Iraq announces Major Banking Sector Overhaul
By Padraig O'Hannelly.
Iraq is embarking on a comprehensive restructuring of its banking sector with the assistance of leading international consultancy firms, according to Dr Salih Salman, Advisor to the Iraqi Prime Minister, speaking at the Iraq Britain Business Council (IBBC) Spring Conference in London on Tuesday.
The Iraqi government has appointed Ernst & Young to restructure six of the country's seven state-owned banks, including the Industrial Bank, Real Estate Bank, Rafidain Bank, and Rasheed Bank.
The Trade Bank of Iraq (TBI) has separately engaged K2i and KPMG to help restructure its internal and external operations to meet international standards.
Dr Salman revealed that Rafidain Bank, Iraq's largest state-owned institution, will be reincarnated as the First Rafidain Bank with government participation reduced to less than 24 per cent. The remaining shares will be offered to private banks and international investors. The restructuring plan is expected to be finalised and approved by the Iraqi government by the end of the year.
The private banking sector is also undergoing reform following a contract signed between the Central Bank of Iraq (CBI) and Oliver Wyman. This two-to-three-year project will result in recommendations for private banks to either exit the sector, comply with international standards, or merge with other institutions.
Iraq has made significant progress in electronic payment systems adoption, with financial inclusion rising from less than 10 percent in 2018-2019 to approximately 40 percent currently. The number of debit and credit cards has reached 60,000-70,000, whilst bank accounts have grown to 22-23 million.
From June 2025, all government payments will be made electronically, with cash payments prohibited across government institutions. The Iraqi government has launched awareness campaigns to encourage public adoption of electronic payment systems, moving away from the traditional cash-based culture.
The government has also introduced the Riyada programme, operated in partnership with the Central Bank of Iraq, to provide financing and training for small and medium enterprises. The initiative offers a registration platform where participants can access training and potential financing opportunities.
Dr Salman emphasised that Iraq remains open to foreign investment and international consultancy services across all sectors, including legal, financial, accounting, auditing, and compliance services. The reforms aim to integrate Iraqi banks into the global financial system after decades of isolation due to sanctions and frozen assets.
Since November 2022, all bank transfers in Iraq have been processed through a Central Bank platform in cooperation with the Federal Reserve of the United States, marking Iraq's re-entry into global financial systems. The country now works with approximately 30 overseas banks, though challenges remain in opening international banking relationships.
The comprehensive banking reforms represent a significant shift towards international standards and greater private sector participation in Iraq's financial sector.
(Picture credit: IBBC)
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