The reform document is a strategic step to enhance confidence in the banking system.
The reform document is a strategic step to enhance confidence in the banking system.
2025/08/12
The Governor of the Central Bank, Dr. Ali Al-Alaq, emphasized that the 2025 Banking Reform Document represents a strategic and fundamental step toward reforming the Iraqi banking system, addressing its shortcomings, and preparing it to operate in accordance with internationally recognized standards. This will enhance the confidence of correspondent banks and global financial institutions and protect it from the risks of international sanctions.
This came in a statement to Al-Sabah during a session attended by the Baghdad Council for Digital Transformation and Electronic Payments and a number of relevant figures. Al-Alaq explained that the document can be described as a “mirror” of the banking system’s reality, clearly revealing its strengths and weaknesses and laying out a practical path to address them, particularly for banks currently moving towards adopting international standards. This, he explained, sends a positive message to the global banking system.
Al-Alaq pointed out that the Central Bank is currently developing a larger technology plan extending through 2028. This plan will contribute to advancing the banking sector and enhancing its capabilities, enabling it to offer banking products and services that meet international standards.
International partnerships
The Central Bank Governor explained that building a robust national banking system requires genuine partnerships with major international banks, whose assets amount to between $300 and $400 billion. These institutions only deal with banks that adhere to strict international standards and do not expose themselves to the risk of dealing with banks that do not meet approved conditions. He explained that the 2025 Banking Reform Document addresses a major flaw facing the banking system and aims to build an integrated banking system that strictly implements laws and regulations, ensuring the safety and stability of banking operations and protecting the national economy from any negative repercussions of sanctions or disruptions to international transactions.
Global partners
Al-Alaq pointed out that the Central Bank selected the prestigious international company Oliver & Aiman to implement the reform project, citing its successful experience in several countries, including the United Arab Emirates. He explained that the company began operating in Iraq over a year ago, collecting detailed data and information on the operations of banks with the aim of charting a reform path consistent with local laws and the Iraqi banking environment, and one that is practically applicable.
He added that Oliver Wyman will work to return the sanctioned banks to normal operations after correcting their course and complying with the document’s requirements, thus restoring the confidence of their international partners.
Limited reservations
The Central Bank Governor revealed that the percentage of banks that expressed reservations about the document did not exceed 10 percent of the total number of operating banks, stressing that any comprehensive reform plan will inevitably face some objections, especially from banks experiencing structural or operational problems. He emphasized the importance of banks having specialized banking media that reflects their activities and stages of development, and highlights the advanced systems and services they adopt, which will contribute to improving their image in the eyes of the public and international investors.
Strategic Partner
Regarding the strategic partner, Al-Alaq explained that the Central Bank had discussed with Oliver Wyman since the first meeting the mechanisms for foreign investor entry, noting that this issue was one of the most difficult and took a long time to discuss.
He revealed an alternative option, which is to establish an Iraqi fund to attract local capital, through which shares can be purchased and banks supported, which could reduce the need for a foreign partner in some cases.
Flexibility and strict procedures
Al-Alaq emphasized that the reform plan is flexible, as some criteria can be eased if the bank demonstrates serious commitment. He cited the case of one bank that was able to bring in a partner with a 40 percent stake, which gave it greater flexibility in adhering to some other provisions. However, he warned that the presence of 10 banks currently under liquidation is a dangerous indicator, especially when some banks are unable to return customer deposits, considering that this phenomenon sends negative messages to the national economy.
Lost trust
The Central Bank Governor pointed out that approximately 80 percent of the issued currency remains outside the banking system, stored in homes, due to weak confidence in banks. This was one of the main motivations for adopting a comprehensive reform plan. He stressed that banks are obligated to raise their capital to 400 billion dinars within the specified periods. He explained that the Central Bank will conduct periodic assessments of each bank’s compliance with the document, and that operating within a local framework does not exempt them from adhering to global capital standards.
Project Finance and Financial Transfer
Al-Alaq explained that the Central Bank has financed housing projects worth 12.3 trillion dinars to serve the community, noting that international institutions have commended Iraq’s unique dollar transfer mechanisms, which have contributed to enhancing transparency and stability in financial transactions.
He added that the bank held individual meetings with each bank to present the details of the document and discuss future directions, with the aim of ensuring the entire banking sector is aligned with the reform plan.
Expected international support
Al-Alaq concluded his statement by emphasizing that the 2025 Banking Reform Document represents a path to enhancing confidence in the Iraqi banking system. He noted that several international correspondent banks have expressed their support for this plan, and that the next phase will witness the launch of productive technical development projects that will enhance the capabilities of Iraqi banks and qualify them to compete internationally.
alsabaah.iq
