Dr. Mazhar Muhammad Salih *: the rentier of private banks in Iraq: behavior and performance!

Policy papers in the banking sector

Dr. Appearance of Mohamed Saleh *: the rentier of private banks in
Iraq: behavior and performance!


01/09/2020







One of the most serious risks to the domestic banking system today in Iraq is its recession
To the rentier economy of the official economy without taking into account the macroeconomic risks of a single nature
.

The issuance of letters of guarantee on the part of private banks and excessively to customers attached to the equipment
Or government implementation in times of oil financial abundance, or even dealing with the dollar window
The central bank has as a profit windfall revenue source for trade finance
External sector of the private sector (while neglecting exchange rate risk) has made these two activities
Adherents of the oil cycle
The least important are of a truly rentier nature and composition
The national economy. The balance sheets of the mentioned banks were mostly attached
By the movements of the country's general budget and the degree to which oil revenues contribute to the formation of the GDP
The aggregate and its impact on the level of macroeconomic activities, including activity
National banker.

Most of the sources of profit came during the booming period of banking revenues in previous years
Operations of banks outside their balance sheets

In particular, the issuance of letters of guarantee to suppliers and contractors on a large scale, sometimes without
An account of legal risks to implement guarantor interests with the state or the public sector. At a time it has remained
Private banks require a share of documentary credits to implement government trade financing
In search of rent income and in isolation from the market! In addition to collecting emergency revenues

They are called profits windfall, which is caused by price differences in abuse
Banks with operations related to the Central Bank window of foreign currency, without being counted
For exchange rate fluctuation risk, my instrument displays letters of guarantee and foreign currency
The burden of severe setbacks over the past 24 months has incurred large banks
Included in the form of additional costs that were referred to be referred to payment.

 Accompanying the loss of sources
Income rent income is as important as the profit opportunities arising from the exchange rate differentials.
It is evident that banking operations may be stuck from within balance on balance sheets
Operations sheet, too, has become an important part of cost growth and decline
Revenue and erosion of the income account of a single bank and its effect on the net wealth center net

The high rate of default in debt collection resulting from the weak recovery due to grants
High risk credit (credit risk), against insufficient or poorly earned collateral
Or even the weak monetization of the guarantees themselves, when received, has also played a role
Operations sheet balance on Show problems
Approaching financial insolvency and counting those credits as bad assets
Lead to bank insolvency and low capital value, which required, over time, an increase
Hedge in the provision for capital itself.

The increase in the three risks to off balance sheet operations (legal and price risks) has been reflected
Disbursement and credit risk (all in low profit and exacerbate loss) and then give a signal
Negative to the stock market about the status of banks and their financial positions, or a low net position
The wealth in it, which made the spread between the credit and debit interest at very high levels of decline

About 8% as the difference between the two interest rates) which is called interest rate risk for operations within
Balance (elasticity high). Calculating a value
Profits and losses in the bank books on the one hand and the market value of the stock the banks themselves
On the other hand .

With the exception of a few banks whose shares are listed on the Iraq Stock Exchange) and bypass
Third), the rest of the banks listed in the market are still less than the market value of their shares
The nominal value is very much (and with a value gap) very worrying, at a time when banking stocks remained
Eligibility dominates more than 48% of the value of shares listed on the Iraq market
For securities. 

The installation of the Iraqi financial market in its current, low-value and representative form
With the heavy contribution of the private banking sector in its capital components, the shop signals a role
Banks exacerbate the total economic recession and decrease their importance in the growth of GDP
Total.

In conclusion, a clear indication between private banking activity on the one hand, and it can be concluded that there is a mixed effect
The rentier macroeconomic role, on the other hand, means that in all cases there is a cause
Mutual impact causality feedback results are the causes and the causes
They become the results in terms of cause and effect.

(*) Researcher, academic economist and former deputy governor of the Central Bank


Copyright Iraqi Economist Network. Republishing is permitted provided that
Source. January 9, 2020
http://iraqieconomists.net/




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