Although the United States Treasury Department returned recently and informed it regarding the need to merge some of those banks and close them, thus deciding their fate after numerous suspicions had been raised, the United States of America did not stop there but moved to punish some Iraqi private banks by preventing them from participating in the currency auction held by the Central Bank of Iraq on a daily basis for selling the dollar.
Four confidential Iraqi banks faced sanctions in the past period; the most surprising of them was the Middle East Bank, owned by the investor Ali Ghulam. He arrived in Iraq on 19-11-2022 and was detained at the Baghdad International Airport based on an arrest warrant issued against him according to Article 456; he was later released on bail.
Well-informed sources have stated that “the Iraqi delegation that visited the US of America a few days ago, under the auspices of Unknown Minister Fuad Hussein, Central Bank Governor Ali Al-Alaq, and Head of the state’s Advisor Kazim Al-Hassani, discussed with the US Treasury and the Federal Bank the matter of preventing the dollar from Iraqi banks.”.
That’s what the sources added, “The US Central bank recently stated from its Iraqi counterpart an agreement to alter the banks restricted from using the dollar, which includes closing several of them and establishing new banks through an alliance of several banks among themselves.”
She focused on that “the Bureaucratic Bank recommended to its Iraqi partner to look for the help of a global organization to introduce a wide change plan for the financial area, and before very long this organization will present its report on the financial area to the National Bank and the Iraqi government.”
That’s what the sources noticed “The Government Bank needs to reduce the number of Iraqi banks from 72 to less than 40 banks during the current phase.”
Before 2022, the US Treasury and Federal Reserve had applied four phases of dollar access prohibition on 32 Iraqi private banks. That list of organizations prohibited from using the dollar in Iraq also reached more than 250 organizations, most notably “Fly Baghdad” Aircrafts.
Also, according to a banking official who preferred anonymity, “the banking market has become monopolized by five banks that dominate the market, making it hard to compete.” Therefore, with the establishment of a coalition consisting of five banks-a foreign bank included-it will break the monopoly of the banking market and increase competition.
He said, “The restructuring process for restricted banks will be through reforming them, starting with changing the ownership and employees, risk management departments, and combating money laundering and terrorist financing, among others.”.
He is concerned that “by the end of this year, the National Bank of Iraq will abolish the dollar transfer phase, and will rely on banks with intermediary banks. In the month of September, a meeting between the National Bank of Iraq and the Central bank in America will take place involving the presentation of the National Bank’s plan to change the region.”
The United States started restricting the access of the Iraqi banks, which are suspected of leaking the dollar to the Iranian government and the country’s private sector businesses in an attempt to prevent them from using the dollar.
Economist Mustafa Akram Hantoush argues, “Amalgamation of banks is an excellent step and would help reduce the number of banks in the country.” Hantoush is a researcher in economics. Also, it is imperative to shut down banks that have been facing problems for many years.
He further stated, “It adds to the blame of what took place in the Iraqi banking industry by the negligence of the Central Bank, which cannot defend itself with the US Treasury or the Federal Reserve,” Hantoush said.
He points out that “there are great banks which have been trapped by the US of America, and National Bank of Iraq should protect them and resume them to work based on the fact that the Iraqi financial sector is being massacred for foreign banks.”
In November 2022, the representative of the US Depository met with representatives of 35 Iraqi confidential banks to alert them to the problems of smuggling dollars from Iraq and adhering to guidelines regarding hard money transfers for import, threatening to sanction them in case of disobedience.
According to leaked information, the meeting lasted two hours and was held without the presence of the Iraqi Central Bank.
It’s interesting how citizens who have lost faith in the banking sector in Iraq also neglect it. World Bank data published last year showed that only 23 percent of Iraqi households have an account in a financial institution, the lowest rate in the Arab world. These account owners, of course, are all state employees whose salaries are transferred to state-owned banks at the end of each month. However, those employees who like to withdraw their salaries in cash and prefer keeping them at home, form long queues in front of the banks the very next moment, and hence, in this case too, salaries remain in the accounts for only a limited time.
