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[size=36][rtl]The Iraqi banking sector challenges and remedies in 2020[/rtl][/size]
Tuesday, January 14, 2020
Tuesday, January 14, 2020
On the occasion of the year 2020, and in view of the special and new circumstances that our beloved country is going through due to the widespread popular movement, legitimate demands for change, political and economic reform, confusion of visions, divergence of views regarding the reality and activity of our banks in the current circumstance, the effects of events and instability in the work environment, and because our banks are the first basic link in the national economy We must make clear the analysis and evaluation of the business results of banks 2018 and 2019 and the financial indicators that confirm that they faced many challenges and obstacles to work and we will try in this paper to address them and according to the available data and our view to overcome them Requirements for the year 2020 in order to achieve stability and sustainability of the banking and work according to the strategy of the central bank and the applications of monetary policy and to maintain business results achieved even at the minimum if current conditions continued.
The structure of the banking system in Iraq
The structure of the banking system currently consists of 7 government banks, 76 commercial and Islamic banks, 25 merchants, 27 Islamists and 17 branches of a foreign bank.
Banking challenges and obstacles
First - Based on the official financial data and indicators issued by the Central Bank for the year 2018, the banking sector suffers from weak banking activity and low liquidity, deposits, revenue and profitability in some banks, especially private banks in large proportions compared to previous years, as well as the prices of their shares in the Iraq Stock Exchange fell due to The economic and financial crisis and the economic stagnation experienced by Iraq for known reasons.
Secondly, the total deposits with private banks reached 14% of the total deposits in the Iraqi banking sector with government banks by 86%, knowing that the number of government banks is 7 banks and private 69 commercial and Islamic banks due to the concentration of government deposits and accounts with government banks.
Third, private banks invest 78% of the capital of the Iraqi banking sector, but it only gets 22% of the sector’s assets and 13% of profits.
Fourth, non-performing debts amounted to 6 trillion dinars, and they constitute 15% of the total bank financing granted, and banks encounter significant obstacles in their collection for judicial, legal, and clan reasons.
Fifthly: Failure to activate and implement the decisions of the Council of Ministers and the Economic Affairs Committee of the Council of Ministers on government support for private banks issued during the previous three years.
Sixth: The inability of private banks to use excess liquidity in loans and financing for projects in light of non-performing credit at 15% of the credit portfolio.
First, raise the ceiling for banking finance in the Central Bank initiative for small and medium-sized projects and allow private banks to invest in various types of real estate, housing, industrial etc. .
Second - The government has taken the necessary legal amendments to consider private bank debts as excellent debts to be repaid, similar to government debts.
Third, the central bank and the government request the United Nations Development Program and Arab and international financing funds to work with Iraqi banks to issue financing programs for mega investment projects to attract foreign investors while granting them facilities and incentives in accordance with Cabinet Resolution 254 of 2019.
Fourth: The central bank should take the necessary steps to assign international auditing and classification companies for the purpose of classification of discreet private banks, because without classification of banks it is not possible to establish partnerships with solid international banks for the purpose of financing large projects or to consider the credit rating of Iraq as an approved classification for discreet banks.
Fifthly, due to the occupation of ISIS terrorist gangs, Mosul, Anbar, and Salah al-Din, the 121 state and private banks have borne the damage and losses of (1 trillion dinars) and a large portion of them are shareholder funds and deposits for customers that the government requires compensation for.
Sixth: Activating all cabinet decisions related to supporting the banking sector and supporting construction and investment issued in the year 2019 and previous years and the decisions of the Economic Affairs Committee to support private banks, in particular the following:
1 - Obligation of the Ministry of Finance and government banks to open bank accounts for ministries and state departments in private banks and not limit them to government banks according to its letter 207 dated 01/31/2019.
2 - Activating the decision to allow ministries and government departments to open documentary credits in private banks up to $ 50 million without going through the Ministry of Finance and the Iraqi Bank for Trade. Economic Affairs Committee resolution 967 on 10/21/2018.
3 - Activate the Economic Affairs Committee Decision No. 253 of 2015 regarding accepting the instruments issued by private banks to pay insurance, customs fees and taxes.
4- Activating Cabinet Resolution No. 245 of 2019 to encourage reconstruction and investment.
5- Activating Cabinet Resolution No. 378 of 2018 regarding the collection of government fees in state departments through electronic payment.
6 - Activating Economic Affairs Committee Decision No. 272 of May 19, 2015 to support private banks, particularly with regard to approval by government banks.
7 - Activating Cabinet decisions No. 313 of 2016 and No. 218 of 2017 regarding localizing employee salaries and asking government departments to localize their salaries as per their desire and not directing them to settle salaries exclusively in government banks.
8 - Activating Decision No. 253 of 3/5/2015 of the Economic Affairs Committee regarding acceptance of instruments issued by private banks to collect government taxes and customs fees.
Seventh - The Ministry of Finance compensates the banks that were affected by the occupation of the ISIS terrorist gangs. It is arrested at the Central Bank
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