Bullseye: Most Iraqi private banks hit $85M capital target

June 15, 2011

22 out of 32 private banks reach $85

million capital target needed to spur

banking activity. Banks that fail may

have licenses revoked.

Reuters

Most of Iraq’s private banks have reached the central bank’s $85 million capital requirement level aimed at diversifying the financial sector’s activities, the head of a private banking association said on Tuesday.

Iraq is slowly getting back on its feet as it emerges from years of war and economic sanctions, and Iraqi banks hope that multi-billion dollar deals signed with international firms to develop the country’s vast oil reserves will spur lending and help private financial institutions flourish.

The central bank laid out a three-stage programme in 2009 for banks to raise their capital. The deadline for the first stage is end-June, when banks should reach capital levels of 100 billion Iraqi dinar ($85 million).

By June 2012, banks need to boost capital to $128 million and the third stage is for June 2013, by which time capital levels need to be at $213 million.

Abdul-Aziz Hassoun, executive director of the Iraqi Private Banks League, an independent organisation to support private banks, said 22 banks had so far reached the $85 million target.

He said another three banks were in talks to merge in order to reach the required level.

“The private banks are on the right path,” Hassoun told Reuters during an interview.

“Only seven banks did not undertake increasing their capital and they have to explain this to the central bank,” he said, adding that the central bank may withdraw the licences of banks that failed to meet the target.

According to the central bank website, OPEC oil producer Iraq has seven state-owned banks, 23 private banks, and eight Islamic private banks.

Its banking sector is dominated by two state-owned banks, Rafidain and Rashid. Much of the private banking activity is limited to deposit services and a small amount is personal lending.

“I personally agree with the capital increasing (decision)…in order to be able to enhance the financial entities’ capability to handle huge banking operations which are monopolised by the government banks,” Hassoun said.

He said private banks also needed to increase other services such as credit cards and ATM machines. Only eight private banks currently offer these services.

Ahmed al-Buraihi, a central bank deputy governor, told Reuters on Tuesday it was important to increase private banks’ capital to help raise their lending capacity.

“This planning is based upon anticipating the future of Iraq’s economy,” he said, referring to expected huge growth in the country’s oil and industry sectors. (By Aseel Kami; Editing by Serena Chaudhry and Toby Chopra)

End to Iraq’s political impasse nears

President of the Kurdistan Regional Government Masud Barzani speaks to the press in Baghdad on Thursday. Mr. Barzani confirmed the Kurds, the bloc that came in fourth place in the election, will retain the presidency the second highest position in Iraq's political structure. Photo: AP.

Iraq’s eight months of political deadlock appeared to be coming to an end on Thursday after a complex agreement was reached between parties, paving the way for the formation of a new government.

Elected officials are set to convene Parliament later in the day to appoint a speaker, setting in motion the final steps towards a tentative power—sharing deal between Iraq’s multiple political, religious and ethnic groups.

It would be only the second session of parliament since the March elections, with the first session in July lasting less than 20 minutes.

Leading politicians from all major parties at a meeting late Wednesday in Baghdad appeared to have agreed to form a broad—based administration with Nuri al—Maliki, from the Shiite—led Dawa party, staying on as prime minister.

Politicians had agreed that “the presidency of Iraq will belong to a Kurd,” Massoud Barzani, president of the northern autonomous Kurdish region of Iraq, said in a televised address on Thursday morning.

Sources in the capital said former prime minister Iyad Allawi’s secular Iraqiya List, the largest party in parliament with 91 members, would get the foreign minister’s portfolio and most likely grab the role of speaker of parliament.

The Iraqiya List had nominated high—profile Sunni member Osama al— Nujaifi to take the post of speaker, Iraqiya spokesperson Haidar al— Mula said according to regional news network al—Jazeera.

Once a speaker is chosen, the parliament can move toward naming a new president, who would then have the job of appointing a prime minister, according to the country’s constitution.

Mr. Al—Maliki, who heads the broader Shiite—majority State of Law coalition, which won 89 of the 325 seats in elections in March, exuded confidence on Wednesday.

“We will not only experience the birth of a new government but even the beginning of the rebuilding of the Iraqi state,” he said.

However, al—Iraqiya, which had been hoping its leader Mr. Allawi would get the premiership still showed signs of dissatisfaction within its ranks as details of the power—sharing deal were released.

“We are the largest faction, according to the election results, and if the others have divided the positions among themselves, that would mean that democracy in Iraq is over,” said Mr. Abdul Qadir Mahdi, an Iraqiya List parliamentarian.

The party’s leadership was said to be meeting to discuss its final position on the power—sharing deal.

Iraq set a world record with its 249 days of failing to form a government.

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