Restructure Financial System Delayed 2013

[wishwell11]

How can the RV happen prior to this restructure. See last paragraph

http://www.alsumaria.tv/en/Economics-News-Iraq/3-64547-Iraq-private-banks-complain-about-bank-regulation-new-restrictions.html

Economics

Iraq private banks complain about bank regulation new restrictions

Wednesday, May 25, 2011 13:08 GMT The majority of private banks in Iraq affirmed on Tuesday that Iraq’s bank regulation allows public banks to monopolize the banking process especially after imposing new restrictions that require from private banks to raise their capital funds to 250 Billion Iraqi Dinar by the end of 2013.

While private banks caution that this decision would paralyze the private bank sector, Iraq’s central bank deem the decision as necessary to preserve Iraqi funds deposited in these banks.

“Certain private banks are facing difficulties to implement new restrictions of increasing capitals within three years until 2013 from 100 to 250 billion Iraqi Dinar”, expert Abbas Al Sudani at Al Shamal private bank told Alsumarianews.

“New restrictions that include as well merging private banks with other banks impede the banking process and hinder the development and upgrade of these banks”, Al Sudani said.

The acting director of Al Warkaa’ private bank Mohammed Al Samerraie told Alsumarianews that private banks are labeled by virtue of the bank regulation Article 28 as investment and finance banks, however, they are prevented from investing, he said.

“Since 2009, the Finance Ministry did not change its view regarding private banks. The Ministry tries not to deal with them. It only calls to deal with public banks which it provide with money supply knowing that public banks are incapable of following up development”, Al Samerraie added.

Central Bank advisor Mothahar Mohammed Saleh said despite the negative impact of government decisions on private banks, they are deemed necessary to protect public funds from looting mainly that there are government deposits in these banks. 37 out of 45 private banks mark failures, he told Alsumarianews.

Iraq had adjourned the restructuring program of Iraq’s finances system till 2013. The program included the restructuring of two Iraqi major public banks namely Al Rashid and Al Rafidain in addition to

the monitoring directorate at the central bank and the development of the private banking sector.

إقرأ هذا المقال باللغة بالعربية

[tjfoz]

please someone? interpret this?? is the rv stalled?

[af4mi]

Amazing! Someone understands the need for RESERVES. Wouldn't that be a novel approach to banking.

Wonder if Geitner or Bernnanke has thought of that? Though, I guess someone has to keep Heidleberg in business.

[zaborniake]

This is an IMF structural benchmark for Iraq's financial development due end of June. They can't just push it back. The following is from the IMF's March 2011 country report for Iraq:

Financial Sector

12. Financial inter-mediation is at a very low level in Iraq. A functioning banking sector is

essential for the development of a strong private sector. We have begun to embark on our

banking sector reform strategy:

A critical step will be to complete the financial restructuring of the two largest state owned

banks, Rafidain and Rasheed, based on their completed financial and

operational audits. In this regard, we formed a Bank Reconciliation Unit that

comprises technical level staff from the banks, the CBI and the Ministry of Finance,

and with the assistance of Ernst and Young (who were the agents of the Ministry of

Finance in the external debt restructuring process) to: (i) deal with all legacy external

liabilities taking into account the government’s actions in the context of Iraq’s external

debt restructuring (ii) identify and propose to write-off non-performing loans to

defunct state-owned enterprises; (iii) propose a course of action for other remaining

unreconciled accounts; and (iv) after the balance sheets have been cleaned up, revalue

the remaining foreign currency denominated balance sheet items. The BRU will work

under the supervision of the Restructuring Oversight Committee (ROC), consisting of

the Minister of Finance, the Governor of the CBI, and the Chairman of the BSA. The

BRU will send its recommendations for final approval to the respective boards of the

two banks. Through this process, we aim to complete the restructuring of the balance

sheets of Rafidain and Rasheed by end-June 2011 (a structural benchmark).

Meanwhile, the Ministry of Finance will continue to work closely with the World

Bank under its banking sector project to modernize these banks by moving ahead with

the plans for their operational restructuring. These banks will operate on a fully

commercial basis, on market terms, and the government will refrain from directing

any lending. Decisions on the recapitalization of Rafidain and Rasheed will not be

made until the restructuring of their balance sheets has been completed and adequate

progress has been made in their operational restructuring, especially by establishing an

appropriate governance structure and strengthening risk management and control

functions. More generally, given the vulnerabilities these (and other) banks face due to

operational risks, the CBI will continue to improve its oversight systems and monitor

closely the activities of the banks, particularly during the transition process.

The new set of prudential regulations for commercial banks, including those related to

minimum capital requirements, liquidity risk, and anti-money laundering, are being

implemented. Work on the relevant reporting tables for the banks will be completed

soon in consultation with the IMF and other technical assistance providers. Under the

auspices of the World Bank banking sector project, we have conducted a full

assessment of the banking supervision department, and this report will form the basis

of improving this department.

http://www.imf.org/external/pubs/ft/scr/2011/cr1175.pdf

[Dalite]

Amazing! Someone understands the need for RESERVES. Wouldn't that be a novel approach to banking.

Wonder if Geitner or Bernnanke has thought of that? Though, I guess someone has to keep Heidleberg in business.

Add a little Sharia into the mix and fractional reserve banking gets a little messy.

http://en.wikipedia.org/wiki/Islamic_banking

In a nutshell, no usury allowed under Islamic Banking Law.

Islamic economics refers to the body of Islamic studies literature that "identifies and promotes an economic order that conforms to Islamic scripture and traditions," and in the economic world an interest-free Islamic banking system, grounded in Sharia's condemnation of interest (Riba). The literature originated in "the late 1940s, and especially" after "the mid-1960s."[1] The banking system developed during the 1970s.[2] Islamic economic literatures' central features have been called "behavioral norms" derived from the Quran and Sunna, zakat tax as the basis of Islamic fiscal policy and prohibition of interest.[1]

http://en.wikipedia.org/wiki/Islamic_economics#cite_note-KuranSubEcon-1

The CBI does not impose these restrictions.

CBI policy rate (valid from 4 Apr 2010) 6%

IQD 7 day deposit 4%

Primary credit facility 8%

http://www.cbi.iq/index.php?pid=Home

[zaborniake]

And they're already implementing the banking reforms. That's why the private banks are whining. This is past tense.

[kevnutz]

Thanks Zab!