New Regulations Aim to Strengthen Financial Sector in Iraq

The Central Bank of Iraq (CBI) has introduced new regulations aimed at enhancing transparency and stability in the country’s financial sector. The measures, which come into effect immediately, are designed to prevent illicit activities and ensure that only reputable entities operate in the banking industry.

Key Changes

Any person engaging in financial activities without a valid banking license or permit issued by the CBI will be subject to severe penalties.
Representative offices of foreign banks are prohibited from using the word “bank” in their name, unless they are an integral part of the parent bank’s name.
The CBI is empowered to conduct surprise inspections and examinations of any financial institution suspected of engaging in illegal activities. Law enforcement officials will assist the CBI in gaining access to premises and records if necessary.

Exemptions for Entities Exercising Governmental Authority

Entities exercising governmental authority are allowed to perform micro and small business credit access or similar grant programs without being subject to the same regulations as commercial banks.
These entities must, however, provide regular reports to the CBI on their activities.

Requirements for Obtaining a Banking License or Permit

Companies seeking licenses must be established in the form of juridical persons and must have at least 50 billion dinars of capital.
Foreign-owned subsidiaries and branches of banks are subject to similar requirements, with the added condition that they must be subject to comprehensive supervision by a supervisory authority in their home country.

Limitations on Foreign Ownership

The number of banking licenses issued to foreign-owned institutions is capped at six through December 31, 2008.
After this date, there will be no limit on the number of licenses issued. However, foreigners can still own up to 50% of an existing or new domestic bank without counting towards the limit.

Application Requirements

Applicants for banking licenses must provide detailed information and documents, including audited financial statements and a business plan outlining their proposed activities and organizational structure.

Overall Impact

The new regulations aim to promote transparency, stability, and accountability in Iraq’s financial sector, while also allowing foreign investment and expertise to contribute to the country’s economic development.