Restructuring plan follows losses
Mergers possible
New larger bank an option
Iraq is planning to change the management teams at its public banks in an attempt to improve their governance and reduce losses.
The move is part of a comprehensive restructuring plan devised by the London-based consultancy firm EY which may involve mergers and the creation of a new larger state-owned bank.
Iraqi prime minister Mohammed Al Sudani has ordered the reorganisation of the boards of government-owned banks, which control over 80 percent of such services in the country.
Iraq has seven major government banks and more than 50 national and foreign units, including 27 Islamic banks, according to its central bank.
Al Sudani’s decision was in line with a proposal by EY, which was asked by Baghdad last year to prepare a study on the restructuring of the country’s banking sector following heavy losses by key government lenders.
“This step comes within the framework of a comprehensive study conducted by EY, which focuses on improving banking governance in the government sector,” Al Sudani’s financial adviser Mudhar Saleh was quoted as saying in a statement by Al-Forat news agency.
He said it will contribute to the restructuring of government banking entities “to become more effective in supporting development, investment and revitalising the financial market”.
“These reforms will also contribute to improving the speed and quality of financial decisions and enhancing risk management, which supports the stability of the financial system and improves transparency and accountability,” Saleh said.
In mid January the Iraqi cabinet announced plans to restructure public banks, including the creation of a new giant bank.
The bank, to be called First Rafidain Bank, will have a paid-up capital of 500 billion Iraqi dinars ($382 million), to be raised later to one trillion dinars ($764 million), of which the government will control 24 percent.
Salah Nouri, an analyst at the Baghdad-based Iraqi Institute for Economic Reforms, said the restructuring plan could include the merger of the government-owned Rafidain and Rasheed banks.
