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CENTRAL BANK OF IRAQ ISSUES GUIDELINES FOR CREDIT POLICY AND CLASSIFICATION

Strengthening the Banking Sector and Promoting Economic Growth

The Central Bank of Iraq has issued new guidelines for credit policy and classification, aimed at strengthening the country’s banking sector and promoting economic growth.

KEY REQUIREMENTS

  • Each bank must define its financial and economic objectives for lending, including increasing employment and stimulating economic growth.
  • Banks must classify their credits into five categories:
    • Preferred Credit
    • Good (Standard) Credit
    • Medium Credit
    • Sub-Standard Credit
    • Bad (Doubtful) Credit
  • The classification system is based on the credit’s risk profile, with Preferred Credits being those that are fully secured by collateral and have a low risk of default.
  • Banks must also establish an information system to manage their credit portfolio, generate reports, and assess the effectiveness of their credit policy.

CREDIT CLASSIFICATION

The guidelines define five categories of credits based on their risk profile:

  1. Preferred Credit: Credits that are fully secured by collateral and have a low risk of default.
  2. Good (Standard) Credit: Credits that are completely supported by the borrower’s payment ability and financial position.
  3. Medium Credit: Credits that require management attention due to the borrower’s weak financial position.
  4. Sub-Standard Credit: Credits that are past-due for principal and/or interest payments and have a high risk of default.
  5. Bad (Doubtful) Credit: Credits that display attributes similar to Sub-Standard Credits but with a high probability of complete collection.

RATIONALE BEHIND THE GUIDELINES

The Central Bank of Iraq’s guidelines aim to promote transparency, accountability, and stability in the banking sector. By implementing these measures, banks will be able to better manage their credit risk, reduce non-performing loans, and increase lending to support economic growth.

“We are committed to creating a robust and stable banking system that supports economic development,” said [Name], Governor of the Central Bank of Iraq. “These guidelines will help banks make informed decisions about credit allocation and management, ultimately benefiting the Iraqi economy.”

CONTACT INFORMATION

For more information on the guidelines, please contact the Public Relations Department at the Central Bank of Iraq:

Phone: [Phone number] Email: [Email address]