Central Bank of Iraq Law Fact Sheet

Objectives

Article 3 of the CBI law provides: “[t]he primary objectives of the CBI shall be to achieve and maintain domestic price stability and to foster and maintain a stable and competitive market-based financial system. Subject to these objectives, the CBI shall also promote sustainable growth, employment, and prosperity in Iraq.”

Monetary Functions

The Central Bank may perform open market operations with commercial banks, make loans secured by collateral, accept interest-bearing deposits from banks, impose reserve requirements at a rate established by the CBI, and act as lender of last resort. Articles 28-30

Managing Foreign Reserves

The Central Bank may conduct transactions in foreign assets and manage all official foreign reserves. The Board may invest these reserves in monetary gold, banknotes and coins in foreign currencies, credit balances in foreign currencies, SDRs, the reserve position of Iraq in the IMF, and readily-marketable debt securities issued by foreign governments. Article 27

Relations with the Government

The CBI may act as the Government’s banker and fiscal agent and may perform financial operations for the Government and is to be remunerated for these services on a cost recovery basis. The CBI may not lend, directly or indirectly, to the Government but may lend to Government-owned commercial banks on the same terms as it would extend to privately-owned commercial banks.

Currency

The Central Bank has the exclusive right to issue Iraqi dinars and monetary coins in Iraq. The CBI arranges for the printing of banknotes and minting of coins and the removal of unfit dinars and coins from circulation. Articles 31-38

Payment Systems

The CBI may establish and maintain systems for clearing and settlement of payment transactions and may regulate and supervise payment systems operated by others. The Central Bank may also facilitate new methods for payments and design a plan for the evolution of the national payment systems in Iraq. Article 39

Bank Supervision

The CBI has exclusive authority to license, regulate, and supervise banks and their subsidiaries; to examine banks and their subsidiaries; to require banks and their subsidiaries to submit information as the CBI directs; and to enforce CBI guidelines and directives. The CBI may also adopt regulations after notice and an opportunity to comment. Article 40

Governance

The CBI law provides for a Board of the Central Bank comprising the Governor, two Deputy Governors, three Senior Managers of the Central Bank, including Branch Managers, and three individuals with suitable expertise not employed by the CBI in any capacity. The Head of Government nominates members of the Board who must be confirmed by the legislature. Board members have five year terms. Articles 10-20.

Criminal Offenses

The CBI law contains a number of criminal provisions related to counterfeiting, possessing, and uttering counterfeit currency and coins. Penalties include monetary fines and imprisonment. In addition, the CBI is authorized to enforce compliance with the CBI law, the Banking Law, and its own regulations and orders through administrative penalties. Articles 49-62

Financial Services Tribunal

The CBI law establishes a Financial Services Tribunal empowered to review decisions and orders of the CBI including actions taken by a conservator or receiver under the Banking Law. The Tribunal is not authorized to review CBI decisions or actions concerning monetary policy and exchange rate policy. The Tribunal will comprise panels of judges appointed by the Minister of Justice. Articles 63-70

Prior Law

The prior law governing the Central Bank of Iraq was the Central Bank of Iraq Law No. 64 of 1976. The prior law is repealed by the new law. Article 73 In July the Coalition Provisional Authority issued CPA Order No. 18, “Measures to Ensure the Independence of the Central Bank of Iraq.” This order suspended the authority of the CBI to lend to Iraqi Government Ministries and gave the CBI authority to determine and implement monetary and credit policy without the approval of the Ministry of Finance.