McDan: I would like to leave you with this thought from Milton Friedman:
“Only a crisis – actual or perceived – produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes the politically inevitable.”
Strongcbm: Okay I’m going way out on a limb here…This is solely IMO….but the Power Ball is looking like a squirrel to me….I’m looking at the timing of it and no one has won… It’s now forecast to hit over 2Billion…..what a way to grab the attention of everyone for the next few weeks…it even smells like control just like the MR….hmmmmmm….just my little opinion
Walkingstick: Samir Abbas Alnasiri *: banking reform requirements in Iraq in 2016
– PUBLISHED IN 01/11/2016
– PUBLISHED IN 01/11/2016
After one year and four months to take over the new Iraqi government, headed by Dr. Haider Abadi, head of the Council of Ministers of the responsibility of the state administration in the light of our follow-up applications economic approach in the government program the decree of the government and approved by the House of Representatives and the selected program schedule for the application of four years (2014 – 2018), a life of the government constitutionally.
Through analysis axes and paragraphs of the government program and materials as far as the economic reform and banking reform in particular note the texts and paragraphs of the application, which referred to the program has not been implemented them anything through the expiration of the period above.
As the time goes, Iraq is suffering from the economic and financial crisis suffocating for reasons both objective and subjective well-known, it requires the competent authority in the government and the Central Bank of the Iraqi government and the private banking sector of take immediate initiative to study the government program vocabulary and the requirements of its application on the ground through the diagnosis and analysis of the reality of the banking sector entities and the challenges it faces at this stage and to identify the processors to promote him and repaired in spite of all the circumstances, obstacles and difficulties experienced by, for example, in the light of the business to some of the big private banks Results Indicators as of 09.30.2015 compared with indices up to 30.9.2014 note what comes :
1. Total deposits declined at rates ranging between (13% – 59%)
2. Operating drop (cash credit + investments) between (13.5 -39%)
3. money between their assets decreased (5% – 74%)
4. Total Assets (financial center) fell between (9% – 43%)
5. The decreased earnings achieved between (16% – 43.5%)
2. Operating drop (cash credit + investments) between (13.5 -39%)
3. money between their assets decreased (5% – 74%)
4. Total Assets (financial center) fell between (9% – 43%)
5. The decreased earnings achieved between (16% – 43.5%)
This confirms beyond any doubt that the sector Bank of Iraq and in particular the private banks are suffering from a real and catastrophic problems during this year and which increases Thread Atma is the sharp decline in stock prices of these banks ranging share price currently for most of the private banks in Iraq Stock Exchange between (250 – 500) fils except for some banks that no more than ten banks ranging shares between (600-900) fils, including two of which exceeded the nominal share of Dinar simple and Ahdbnsabh This means that up to 40 banks amounting to the value of its shares declined by (50% – 75 %) of the nominal value her.
Since the banking sector is the ring core in a series of the Iraqi economy rings and the Iraqi economy, the problems are many and complex and there is a tangle and confusion between the mechanics and the requirements of building introductions transition to a market economy, according to Maahart him Article 25 of the Iraqi Constitution and the legislation and regulations, instructions, and the determinants of the central administration of the economy added to That lack of security and economic stability and financial mismanagement during the years (2003- 2015) and administrative corruption and financial institutions related to the economy. Which led to the creation of a true obstacles to attempts to banking reform.
Problems and constraints of the banking sector in 2016
Through diagnostic and analytical view of what it will be the year for the development of macro economy in 2016 and the difficult economic conditions experienced by Iraq, we noticed that it could directly reflected in the financial and banking sector, making exacerbate the structural imbalance in the Iraqi economy does not work with him confront policies and instructions superficial and ineffective but a strategy of economic policies are interlinked in the short term and the medium and long term and this requires us to identify the main problems and obstacles faced by the banking sector this year, as follows:
First, the special security conditions because of the war on terror and the occupation of some provinces of Daash terrorist gangs and theft of customers’ deposits in the branches of government and private banks in those provinces and destroyed documents that guarantee owed banks rights of borrowers and which are currently classified according to the indicative list issued by the Central Bank’s debt can not be repaid realistically because of the exodus of most of the borrowers of their provinces and their inability to payment in addition to an increased risk ratios in the cash grant credit to customers that disrupted the work of banks and reflected on the liquidity limits, which led it in some banks to a minimum, which will display some of them to bankruptcy and financial collapse in addition to the that it will lead to influence the economic situation and financial activity and investment during the current phase.
Second: the suffering of the Iraqi banking sector, particularly private banks in all areas of banking activity of militancy in the application of some of the instructions issued by the Central Bank of Iraq and the Finance Ministry and government banks (Rafidain and Rasheed), although he had already been a number of decisions of the Committee on Economic Affairs issued in the Council of Ministers overcome them and overcome them There were also Bamamha No. 64/4/2/2015 but to no avail due to poor follow-up of those responsible for the implementation of these decisions and Mayati:
(A) the Ministry of Finance by requiring all state departments to accept certified instruments issued by private banks.
(A) the Ministry of Finance by requiring all state departments to accept certified instruments issued by private banks.
(B) The Central Bank of Iraq and the government study the possibility of banks lending to private banks to finance small and medium enterprises because of their importance to the revitalization of the Iraqi private sector.
C- the Trade Bank of Iraq to open credit lines with private banks under the supervision of the Central Bank of Iraq.
W emphasis on activating the role of the financial court as stipulated by the Banking Act and in accordance with the Law of the Central Bank of Iraq and not to resort to other courts.
(C) the Central Bank of Iraq to study the possibility of benefiting from the legal reserve for private banks to grant investment loans from the reserve and Beshravh.
(H) an emphasis on the Ministry of Finance and the Central Bank of Iraqis applying for the Committee on Economic Affairs Resolution No. S.l / 495 on 11.18.2014 regarding the opening of letters of credit to the private banks up to $ 10 million (ten million dollars) without passing Iraqi bank for trade.
G. do all of the Rafidain and Rasheed deposit part of their money with private banks in exchange for soft benefits that the private banks to invest that money in investment projects in accordance with the economic feasibility and according to specific mechanisms and guarantees of studies
(D) that the Ministry of Finance and the Central Bank of Iraq and the Iraqi Trade Bank of the release of the amounts of appropriations according to the contexts in force globally and not suspended or delayed when backing receiving the items.
(D) that the Ministry of Finance and the Central Bank of Iraq and the Iraqi Trade Bank of the release of the amounts of appropriations according to the contexts in force globally and not suspended or delayed when backing receiving the items.
Z- urged private banks to create partnerships with international banks for the purpose of strengthening the developmental role of the country and create investment opportunities and the operation of labor.
Third: the continued absence of plans and strategies for rebuilding and restructuring of the Iraqi banking sector and the weakness of the foundations and the detailed policies adopted by banks in the field of risk management in cases of natural situation and in emergency situations, although the World Bank’s reports on the financial situation in Iraq and the stomach in conjunction with Iraqi officials diagnosed the challenges and processors since 2011 until last visit to Iraq for their team.
Fourth: the continued weakness of credit to the contribution to gross domestic product, so that does not exceed 10%, while in regional countries (Middle East and North Africa, up to 55%), and this means that the impact of the Iraqi banking sector in economic development and reconstruction of the national economy building according to look serve the orientation of the market economy . And the current lack of liquidity in banks help in the continuation of this problem, which is not being able to cash the granting of credit to customers and investment projects in different economic sectors.
Fifth: the lack of financial institutions retaining the banking business as a deposit guarantee and credit guarantee companies and the lack of specialized offices to study and analyze and identify risks (credit, liquidity, market and operational) despite the diagnosis that a few years ago.
Sixth: the inability of the Iraqi banking sector from acquiring the capabilities and potential and infrastructure substantive and technical influential in portfolio management and catch up in the footsteps of the banking development in the neighboring countries, making the customer look at our banks look backward and is able to provide the best advanced services to him, which led to their reluctance to deal with the Iraqi banking sector, particularly private banks as that confidence has been shaken in the last period due to the inability of some banks to meet the withdrawals customers of their deposits, which led to a decline in deposit rates in most of the banks to a great extent, which will affect the possibility of financing banks during this year.
Seventh: the existence of a parallel sector Unregistered represented Cashiers ARD who are big operations (internal remittances or external, banking, conversion of cash) takes place outside the formal framework and result in huge commissions under weak or control specific, creating a difficult environment for the banking system the government and private and has led to speculation in the foreign currency market, the impact on the central bank’s policy of maintaining the Iraqi dinar exchange rate against foreign currencies from time to time that disrupted his plans in the supervision and management of the money market and to maintain balance.
Eighth: the complex and that do not fit with the support and economic reform that must be provided by the government for the banking sector policies with a financial and administrative corruption is evident in most economic institutions, including the taxation departments tax laws.
Ninth: The limited development of financial systems in Iraq and the central policies in determining interest rates is reflected in the non-payment of loans and thus to restrict the ability of banks to finance new loans, which led to slow growth and the emergence of serious calls to restructure and reform the banking sector.
Tenth: general culture prevailing in society and still consider to private banks and conservatively avoids dealing instruments or Alaitmanieh cards In addition, the inability of some banks to fulfill its obligations to customers, creating a body and lack of confidence in the banking sector and this is a big problem.
Banking reform in 2016 Requirements
First, institutional and structural reconstruction of economy
Reconsider institutional and structural building the Iraqi economy according to Mayati:
1. activation of economic reform law after the involvement of the private sector in the management and supervision and draw public policies and strategies and detailed and contribute to the state in support, guidance and pre-emptive censorship.
2. activation of the founding of the Supreme Council for Economic Affairs and the broad participation of private sector experts and technocrats, university professors and advisory offices and homes experience
3. restructuring of State-owned banks and private banks, according to the reform outlook reached by the teams and the World Bank experts, bankers and experts Iraqis and signed a memorandum of understanding for this purpose several years ago have not been implemented so far.
Second, the lack of liquidity
Second, the lack of liquidity
The central bank and Ministry of Finance analyzed the financial position of the banks as at 12.31.2015 and is expected for 2016 and determine the actual need for liquidity to sustain cash trading in the Iraqi market in all fields and to develop a proactive plan to prevent the bankruptcy and the collapse of some banks and sustaining banking wheel under the current circumstances and the use of mechanisms and tools for new applications monetary policy
Third, the implementation of the government program
Effective implementation of the government program with respect to paragraph (d) of the third axis (encouraging a shift to the private sector) and private (business development bank), which emphasizes the Mayati:
1. Implementation of investment funds social security policy.
2. Activating the role of state banks and specialized banks and private banks to provide soft loans to the private sector and the national as well as finding solutions to the problems of accumulated tax benefits resulting from the stalled project for the owners of production solutions.
3. Develop a short and medium-term fiscal policy.
4. coordination between fiscal policy and monetary policy as the foundation of economic policy and the development of mechanisms and principles for its implementation.
Fourth: the legislative environment
Reconsider amending banking legislation in Iraq, which regulates the banking work for the advancement of the reality of banking and in particular the Central Bank Law No. (56) for the year 2004 and the Banking Law No. (94) for the year 2004 and the Law on Registration of Companies No. 21 of 1997 and the law of Iraq Stock Exchange No. 74 for the year 2004 and activate the money laundering law and the law of the new investment.
Fifth: structuring bank financing
The current private bank financing structure mired with many failures and constraints and in order to increase the credit product and funding from private banks and activate their contribution to various aspects of investment and reconstruction and advancing the process of development and move the economic cycle in Iraq see as an essential step is serious is to activate expand the financing of small and medium-sized private enterprises as an objective social and economic a private and urgent priority and that is the Iraqi Central Bank supervisory role and effective oversight at the take over development initiatives and activated, expansion and start its implementation and special fall 6 trillion dinars for this activity.
Sixth: the financing and promotion of small and medium enterprises
Develop and promote the financing of small and medium enterprises according to the following methodology:
1. The role of government to activate in building a strategy for the development of small and medium enterprises is the most important elements of success as the government that have the financial possibilities in a yield economy in which the private sector weakens to a large degree and can not promote this sector without having a plan for the development of this sector and the building and clear mechanisms and declared actively involving the private sector so that it can be turned from a small government sector continued to key partner and then to the commander in investment and construction operations and is done through Mayati:
A. begin to transfer the government sector of port projects and competitor to the private sector to monitor controls and facilitator of the procedures and laws.
2. the issuance of small and medium-sized law firms and small and to help create new jobs and to reduce poverty and destitution and contribute to the economic and social development plans and to reduce high unemployment, which exceeded 25%.
The establishment of the Independent National Commission for the building and the formulation of strategies, policies, systems, finance and lending to boost the profitability of micro and small and medium-sized companies and is this independent body to provide advice and studies to government departments on legislative, regulatory and financing measures to support this sector to be formed of representatives from concerned private sector ministries.
Seventh: The Central Bank of Iraq policies
Activate and revise the instructions and implementing regulations and guidance on the applications of monetary policy and the development of a proactive regulatory regime careful to follow up the implementation and in particular with regard to foreign exchange and Auctions currency overseen by the Central Bank of Iraq and the development of new mechanisms for external transfer and documentary credits and study the possibility of leaving the foreign currency auctions.
Activate and revise the instructions and implementing regulations and guidance on the applications of monetary policy and the development of a proactive regulatory regime careful to follow up the implementation and in particular with regard to foreign exchange and Auctions currency overseen by the Central Bank of Iraq and the development of new mechanisms for external transfer and documentary credits and study the possibility of leaving the foreign currency auctions.
Eighth, guarantee deposits and credit law
The issuance of the Deposit Insurance Act, the credit guarantee and loan and the establishment of the concerned companies to this area.
Ninth: Basel
The issuance of the Deposit Insurance Act, the credit guarantee and loan and the establishment of the concerned companies to this area.
Ninth: Basel
The Central Bank of Iraq to activate the application of Basel (1.2, 3) follow up their implementation with banks and focus on risk management and the application can be applied from the minimum capital requirements and supervisory review process and market discipline.
Tenth: classification of private banks
Re-classification of private banks in accordance with the standards of performance and efficiency of the activity approved the adoption of the international standards that we review and evaluation process a neutral accounting institutions accredited under the supervision of the Central Bank of Iraq.
Eleven: technical gap
Address the technical gap and secure the legal and technical requirements for twinning widespread among government banks and private banks on the one hand and between international banks on the other hand in order to develop the banking, modernization and regulation of the financial and monetary circulation processes the payments system according to the latest applied modern electronic banking systems in the world.
Twelve: banking merger
Twelve: banking merger
The Central Bank is preparing to review the analytical study of the reality of private banks in the light of the financial results for 2015 and make decisions critical to integrate small-sized banks and weak activity with large and discreet banks with a view to the development of the private banking sector.
To be specific banking merger rules and means to address the problems and constraints of working in banks and not transfer their problems to other banks sober.
(*) Researcher and economist
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