Experts: Decision to qualify 7 banks is a step towards global financial integration
Financial and economic experts considered the Central Bank of Iraq’s agreement with the US Treasury Department to qualify seven Iraqi banks to return to foreign correspondent banking channels as an important step in the path of reforming the banking sector and strengthening its integration into the global financial system, indicating that it frees banks from financial isolation, breaks the monopoly of the parallel market, and attracts foreign direct investment. Anti-CorruptionCampaign Updates
Prime Minister Ali Faleh al-Zaidi welcomed the understanding reached between the Central Bank and the US Treasury Department, considering the move as confirmation of the success of the financial reform approach adopted by the government, enhancing confidence in the Iraqi banking sector, and opening broader horizons for the economy.
National and investment.
The Beginning of a New Phase
Regarding the importance of understanding, the economic expert, Dr. Nabil Al-Abadi, considered it a very positive and necessary step, indicating that it is the beginning of a new phase that carries great strategic gains, in contrast to strict implementation challenges.
Al-Abadi explained to Al-Sabah that allowing these banks to deal in other currencies (the euro, the dirham, and the Jordanian dinar) is like a lifeline for them. He pointed out that halting dollar transactions is akin to “clinical death” for these banks, and their return to external channels will keep them alive and prevent their bankruptcy.
He added that the success of these banks in conducting foreign financial transactions legally and systematically will reduce pressure on the demand for dollars in the parallel market, which will positively impact the stability of the dinar-dollar exchange rate in the medium term. He pointed out that foreign investors need secure banking channels to bring in their funds and repatriate their profits. The rehabilitation of seven banks sends a reassuring message to the international community that Iraq has begun to take the issue of combating money laundering and terrorist financing seriously, a fundamental requirement for any investment.
Restructuring
The economist noted that returning to international channels necessarily entails full compliance with US Know Your Business (KYC) and AML standards. This means that any financial activity by these banks will be under US scrutiny, which could complicate some commercial transactions with certain entities and deprive Iraq of some of its traditional financial flexibility. He added that announcing the names (which have not yet been revealed) will be a true test. Whether these banks are private sector or large state-owned banks (such as Rafidain and Rasheed), their success will require a radical administrative restructuring.
Al-Abadi concluded that the step was 100 percent correct and that the Iraqi economy could not bypass it, because remaining outside the global financial system was a disaster, adding that the biggest challenge is not in reaching an understanding, but in the daily implementation within the banks.
Stimulating economic activity
In a related context, economist Dr. Mustafa Akram Hantoush believes that building a strong economy begins with adopting an efficient financial and banking system capable of stimulating the movement of money and recycling capital within the market.
Hantoush told Al-Sabah that successful experiences, including the Egyptian experience in developing the financial system, have proven that facilitating financial operations and enhancing payment and financing tools contribute to stimulating economic activity and increasing investment and production. He pointed out that reviving the capital cycle raises the efficiency of markets, provides greater liquidity for projects, and positively impacts job creation and the achievement of sustainable economic growth.
Restoring trust
Meanwhile, academic Dr. Ali Fakher stated that the Central Bank’s commitment to international standards, transparency, and anti-money laundering measures positively impacts building trust between citizens and the state, given that the Central Bank is the official body of the country.
Fakher added, in an interview with Al-Sabah, that the greatest importance lies in attracting foreign investments, as the latter are looking for a banking system capable of carrying out international transfers easily, noting that the return of Iraqi banks to the global financial system is extremely important for improving investments and increasing the flow of funds.
He stressed that the basic standard for cash transactions is trust, and the more the citizen trusts the banks, the higher the deposit rates will be. He explained that the use of electronic payment methods reduces the hoarding of money outside the scope of the bank and limits informal transactions. Moreover, the stability of the exchange rate through the dealings of Iraqi banks with their global counterparts reduces the pressure on the dollar market.
He explained that this step represents the transition from a sanctions economy to an open economy, given that Iraqi banks have long been associated with oversight, rather than financial partnerships built on trust. He pointed out that it is possible to raise their credit rating, which will have a positive impact on financial institutions, improve the business environment, and reduce international financial isolation.
He said that any success in banking reform will necessarily reflect on economic reform and achieve important results by maintaining compliance and governance standards, and will grant international confidence through transparency. Therefore, it is a step towards restoring international confidence and achieving a more robust economy.
Alsabaah.iq