or long-term level.
For the basis, a price gap will occur that works to raise inflation levels, but it will not soon disappear on the condition of the need to proceed scientifically by implementing the procedures of international linkage and transfer within the terms and instructions of compliance with international standards and the need to achieve the above points.
Therefore, in this context, we propose several requirements to raise the ability of Iraqi banks to behave compliance standards, stimulate their relations with correspondent banks and enhance confidence in their performance, including:
Following the compliance laws and modern international legislation, issued by international regulatory institutions and authorities, including the Basel Committee and the International Financial Action Task Force (FATF), which issued its 40 recommendations to combat money laundering and terrorist financing. In addition, the US decisions and laws issued by the Treasury Department represent basic conditions for compliance and constitute an ongoing situation for the banking sector in the world, not only for the Iraqi and Arab banking sector.
Our banks must invest in the necessary infrastructure for mega development projects such as the path of development, and apply advanced technology that supports the achievement of the stages of international compliance.
Supporting everything that leads to deepening the effective contribution of our banks to development through the issuance of legal facilities and financial facilitation to support the banking capital cycle towards foreign trade, industry and investment.
It is necessary to adopt the principle of transparency in banking operations and financial reporting; to build sustainable trust with the international community, and prepare a comprehensive national plan for capacity development, training and qualification in the field of banking compliance through the establishment of a specialized administrative joint for this purpose.
So this linkage step is a strategic step for the monetary policy of the Central Bank of Iraq, as the volume of Iraqi banking sector of deposits exceeds 100 billion dollars, which is a catalyst for activating the work of banks. In the same context, if we know that Iraq imports a value of $70 billion, it would be more economically viable to cover these funds through a sober banking sector that opens credits and is linked to the global financial system and international institutions efficiently and transparently.
It concludes from the above and according to the importance of the linking and compliance step, the private sector must be ready to start developing and financing the national economy and achieving the desired growth. Especially after the American Bank (JPMorgan) finally expressed its readiness to support Iraqi trade finance operations, which is the largest and most sober among international banks, and has a major role in interbank correspondence operations worldwide.
