Most Iraqi private banks hit capital goal

Many banks succeed in raising their capital

* Capital increase in three stages

By Aseel Kami

BAGHDAD, July 8 (Reuters) - Most of Iraq's 34 private banks have reached the central bank's 150 billion Iraqi dinar ($128.8 million) capital requirement level for 2012, a measure to enhance their financial capability, officials said.

The central bank laid out a three-stage programme in 2009 for banks to raise their capital - a move intended to boost the banks' ability to deal with any crisis they might face in a country still trying to rebuild its battered economy after years of war and economic sanctions.

The deadline for the first stage was the end of June 2011, when most banks reached capital levels of 100 billion Iraqi dinar.

In June 2012, many banks increased their capital to $128.8 million and the third stage is June 2013, by which time capital levels need to be at $215 million.

"The capital increase of the private banks aims to strengthen the banks in order to have the ability to absorb the losses. The capital is actually a cushion to absorb the losses," Mudher Kasim, deputy governor of the central bank, said last week.

The Iraqi Private Banks league said reaching the capital target had been fairly easy for many banks.

"80 percent of the banks have increased their capital, some of them have increased it even more than the required levels, it is not a dilemma," said Abdul-Aziz Hassoun, executive director of the Iraqi Private Banks League.

According to the central bank website, OPEC oil producer Iraq has seven state-owned banks, 23 private banks, and 11 Islamic private banks.

Most banking activities are conducted 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.

The banks which did not succeed in raising their capital have asked the central bank for a grace period until the end of the year, Kasim said.

"We are not very strict in this issue...but at the same time we cannot give a hint that our decisions could be rolled back," he said.

Hassoun said he would prefer the central bank to encourage failed banks to merge. ($1 = 1163.0000 Iraqi dinars) (Reporting by Aseel Kami; Editing by Erica Billingham)