How does Warka Bank under Guardianship fit in with an IQD RV?

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How does Warka Bank under Guardianship fit in with an IQD RV?

There can be no significant (upward) revaluation (RV) of the Iraqi Dinar (IQD) against the USD without Warka Bank coming out of its own insolvency and stepping up to the task of servicing its client’s (both Iraqi and international) with all of its branches and ATMs immediately when the RD and RV processes start.

According to its own website, the CBI is the Central Bank for 52 individual banks and within those 52; the Private Sector is the largest sector with 23 banks.

Of those 23 Iraqi Private Banks, Warka has by far the largest footprint in Iraq with 120 branches and 350 ATM machines scattered around the country.

In fact, currently, Warka supposedly has the largest financial footprint of any bank in Iraq whether it is State, Commercial, Private or Islamic.

Warka Bank has been touted as a semi-major player in the upcoming CBI RD process.

I look for the CBI to help Warka Bank re-emerge out from under Guardianship as the number one go-to private bank for investment and finance in Iraq in order to attract max foreign capital in preparation for the internationalization and/or globalization of the IQD.

Being invested in the IQD since the summer of 2004 and having never paid anything but CBI published bank prices for the IQD that I still have left in my Warka account means I’m up around 24% from my original investment ~ and that’s just on the gradual rise of the IQD against the USD from 2004 (1/1450) to 2012 (1/1166).

If after a successful RD, the exchange rate between the new IQD and the USD goes to US$1.00 per IQD1.167 or US$0.86 per IQD1.00, I will still be up only 24% from my original investment because a redenomination will be conducted at par with no Iraqi citizen getting short changed in the exchange.

However, if shortly after the initial RD, there is a market push RV up to US$1.00 per IQD1.00, then I will be up a total of 39% just in the difference between purchase and sale prices.

Plus, I’ve been netting a solid 9.25% as an aggregate annual interest gained between my 7% Warka IQD Savings interest, my 10.5% Warka IQD CD interest and my 4% Warka USD savings interest ever since I converted all my IQD cash into a Warka account.

The ISX is up over 30% for 2012 and Warka has an ISX brokerage department.

I’m hoping that once the CBI passes international financial muster with the IMF in February of 2013, things will get better down line and the CBI/MOF will then have the muscle to sort out the Bunnia Family (56% owners of Warka Bank) and get Warka properly and (finally) merged with some other money outfit with fresh capital ~ our capital to be exact.

Whatever the case, here’s a possible rundown of events leading up to a significant revaluation of the IQD against the USD:

• The current SBA between Iraq and the IMF expires in Feb 2013 and thereby leaves the possibility open that the IQD could be allowed to trade with other world currencies at the whim of the CBI and/or Maliki’s GOI.

• The CBI announces that Warka Bank is officially out from under “Guardianship” and is now a current, upstanding member of the international banking community, capable of controlling its own destiny ~ under whatever its merger name turns out to be. The date of this announcement is completely unpredictable; since the CBI itself still has to get right with the IMF under its own probationary period.

• Kind of like the blind leading the blind ~ only different.

• Look for Warka Bank merger speculation news in the Iraqi Business News columns as a sign that Warka is getting solvent again.

• After getting right with the IMF, the CBI announces (probably sometime in 2014 or 2015) that the plan to RD the IQD will be implemented and that the current high denominational IQD banknotes will be recalled and traded with either a debit card account or the new lower denomination banknotes ~ still yet to be issued.

• Once the redenomination process starts, the 3 currencies (existing IQD banknotes, new IQD banknotes and USD banknotes) will all co-exist in circulation at the same time inside Iraq and will be traded at par (right now $8.56 USD buys either an existing IQD10,000 note or a new IQD10 note) for about a year with the current large denomination banknotes and the USD banknotes being withdrawn and exchanged for the new lower denomination IQD banknotes as they are turned in to the local banks.

• Look also for Warka debit and pre-paid MasterCards, and for some State Bank sponsored debit and credit cards as well to be introduced as alternatives to just the new cash notes. Cards for Iraqi citizens will be especially useful for purchases outside of Iraq ~ for example via the internet.

• Once the Iraqi citizenry is used to these new processes, Iraq will be ready to go international with a CBI stated exchange rate approved by the IMF and applicable to the new IQD (only) ~ since the existing larger denominations will have been largely withdrawn from circulation by that time, anyway.

• Once the new IQD currency is re-introduced into the global economic community the market will attempt to move the USD rate of exchange upward, but will likely end up close to 1 to 1 soon after the RV and just stop there.

• It will take years of global market pressure to push the exchange rate past 1 to 1 because the CBI and the GOI will resist it in order to keep the IQD to USD rate competitive enough to get the most out of selling its resources.