Coalition Provisional Authority
Contact: Victoria Whitford
CPA welcomes banking sector reforms
Baghdad, February 2 – The Central Bank of Iraq on 31 January announced the selection of three foreign banks – Hong Kong Shanghai Banking Corporation, National Bank of Kuwait and Standard Chartered Bank - to proceed to the final stage of the foreign bank licensing process. The CBI also announced the complete liberalization of domestic interest rates.
“These reforms will bring real benefits to Iraqi people,” said Ambassador L. Paul Bremer III, the Coalition Provisional Authority’s Chief Administrator. “They mean Iraqis can earn market rates of interest on their money and enjoy a more modern banking service, which is good for Iraqi consumers and businesses alike. I congratulate Central Bank Governor Sinan Shabibi for taking these decisions.”
Both announcements are another step forward for the modernization of Iraq’s financial system. Under Saddam Hussein, foreign banks were not allowed to operate in Iraq, while interest rates for loans and deposits were set within a certain range.
The presence of foreign banks in Iraq will bring modern practices and know-how to the banking sector. It will also add an extra element of competition to banking, benefiting Iraqi consumers and the Iraqi economy.
Freeing interest rates to allow them to operate according to market forces allows Iraqi entrepreneurs and businesses to operate without governmental control. It provides incentives for Iraqis to deposit their savings in banks, earning them competitive rates of interest. And it allows banks to offer loans at market rates, benefiting borrowers and creating competition. Ultimately this attracts investment and creates jobs.
For further details, please contact the Central Bank of Iraq Department of Public Relations.