Central Bank of Iraq Issues Regulatory Instructions for Credit Policy and Classification

In an effort to ensure the stability and soundness of the banking system in Iraq, the Central Bank of Iraq has issued new regulatory instructions for credit policy and classification.

Framework for Effective Credit Portfolio Management

The instructions provide banks with a framework for managing their credit portfolios effectively, ensuring that lending activities are carried out in a prudent and responsible manner. The regulations aim to promote good governance, transparency, and accountability within the banking sector.

Requirements for Each Bank

Each bank is required to have an internal credit policy that outlines its lending practices, risk management strategies, and provisioning requirements. Additionally, banks must establish a credit classification system to categorize their loans into five main categories:

• Preferred Credit: Loans secured by collateral that can be easily liquidated to cover the principal and accrued interest.
• Good Credit: Loans supported by the borrower’s payment ability and financial position, with guarantees and current account facilities.
• Medium Credit: Credits considered a potential problem due to weak financial positions, requiring management attention.
• Sub-Standard Credit: Loans past due for principal and/or interest payments, where losses are expected if not managed properly.
• Bad (Doubtful) Credit: Loans displaying the same attributes as Sub-Standard Credit but with a high likelihood of complete collection being doubtful.

Information System Management

Banks must also maintain an information system to manage their credit portfolios, generate reports necessary for decision-making, and assess whether their credit policies are meeting the needs of their customers and adhering to regulatory requirements.

Compliance and Regulatory Actions

The Central Bank of Iraq has emphasized that compliance with these instructions is mandatory for all licensed banks in Iraq. Failure to comply may result in regulatory actions, including penalties and fines.

Contact Information

For more information on the Central Bank of Iraq’s regulatory instructions for credit policy and classification, please contact:

• Name: [Insert Name]
• Title: [Insert Title]
• Phone: [Insert Phone Number]
• Email: [Insert Email]

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