Iraqi banks eye capital boost extension

Shafaq News – Baghdad

Iraq’s Central Bank and broader banking system are undergoing a pivotal phase, with expectations rising that the deadline for mandated capital increases will be extended to three years, economic expert Mustafa Akram Hantoush told Shafaq News on Monday.

He clarified that the Central Bank of Iraq (CBI) had contracted the global consultancy Oliver Wyman last year to conduct a comprehensive assessment of the country’s banking sector, confirming that the company has completed its study.

An initial report was submitted three weeks ago, followed by the release of a final report containing a set of mechanisms to address banking challenges and regulate dollar transactions. These proposals are currently under review by the Central Bank and Oliver Wyman.

According to Hantoush, the recommendations include raising the capital of all Iraqi banks to 400 billion dinars(Approx. $306 million), as well as requiring banks to pay $2.4 million over four years. These conditions are part of a broader reform framework that also calls for mergers or liquidations, and for restructuring capital ownership so that no more than 10% is held by family members.

He noted that these requirements pose a major challenge, particularly for sanctioned banks, making it difficult to meet the new capital thresholds, emphasizing the need for ongoing discussions between the Central Bank and affected banks to reach a workable arrangement.

He added that the Central Bank is expected to open a new round of dialogue with the consulting firm in search of a compromise, which may include extending the capital increase period beyond three years or lowering the required amounts to better align with the capabilities of Iraqi banks.