Warka won their lawsuit against the CBI ~ so why aren’t they open for business?

[phlip]

This stagnant period that Warka is going through right now is certainly frustrating.

 

It’s now been over 36 months of insolvency and over 9 months since the Iraqi Supreme Court ordered the CBI to lift the Custodianship over Warka, and deposit sufficient compensation funds to restore Warka’s solvency and finally, to publicly restore Warka Bank’s reputation as a solid bank.

 

So far, all the CBI has done is lift the Custodianship (5 months late); and now with no appeals left, the CBI Board of Directors stand obligated to comply with the rest of the order ~ pay up and restore the Warka reputation.

 

For Warka’s Board Members, it’s really all over except for the actual receipt of the cash and a big fat (useful for business) apology.

There are no more appeals to be submitted, and no more oversight by way of Custodianship allowed for the CBI. Time to say “Sorry” and pay up, period.

 

So why hasn’t the CBI made good on what it was ordered to do?

 

If all the conflict going on in Iraq right now is any indication, it may be that really the only thing holding back the proper transfer of the necessary funds (both IQD and USD) from the CBI to Warka (and then eventually from Warka back to us) is the fact that the Shia dominated CBI, GOI and MOF feel that they can just take their sweet time handing over anything to that ole Sunni dominated Warka Bank for Investment and Finance.

 

I also suspect that the Shia/Sunni bitterness may have even been the root cause of the CBI attacking Warka in the first place, years ago ~ and consequently is now still causing this mess.

 

Right now, there is simply no incentive for the CBI to do what the court ordered it to do, and at the same time currently there is no leverage which Warka can use to make them do it ~ other than just retain ownership of the 120 branches and the 350 ATM machines that the CBI definitely needs as infrastructure in order for Iraq to move up to international banking standards.

 

Warka still needs those funds from the CBI to be solvent; but IMO, without that Warka electronic infrastructure, any CBI attempt to RD or RV will likely fail.

 

The IQD is already a fiat currency; may as well have the digital speed of transfer to go along with it or Iraq won’t be able to keep up with international standards of all the rest of the fiat currencies. The CBI will have to restore Warka to solvency before any major currency changes can happen ~ just to help facilitate the change without causing more mass rioting in the streets.

 

Iraq is still mostly an all cash society and right now there’s a critical demand for more IQD cash on the street, especially in the north inside Kurdistan.

The CBI has been deliberately withholding IQD from Kurdistan in an effort to get them to knuckle under and look where that policy has gotten them.

As an alternative, everyone is turning to USD cash and especially to continue any trading across borders.

 

Kurdistan has a tanker full of oil docked at a Texas port waiting to off-load right now. Maliki has convinced a US Judge to have the tanker temporarily impounded so Kurdistan can’t earn any USD without involving Baghdad; but, since there is no HCL in place to determine portions that move could easily backfire on him. That tanker could become a political hostage for a long time.  

 

More proof that those dinar currency countries right around Iraq, still prefer to be paid in petro dollars when selling their oil and other goods cross-country is the fact that when  ISIS took Mosul, they robbed the main bank there of US$427 Million, not IQD427 Million.

 

 

I would venture to say that the current CBI effort to solve the cash shortage in Iraq by redesigning and reprinting new high denomination bills (with improved security features and in 3 languages), is indeed a step closer to a real currency redenomination; but right now, the GOI and the CBI will be even less interested in issuing brand new lower denomination bills with improved features than they ever were before. The CBI has publicly stated that it doesn’t intend to address the redenomination process until at least 2016 and that’s only if the security and stability of the country will allow it.

 

For USD international transfers to happen it will take more than just Warka solvency. Warka is dependent on having correspondent banks in the other countries that it is allowed to transfer USD funds to.

Most of those other country’s central banks are not allowing correspondence with Warka right now because it is still insolvent; so, the inability of Warka clients to access funds via an international wire transfer of USD can be open or closed at either end of the transfer.

 

 

I’d like to think that there will still be some way to successfully communicate with Warka in the near future despite them being in such a suspended animation state that they don’t even answer most emails lately.

 

Because of language barriers and the nuisance of answering so many different emails, I suspect the Warka staff is depending heavily on the latest news streaming on the home page of the Warka website to be the answer to whatever depositors might need to know and therefore have stopped answering most emails.

 

Because of the insolvency issue and having to wait on the CBI, Warka Bank still cannot do the following with its frozen depositor accounts:

 

Sell a Certificate of Deposit to a depositor

Allow an Internal Transfer of Funds from one Warka account to another

Allow a purchase or sale of ISX stocks through their in-house brokerage

Allow outgoing funds via any of the Warka bank cards.

Allow any letters of credit to be established

 

Without internationally approved and transparent financial solvency and without an official stamp of approval from the various central banks and countries that have allowed Warka to do business in the past (especially the FED with all its FACTA entitlement attitudes) no one will be able to transfer USD funds out of Warka to their home banks.

 

All depositors are still accumulating 7% on IQD and 4% on USD and those gains are still posted every 6 months.

Not sure where that money is coming from unless the CBI is still faithfully paying Warka their share of that very same interest earned and Warka is still faithfully passing it on to us.

 

Compounded interest adds up quickly when not disturbed, but that still doesn’t mean much until the flow of fund has been restored.

 

Even if a Warka depositor has a designated Warka Correspondence Bank Account in another country that is not directly under FED control, such as Canada or UAE (Dubai) or Jordan, or Germany; still, no USD transfer of funds will be allowed out of Warka without that final FED approval on Warka’s insolvency ~ and that’s including even in the event of an IQD currency redenomination and/or an IQD currency revaluation. The Fed issued the notes and has final say on redeeming them ~ I guess.

 

It’s not a pretty picture, but at least our funds are still intact and earning interest compounded monthly; and they will automatically be adjusted to any RD or RV that happens ~ just as the number of any ISX stock shares we own will also be adjusted accordingly if either of those two events happen.

 

Let’s hope that the CBI either wakes up and gets going with its obligations or is eventually forced into doing so politically.

 

Warka could even be looked at as a microcosm of the bigger picture in that when Warka gets fixed the political situation should also be stabilizing.   

 

[Frank61]

Thank you for putting the time in on that great post.  I think we will be ok, however it is a frustrating time indeed.

[birelkart]

Thank you Philip!

[sandfly]

THANKS

[haymon]

Very informidable. Thanks for you're time.

[TrinityeXchange]

I also suspect that the Shia/Sunni bitterness may have even been the root cause of the CBI attacking Warka in the first place, years ago ~ and consequently is now still causing this mess.

I do believe this is the main issue with Warka.  They were too dominant a Sunni monetary force.  The campaign against Sunni power led by Maliki's regime all but annihilated them entirely.  All Sunni political figures holding high leadership positions within the country were systematically removed.  Warka was just another casualty of this campaign.

[Goldiegirl]

I believe it will eventually all settle. This has never been a concern of mine. Still isn't.

[DoD]

I believe it will eventually all settle. This has never been a concern of mine. Still isn't.

GG, are you in the ISX with Warka? I've got a lot invested with them an will be glad when they start returning emails from their clients. At present we have no choice but to ride it out with them but just as soon as I can I'm switching my brokerage account to the other guy... 

[Goldminer]

Thank you phlip for this update of the WARKA/CBI legal decision. Also interesting was the description of the bank in virtual hibernation. No wonder my emails were unanswered since last year. Feeling a little better now about money on deposit. Earning interest during this period is a nice surprise.