The Central Bank announces reform plans aimed at modernizing the Iraqi banking sector.
The Central Bank announces reform plans aimed at modernizing the Iraqi banking sector.
2025/04/07
The Central Bank of Iraq announced, on Monday, a comprehensive reform project for the private banking sector, while pointing out the details of the reform steps to build a solid, modern, and flexible banking sector.
A statement from the Central Bank, received by Al Furat News, stated that, “With the full support of the government and in cooperation with Oliver Wyman Consulting, the Central Bank of Iraq has unveiled reform plans aimed at modernizing the Iraqi private banking sector and building a sound, modern, and flexible banking sector that drives economic growth, enhances financial inclusion, and achieves stimulating and sustainable returns for shareholders.”
He added, “This plan is the result of joint efforts between the Central Bank of Iraq, the government, and the private banking sector, in cooperation with Oliver Wyman Consulting. Its success depends on the active participation and cooperation of all stakeholders.”
He pointed out that “the bank and the government will lead projects aimed at modernizing the sector and meeting the evolving needs of a rapidly growing economy. These projects focus on three objectives: enhancing and deepening financial inclusion in Iraq; increasing the efficiency and productivity of the private banking sector; and creating a fair and healthy competitive environment in the market while enhancing the sector’s resilience and ability to withstand risks.”
He explained that “this project will contribute to enhancing the protection of depositors and creditors, along with financial education campaigns to restore confidence in dealing with banks. The base of financial inclusion will also be expanded by establishing legal and regulatory frameworks and implementing them effectively, with the aim of enhancing access to services.”
He continued: “Payment systems will also be modernized to facilitate efficient and reliable transactions for both businesses and individuals. Financial infrastructure will also be expanded, including an increased network of branches and ATMs. Compliance procedures for anti-money laundering and counter-terrorism financing measures will also be streamlined and strengthened through the digital identity system.”
He pointed out that “a prerequisite for the success of the plans is requiring all banks to comply with a set of standards and actively participate in the sector’s transformation process. Banks must move towards business models that add value to the Iraqi economy, while providing distinguished services to customers, ensuring their financial stability, and combating fraud and financial crime.”
He added, “The main banking standards to be implemented are divided into four main categories:
1. Ownership and governance structure:
– Setting a maximum ownership limit to prevent excessive control (concentration) by any single entity or related parties.
– Ensure the existence of competent and independent boards of directors, with the application of suitability tests for all key leadership positions.
– Conducting intensive due diligence on all major shareholders.
2. Sustainability of the business model:
Requiring banks to adopt sustainable and viable business models by submitting detailed, consistent business plans, strategic plans, financial forecasts, organizational structure, technology implementation plans, and operations management plans.
– Ensuring that key services and products align with market needs to support the Iraqi economy and citizens.
3. Financial metrics:
Maintaining capital adequacy and liquidity ratios in line with global best practices to ensure banks’ resilience in the face of financial crises.
4. Risks and Regulatory Compliance:
– Keeping pace with global best practices in the field of compliance, including comprehensive measures to combat money laundering and terrorist financing, to ensure the protection of the sector from financial crimes.
– Enhancing transparency in reporting and auditing by accredited auditors to reduce conflicts of interest, including transactions with related parties.
The bank confirmed, according to the statement, that “the reform process will be a multi-stage journey, during which private banks will be assessed for their compliance with the required standards at various stages of the reform process. The first evaluation cycle is expected to begin in the first quarter of 2026.”
He pointed out that “in the coming months, the Central Bank of Iraq will share with the private banking sector detailed criteria and timelines for implementing the reform process, in official circulars. It will also work to activate support channels and hold technical assistance workshops to ensure readiness before the evaluation process begins.”
He added: “All licensed private banks will also be asked to formally confirm their participation in the reform process. The Central Bank of Iraq is fully committed to achieving this transformation by working closely with all relevant parties to pave the way for a strong and inclusive financial system.”
alforatnews.iq
