Financial Crime World

Iraq’s Central Bank Granted Sweeping Powers in New Law

The Iraqi government has passed a new law granting the country’s central bank, the Central Bank of Iraq (CBI), sweeping powers to regulate the financial sector.

Key Provisions

  • The CBI will have the authority to issue legally-binding orders to specified individuals or entities, directing them to take specific actions in accordance with the law.
  • The bank will also be able to establish internal rules and guidelines for its organization and administration.
  • The authorized capital of the CBI is set at 100 billion dinars, fully paid by the state in exchange for 100% of the bank’s capital stock.

Capital Structure

  • The capital stock will be held solely by the state and will not pay dividends or be transferable or subject to encumbrance.
  • The CBI is required to maintain a general reserve account, an unrealized profits reserve account, and other reserve accounts as may be necessary under international accounting standards.

Financial Reporting

  • The law requires the CBI to determine its net profits available for distribution within three months after the end of each financial year.
  • The bank will then distribute 80% of its net profits to the general reserve account until such time as the reserve account reaches a sum equal to 10% of the total assets of the CBI.

Treatment of Unrealized Gains

  • The law requires the CBI to deduct from its net income any unrealized gains included in the net income and allocate an equivalent amount to the unrealized profits reserve account.
  • The bank will then be able to add back to its net profits any unrealized gain that was deducted from previous years’ net income.

Capital Contributions

  • The law grants the CBI the power to cover shortfalls in capital by seeking a capital contribution from the state if the bank’s assets fall below the sum of its liabilities and unimpaired authorized capital.

Management Structure

  • The Board of Directors will consist of nine members, including:
    • The Governor as chairman
    • Two Deputy Governors
    • Three Senior Managers
    • Three other individuals with suitable expertise in banking, economics, finance, commerce, or law
  • The law sets out rules for the eligibility of Board members, requiring them to be persons of recognized integrity who hold a university degree or have extensive professional experience in a field related to banking, economics, finance, commerce, or law.