Liquidity shortages threaten Iraqi private banks and push towards mergers to settle obligations.
A banking source revealed on Thursday that there is a shortage of liquidity in a number of private banks in Iraq, attributing this to the limited deposits and the decline in citizens’ confidence in private banks, which has weakened their ability to meet some local and international obligations and the requirements of the Central Bank of Iraq. DailyNews Reports
The source told Shafaq News Agency that this situation may push towards the merger of a number of banks, noting that mergers also come within the requirements of reforming the banking sector and trends related to international standards.
He added that banks are required to have financial assets and insurance with the Central Bank of Iraq, explaining that a bank that suffers from weak assets or is unable to meet its obligations towards citizens may be subject to closure, provided that the rights of depositors are dealt with in accordance with the approved principles and controls.
The source explained that merging struggling or liquidity-deficient banks does not necessarily mean the loss of citizens’ money, as financial obligations and rights remain in place, but the recovery of funds may not be as quick and easy as depositors expect.
He pointed out that addressing the liquidity shortage problem requires restructuring the banking sector and strengthening confidence in local banks, in addition to increasing their ability to comply with regulatory and financial requirements, which contributes to reducing the risks of default and protecting depositors’ funds.
Shafaq.com