Banking reform: towards a more efficient banking structure

Banking reform: towards a more efficient banking structure

06/17/2025

Financial sector experts unanimously agree on the importance of proceeding with a comprehensive restructuring of the state-owned banking sector, a move overseen by the Central Bank in collaboration with the global consulting firm Ernst & Young. The process includes the restructuring of six out of seven state-owned banks, in response to directives from Prime Minister Mohammed Shia al-Sudani as part of financial and banking reform efforts.

This step is seen as part of a broader government program to modernize the banking sector, improve its efficiency, and increase its competitiveness, which will positively impact economic development and enhance investor confidence in the Iraqi financial system.

Experts believe this approach represents one of the most important economic decisions of the current decade and is the cornerstone of any genuine economic reform.

Advisor to the Prime Minister, Dr. Saleh Salman, said: “The restructuring of the government banking sector represents a step toward changing the course of performance in Iraq and will help stimulate the national economy, as the financial sector represents the primary axis of economic recovery and the effective driver of the labor market.”

Salman confirmed to Al Sabah that “banking reform will have a clear positive impact and enhance the financial products offered to the public, especially since the reform process is being undertaken in cooperation with reputable international companies that hold significant sway in the global financial arena.”

Comprehensive restructuring

During his participation in the Iraq-British Business Council conference in London recently, Dr. Saleh Salman confirmed that a comprehensive restructuring of the banking sector is being implemented with the help of leading international consulting firms. He also announced that the Iraqi government is cooperating with Ernst & Young to restructure six of the country’s seven state-owned banks, including the Industrial Bank, the Real Estate Bank, Rafidain Bank, and Rashid Bank.

International standards

The government advisor noted that the Trade Bank of Iraq (TBI) signed separate contracts with K2i and KPMG to help restructure its internal and external operations to meet international standards, and that the private banking sector will undergo reforms following the signing of a contract between the Central Bank of Iraq and Oliver Wyman.

Salman pointed out that Iraq has made significant progress in adopting electronic payment systems, with financial inclusion rising from less than 10 percent in 2018-2019 to approximately 40 percent currently. The number of point-of-sale devices has reached 60,000-70,000, while the number of bank accounts has increased.

To 22-23 million.

Restructuring plan

Dr. Salman also revealed that Rafidain Bank, the largest government institution in Iraq, will be transformed into Rafidain First Bank, with the government’s stake reduced to less than 24 percent. The remaining shares will be offered to private banks and international investors. The restructuring plan is expected to be completed and approved by the Iraqi government by the end of the year.

Strong banks

Financial expert Dr. Mustafa Akram emphasized the importance of restructuring government banks, describing it as one of the most important decisions issued since 2003. He noted that this approach will produce strong, well-established banks.

He explained that the financial sector requires solid banks capable of opening accounts with major international banks such as Citibank, JPMorgan, and others, facilitating global financial transactions.

Financial system

For his part, banking expert Dr. Nabil Al-Abadi considered the government’s move to restructure the Iraqi banking sector one of the most important economic decisions of the current decade and a cornerstone of any genuine economic reform. He noted that it is not merely a regulatory change, but rather a necessary revolution to lift the financial system out of its current state and enable it to lead the desired economic development.

Al-Abadi told Al-Sabah that Iraq’s economic future begins with reforming its financial system, and that this represents the most important step toward building a modern, diversified, and stable Iraqi economy. He explained that its success requires national cooperation between the government, the Central Bank, banks, the private sector, and the international community.

Attracting investments

Al-Abadi warned that the comprehensive restructuring of the Iraqi banking sector is not a luxury option, but rather an absolute necessity for Iraq’s economic survival and progress. He also noted that it is a major surgical operation that requires boldness, wisdom, careful planning, and decisive implementation. He added that success in this process will have a tremendous multiplier effect on all aspects of the Iraqi economy, as it has contributed to attracting investment, revitalizing the private sector, creating jobs, integrating the informal economy, and combating corruption.

Strategic projects

The spokesman emphasized that the expected restructuring and its importance require merging private banks and transforming them into strong banks, with the goal of creating large banking entities with significant capital. These entities are capable of financing strategic projects (energy, infrastructure, and industry), better handling risks, reducing operating costs, and enhancing financial stability. This will lead to the creation of strong and efficient banks.

Economic diversification

He explained that the overall strategic importance of this approach lies in supporting economic diversification, as the Iraqi economic vision to move away from oil cannot be implemented without a strong banking system that directs financing towards productive sectors such as agriculture, industry, tourism, and technology, and contributes to attracting foreign direct investment, as international investors require the existence of a sound, transparent, and advanced financial system to ensure the ease of transferring funds.

And protect their investments.

alsabaah.iq