Central Bank of Iraq’s Banking System Shows Resilience Amid Financial Crises

Introduction

The Iraqi banking system has demonstrated remarkable resilience in the face of financial crises, according to a recent study. The study analyzed data from the Central Bank of Iraq’s financial stability report and found that the banking system’s capital adequacy ratio increased significantly from 2017 to 2018.

Capital Adequacy Ratio

• The capital adequacy ratio of the Iraqi banking system increased from 181% in 2017 to 285% in 2018.
• This high ratio enables the banking system to cope with unexpected risks and maintain solvency.
• The study found a gap between government and private banks’ capital adequacy ratios, with private banks having a higher index of capital adequacy than government banks.

Liquidity Risk Ratios

• The study analyzed liquidity risk ratios for several Iraqi banks and found that Al-Rasheed Bank and Al-Sharq Al-Awsat Bank had higher average liquidity risk ratios compared to Al-Mansour Bank, but remained below the standard rate set by the Central Bank of Iraq (70%).
• The three banks in question have been reducing their liquidity risk ratios since 2015.

Relying on Capital vs. Existing Deposits

• Private banks rely more on their capital at work while government banks rely more on existing deposits due to citizens’ confidence in them.

International Standards and Banking Developments

• The study highlighted the importance of international standards, such as Basel II, which require Iraqi banks to develop their banking methods and pursue banking developments.
• “The Central Bank of Iraq’s commitment to international standards has helped improve the resilience of the banking system,” said Mazen Dawood Salman, one of the study’s authors.

Conclusion

The study concluded that the banking system has adapted well to financial crises and is now better equipped to handle future challenges. The findings have important implications for policymakers, regulators, and banks in Iraq, suggesting that the country’s banking system is resilient and capable of withstanding financial shocks, but also highlights the need for continued vigilance and improvement.

Key Findings

• The Iraqi banking system’s capital adequacy ratio increased from 181% in 2017 to 285% in 2018.
• Private banks have a higher index of capital adequacy than government banks.
• Al-Rasheed Bank and Al-Sharq Al-Awsat Bank had higher average liquidity risk ratios compared to Al-Mansour Bank, but remained below the standard rate set by the Central Bank of Iraq (70%).
• The three banks in question have been reducing their liquidity risk ratios since 2015.
• Private banks rely more on their capital at work while government banks rely more on existing deposits due to citizens’ confidence in them.