Sept 6th Warka News could be an indicator for an IQD value change

[phlip]

Finally!!

Some really great news from Warka!!

Look at Warka Bank’s latest news bulletin published on September 6th:

  Dear Warka Clients,

The Central Bank of Iraq board of directors have agreed to rehabilitate Warka Bank for Investment and Finance in accordance with a set get well plan. This decision has been announced and broadcasted through all Iraqi TV networks.

Best regards.

Warka Bank for Investment and Finance

 

It’s anybody’s guess how long it will take before the CBI’s “set get well plan” will allow us Warka depositors to withdraw USD’s, or purchase IQD CD’s, or transfer funds between our Warka internal beneficiary accounts or trade on the ISX; but at least the CBI has finally now been publicly committed to totally fixing Warka’s banking reputation and (partial) insolvency.

 

The CBI was ordered to do this two years ago by the Iraqi Financial Supreme Court when Warka won the lawsuit against the CBI for actually causing the Warka insolvency in the first place back in 2010.

 

Meanwhile, Warka has been keeping the doors open in Iraq’s all cash society by reducing the interest paid for CD’s and savings accounts and by allowing local Iraqi clients to withdraw only a fixed percentage of the their account totals.

 

In that way, Warka is no different than the other 30 or so private banks in Iraq who are also doing the exact same thing due to the local cash shortages; and also because of the continual drop in oil prices.

 

That drop in oil prices affects us Warka account holders by way of Warka’s internal exchange rate when converting our IQD back to USD.

 

USD’s in Iraq are getting more precious as Iraq has to pay for the ISIS war in USD’s and the CBI’s USD reserve amount shrinks to compensate.

Not as many dollars to go around now; so it costs more IQD to buy USD’s.

 

Warka’s exchange rate when converting IQD back to USD has jumped from 1179 IQD to buy 1 USD up to the current rate of 1190 IQD per USD.

 

All in all, the CBI rehabilitating Warka Bank is great news and I’m looking forward to a time when at least some transactions can get back to normal.

 

To add some background, I found the following article to be a pertinent reminder to all foreign depositors that Warka Bank is not the only financial outfit with liquidity problems in Iraq ~ or in the rest of the world for that matter.

 

IMO, there’s no need to feel picked on with the Warka Customer Service level lately, because the entire Iraqi Private Banking Sector is going through the same cash shortage; and especially with its own Iraqi customers.

 

Here’s the article and its link:

 

Iraq’s private banking sector is having trouble meeting customers’ demands because of liquidity issues, leading to unrest and worry.

 

Some banks are limiting withdrawals to a specific percentage of deposited funds, while others have stopped allowing them altogether. In addition, even funds originally deposited in US dollars can only be withdrawn in Iraqi dinars, according to the Central Bank’s exchange rate.

 

Such procedures confused customers and angered many of those who deal with banks. Overall deposits in one Iraqi bank — whose name cannot be published for legal reasons — did not exceed 2.5 million Iraqi dinars (about $2,000) in an entire workweek, which is a relatively modest figure.

 

When Al-Monitor visited this bank, its lobby was filled with scores of customers demanding their money, and the administration was refusing to allow customers to withdraw all of their funds at once.

 

Umm Ahmad, the mother of four grown children, travels more than 300 miles every Thursday from Basra governorate to Baghdad to make withdrawals from North Bank. She began doing this after the bank stopped allowing withdrawals from its branches in various provinces and limited such transactions to its main branch in the capital.

 

Umm Ahmad seemed stressed as she discussed her situation. She told Al-Monitor that her children need money to emigrate, so she decided to sell their house, give her children half of the proceeds and buy herself a smaller house with the remaining amount of money she had deposited in the bank’s branch in Basra. However, the bank refused to let her make the withdrawal.

 

http://www.iraq-businessnews.com/2015/07/18/banks-refuse-to-ante-up-amid-liquidity-shortage/

 

US citizens tend to forget that this same universal bank reluctance to give up large amounts of depositors cash to depositors on demand is also prevalent in most US banks.

 

Ask for most or all of your cash from any US bank and you will probably have to endure a grilling by the manager to explain why you have to have the cash instead of a cashier’s check or money order.

 

Truth be told, only about 3% of existing USD’s are actually in Federal Reserve Notes, AKA the US version of cash. The rest is digital.

A run for cash on almost any US bank could wipe that bank out or at least cause it to look insolvent.

 

Lots of banks have already been closed in the US and their combined worth has been consolidated to where only 10 of the biggest US banks control over 77% of the wealth within the Fed system.

 

With its massive debt burden, the Federal Reserve System makes the US not so different from Greece or Iraq.

 

IMO, when Warka Bank in Iraq is finally “rehabilitated” up to full service and Warka’s 350 ATM machines are again available for daily use, then the IQD redenomination process (already in progress in Iraq) can start to accelerate.

 

The present cash shortage in Iraq could partially be solved with the issuance of loaded ATM cards instead of the currently circulating large denomination banknotes ~ but only if the cash minded Iraqis will learn to accept the electronic banking system.

 

With its USD cash reserves being used to fight ISIS, and its incoming USD revenue being reduced due to the reduction in the price per barrel, the CBI might not have any choice but to devalue the IQD in the short term in order to keep the IQD at an internationally accepted rate pegged to the USD.

 

In any case, the CBI will be determining the rate of exchange for the IQD and also the volume of how many USD and/or new lower denomination IQD banknotes will be available to load Warka’s ATM machines.

 

Once that base infrastructure of Warka Bank operating at full service is in place it will be far easier for the CBI to announce further progress in the coming IQD/USD rate change.

[new york kevin]

This is a great article. Lotsa great indicaters. 1. They are having local cash shortages IQD and USD, because of the continual drop in oil prices, 2. and USD cash reserves being used to fight ISIS.3. and its incoming USD revenue being reduced due to the reduction in the price per barrelof oil. Not happy about a temporary devaluation while rehbilitation details are worked out and implemented.

 

Not sure how the news that the CBI accidentally paid more than double the requested?required amiunt for investment purposes from an article earlier this week, I would have thought this woops would have flooded the internal Iraqi market, Increased the IQDs competition with the USD.

 

There are a few methods whereby GOI  is lowering the circulation of USD for internal commerce purposes, and simultaneously lowering the internal IQD note count. In any case, the CBI will be determining the rate of exchange for the IQD and also the volume of how many USD and/or new lower denomination IQD banknote. A exchange rate based on how many USD and or how many IQD banknotes are out there or available. I like the sound of that baby. Thats why I paraphrased it for a 2nd time.

[ronscarpa]

Thanks Philip (+1) and NYKevin (+1)..!