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Iraq Introduces Strict Regulations for Foreign Banks

The Central Bank of Iraq (CBI) has introduced new regulations governing the establishment and operation of foreign banks in the country. The move aims to ensure that only reputable and financially sound institutions operate in Iraq.

Key Requirements

  • Any entity seeking to establish a bank or branch in Iraq must obtain a banking license from the CBI.
  • To be eligible for a license, applicants must meet certain criteria:
    • Have a minimum capital requirement of $35 million
    • Be subject to consolidated supervision by a supervisory authority in its home country
  • Foreign banks will need to demonstrate their commitment to combating money laundering and terrorist financing through robust internal control systems.

Restrictions on Foreign Ownership

  • Only six foreign-owned banks will be allowed to operate in Iraq until December 31, 2008.
  • After this date, there will be no limit on foreign ownership of Iraqi banks.
  • However, foreign individuals or entities can own up to 50% of an existing or new domestic bank without counting towards the limitation.

License Application Requirements

  • The CBI has outlined specific requirements for license applications, including:
    • Detailed information about the applicant’s corporate structure
    • Ownership and management team
  • The agency will conduct regular inspections and examinations of licensed banks to ensure compliance with regulations.

Goals of the New Regulations

The new regulations aim to protect Iraq’s financial system from potential risks and ensure that foreign banks operate in a transparent and accountable manner. They are designed to enhance the country’s financial stability, integrity, and promote economic growth and development.

CBI Empowered to Conduct On-Site Inspections

The CBI has been empowered to conduct on-site inspections of any person or entity suspected of engaging in activities incompatible with the new regulations. Law enforcement officials will assist the CBI in gaining access to premises and examining records as necessary.

Micro and Small Business Credit Access Exempted

Entities authorized by the government to provide micro and small business credit access or similar grant programs will be exempt from the new regulations. Such entities must, however, notify the CBI of their activities and submit periodic reports on their operations.

Effective Date

The new regulations come into effect immediately and are intended to enhance Iraq’s financial stability and integrity while promoting economic growth and development.