The banking sector and the new public
The past year, 2025, witnessed tireless activity at various levels in the pursuit of achieving the desired banking reform in Iraq.
On the one hand, the outgoing government made strenuous efforts to reform the state-owned banks, which included merging some banks and making the decision to split Al-Rafidain Bank into two banks. These measures were described as being part of the reform of the state-owned banking sector.
On the other hand, the Central Bank of Iraq, as the supervisory and regulatory body for the work of private (national) banks, played a pivotal role in advancing the reform of this sector, by taking important steps during 2025, the most prominent of which was bringing in the global company “Oliver Wyman”, which is one of the consulting companies specializing in the development of banking and financial systems.
This contract aims to elevate the private banking sector to meet international standards, especially since Iraq is about to enter a phase of developmental and reconstruction renaissance that requires a robust banking sector capable of meeting the needs of international companies wishing to invest in Iraq, after the wars and crises that the country has gone through that have deeply affected its economic structure.
Oliver Wyman established strict conditions and clear requirements for achieving banking reform, obligating banks to comply and emphasizing that those lagging behind or failing to comply could be forced out of the banking sector. These conditions included: increasing bank capital, encouraging bank mergers, and adhering to international standards for governance, solvency, and risk management.
According to the available data, most banks have responded to these requirements and agreed to bear the costs of consultations and repairs.
This raises a fundamental question commensurate with the scale of this response:
After the banks have fulfilled their obligations, what rights and facilities should they receive to enable them to provide banking services that meet the standards of international banks?
Banking experts believe that successful banking reform is a reciprocal process. After banks commit to the new standards, there is an urgent need for an incentive package to help them conduct their banking activities efficiently, especially since a large portion of banks are still subject to various sanctions.
These stimulus packages include financial and funding support, technical assistance and institutional capacity building, regulatory flexibility and a phased approach to implementing requirements, infrastructure and technological system reforms, and opportunities for growth and regional and international partnerships. The success of banking reform depends not only on enforcement but also on integrating obligations with rights and building a banking environment capable of supporting comprehensive economic development in Iraq.
Finally, reforming the banking sector in Iraq cannot be measured solely by the number of regulations or the stringency of the conditions, but rather by its ability to become a genuine engine for economic development. Banks that have responded to the reform requirements and complied with international standards, in turn, need a supportive regulatory environment and practical incentives that enable them to fulfill their natural role in financing, investment, and driving economic growth. Successful banking reform is a balanced partnership between the regulatory authority and the banks, based on the exchange of obligations and rights, a phased implementation, and addressing structural challenges, foremost among them sanctions, weak infrastructure, and limited financing tools. Without this, reform could transform from an opportunity for advancement into a burden that hinders the sector’s effectiveness.
With the start of a new year, the opportunity remains to build a modern, robust Iraqi banking sector that is integrated into the global financial system and capable of meeting the requirements of reconstruction and sustainable development, provided that the reform process is completed with a comprehensive vision that balances discipline and empowerment, and oversight and incentives, in a way that serves the national economy and enhances confidence in the banking system.
Alsabaah.iq