Samir Nasiri *: reading in the Iraqi Central Bank's decision to warn some of the private banks



Several days ago, the CBI issued a warning of eight community banks and grant the three-month deposit of 500 billion dinars and registration of real estate that did not record the names of those banks. The goal [...]
Several days ago, the CBI issued a warning of eight community banks and grant the three-month deposit of 500 billion dinars and registration of real estate that did not record the names of those banks. The aim of the resolution is to rehabilitate these banks and bring it back to the work of sound banking, and restore confidence between them and the public, and to ensure adequate liquidity for the purpose of meeting draws customers from Mbalghm deposited with these banks. Some of these banks have begun to demobilize some of its employees and its cadres by giving them leave open without pay because they believe that this step will help them rehabilitate their banks. Through a review of analytical decision of the central bank note the following:

1.There are two reasons behind the collapse of these included in the resolution of banks that have become close to bankruptcy only two, namely: poor planning Management (Board of Directors) and his intervention in weak executive management possibilities banking and competencies, or affected by the security conditions and the economic crisis and unsustainable damage beyond its control due to the closure of branches in hot provinces and where I got stopped terrorist operations and banking activities.

2.Incurred owed debts of customers ranging from (50-100) billion dinars two years ago did the banks unable to retrieve what has become of debt that can not be obtained in accordance with the list of indicative Add to that the banks faced major difficulties in the implementation of judicial decisions because of the threats to the debtors.

3.Lqbal customers to withdraw their deposits from banks at higher rates than normal rates, and not the filing of any new funds, which led to a decline in liquidity in these banks to the minimal requirements of the Central Bank and became cash in coffers section of the banks is zero.

4.Because of paragraph (3) above, decreased deposits in these banks increased by 30-70 percent of what these banks were forced to stop their activities and investment credit.

5.Stop some correspondent banks correspondent banks dealing with these banks, as happened with the German bank Commerzbank Commerzbank, which halted its offshore banking (letters of credit and foreign remittances).

6. Due to the economic recession in the country's financial crisis stifling share prices in the secondary market declined in the Iraq Stock Exchange and the arrival of the shares of these banks to less than the nominal share price by 85 percent.

7.Weakness and a lack of efficient banking departments in these banks that are able to overcome the tragic situations wisely as is the case in some of the good bank, which is still working good equably and they are many.

8. Pre-emptive censorship failure in spite of the evolution in the payments systems and proactive regulatory regimes and the introduction of new specialist sections and working on the development of the current administration and prepared a strategy for the development and the stability of the financial system for five years, which requires the central bank activate.

The responsibility of supervision and control and the development of the banking business and the application of monetary policy is the responsibility of the central bank. So it requires coordination with the Association of private banks with the help of these banks and rehabilitated according to the following:

1. the central bank to re-examine and evaluate the banks that gave it for a period of three months from its commitment to implement the central bank's decision and make sure they all measures rehabilitative and corrective taken to overcome its current state, and this is the adoption of the analysis of activity indicators for 2016 up to 30/9 standards. In light of the evaluation results of the eight banks are classified into three categories: Category who was able to rehabilitate its current status and can stand up and practice of banking work well in terms of liquidity, operation and investment of funds and the exercise of deposits and withdrawals and a good rate. Another class who managed the provisions of executing the decision of the central bank, but need financial and administrative support technician in order to continue rehabilitation. This requires the help of the Central Bank. The third class, who can not perform the qualification requirements must guardianship status according to the law in force banks.

2. The central bank to provide support for the second category is the use of banking mergers optional or mandatory for the purpose of achieving the success of the banking merger requires:

(A) provision of data and information in accordance with the principle of disclosure and transparency for each bank of the banks covered by the merger.

(B) the economic feasibility and expected results at the time of the merger study is evaluating these studies by the monetary authority before making the decision to merge.

(C) to carry out financial restructuring and managerial target for banks before the merger and determine the manpower necessary technical and administrative management of the new entity.

The banking mergers if as stated above will be achieved as follows:

(A) increasing the capacity of the new bank to activate the banking activities in all areas, most notably the rise in the capital and revenues of banking operations and financial position.

(B) net profit increase that results in increasing the value of its shares in the stock market and increasing deposits and the high number of customers and increase the number of its depositors and therefore boost confidence, the most important thing in the banking business.

(C) the new bank's commitment to meet all its previous obligations towards financial institutions and to customers.

3. For the purpose of improving the efficiency of the performance of banks requires adherence to the instructions of the Central Bank of candidates for the Board of Directors and Managing Director of the leadership and functions that interfere with the central bank for the nomination of directors authorized for these banks and ensure the availability of qualified and experienced executive professional to manage the bank.

4. The Central Bank governance boards of directors and to prevent interference owners executive management is absolutely not stipulated by law.

5.take quick action by the central bank to address the issue of workers in banks, who have been demobilized or give them leave open without pay that is to give them half of the salary without allowances for three months or give them a tip end of the service as decided by the Board of Directors.

* Samir Abbas Alnasiri


Consultant in Baghdad Economic Forum