Strict or necessary: Controversy over the Central Bank’s conditions for banking reform in Iraq
Strict or necessary: Controversy over the Central Bank’s conditions for banking reform in Iraq
8-9-2025
Information/Report…
The reforms announced by the Central Bank of Iraq for the banking sector are the subject of intense debate among experts and specialists over the feasibility of the reform criteria, which some have described as “unreasonable,” while banking officials maintain they are necessary to protect the financial system and depositors.
The Central Bank has set a set of standards requiring banks to increase their capital to 400 billion Iraqi dinars before the end of next year, a move aimed at enhancing financial stability and improving the performance of the banking sector.
However, these standards have raised concerns among economists, who believe they could increase the pressures of the crisis on local banks, especially in light of declining investments and deteriorating economic conditions.
Economic expert Mustafa Al-Faraj said, “The conditions imposed by the Central Bank are stringent and prohibitive, and do not take into account the difficult economic situation facing Iraqi banks.”
Al-Faraj explained that realistic solutions would have been to provide direct support from the Central Bank through debt rescheduling and interest rate cuts, rather than tightening the measures.
For his part, Ahmed Brihi, a member of the Central Bank’s Board of Directors, emphasized that the standards set by the bank for reforming the banking sector are neither stringent nor prohibitive. Rather, they aim to protect banks from collapse, ensure the safety of depositors’ funds, and preserve Iraq’s international financial relations.
In a statement to Al-Maalouma News Agency, Brihi said, “The banking reform standards approved by the Central Bank for private banks are not the strict measures being promoted, but rather necessary steps aimed at ensuring financial stability and preventing banks from collapsing.”
He added, “A number of private banks faced circumstances that disrupted their financial operations, requiring the Central Bank to establish regulatory standards to protect them and depositors’ funds.”
He pointed out that “these standards also take into account the importance of maintaining the Central Bank’s international financial relations, which represent a crucial factor in Iraq’s monetary and financial stability.”
This dispute comes as Iraqi authorities seek to reform the financial sector, which has been affected by years of sanctions and political and economic turmoil.
Amid this controversy, the question remains about the ability of local banks to meet reform requirements, given the lack of clear financial support from the government and the ongoing economic crisis facing Iraq.
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