CENTRAL BANK OF IRAQ GAINS NEW POWERS TO REGULATE AND MANAGE ITS AFFAIRS

Enhanced Authority for Central Bank of Iraq

The Central Bank of Iraq (CBI) has been granted new powers to issue legally binding orders and guidelines, according to a recently passed law. The CBI will now have the authority to direct specific actions from individuals or entities in line with its regulations.

Key Provisions of the Law

• The CBI’s authorized capital has been set at 100 billion dinars, fully paid for by the State in exchange for one hundred percent of the bank’s capital stock.
• The state will hold sole ownership of the CBI’s capital stock and will not pay dividends or allow it to be transferred or encumbered.
• The law outlines the CBI’s reserve accounts, including:
  • General reserve account
  • Unrealized profits reserve account
  • Other reserve accounts as deemed necessary under international accounting standards
• The CBI must hold a general meeting within three months after each financial year to determine its net profits available for distribution or losses.

Treatment of Unrealized Gains

• Unrealized gains will be deducted from the CBI’s net income and allocated to an unrealized profits reserve account.
• Unrealized gains that were previously deducted and realized during the financial year will also be added back to the net profits available for distribution.

Board of Directors

• The Board of Directors is responsible for conducting the business and carrying out the responsibilities of the CBI.
• The law sets out the composition of the Board, which consists of nine members, including:
  • Governor as chairman
  • Two Deputy Governors
  • Three Senior Managers of the CBI
  • Three other individuals with suitable expertise
• Eligibility criteria for appointment to the Board include:
  • Recognized integrity
  • University degree or extensive professional experience in fields related to banking, economics, finance, commerce, or law
  • Not being a citizen of Iraq, not being a fit and proper person, or having any conflicts of interest

Powers to Cover Shortfalls

• The CBI has been granted powers to cover shortfalls in its capital by requesting a capital contribution from the State.
• The Board will assess the situation and prepare a report on the causes and extent of the shortfall, and may request a capital contribution to remedy the situation.

Conclusion

Overall, the new law aims to enhance the CBI’s ability to regulate and manage its affairs, and to strengthen its position as a key institution in the Iraqi economy.