Shafaq News- Baghdad

Current indicators show no cause for concern over the Iraqi banking sector’s ability to meet its obligations to depositors, the Prime Minister’s Financial and Economic Adviser told Shafaq News on Monday.

Mudher Mohammed Saleh said regulators continuously monitor liquidity, solvency, capital adequacy and asset quality, as well as credit and market risks and asset-liability management. Saleh also urged citizens to rely on official information rather than rumors.

Asked about potential risks to Iraqis’ deposits or restrictions on withdrawals, he said protecting deposits and maintaining banking-system stability were regulatory priorities, adding that banks must maintain sufficient liquid assets to meet short-term obligations, withdrawals and transfers.

“Protecting depositors’ funds and maintaining confidence in the banking system are also essential to monetary and financial stability,” Saleh said.

Shafaq News contacted the Central Bank of Iraq seeking answers to several questions, but most officials declined to comment.

Read more: Banking without trust: Why Iraqis still keep their money in cash

Varying Risks

The absence of official restrictions on withdrawals does not necessarily mean all Iraqi banks enjoy the same level of stability, economic researcher Ahmed Eid told Shafaq News. Some banks facing financial difficulties or regulatory measures could experience temporary problems meeting withdrawal requests, he stated, but that does not mean the situation applies to the sector as a whole.

Eid attributed weak liquidity in Iraq’s banking system partly to citizens keeping large amounts of cash outside banks because of low confidence.

Read more: Cash culture dominates Iraq, reform efforts stall

Reforms and Depositor Protection

Economist Ahmed Abdul-Rabbo said regulatory measures against banks should not be equated with insolvency, saying they were part of a broader reform program assessing banks against governance, compliance, risk-management and transparency standards, with banks potentially remaining independent, merging or exiting the market.

Abdul-Rabbo also cautioned against automatically linking the reform program to speculation about general withrawal restrictions.

Read more: Banking sector faces turning point in Iraq’s reform drive