Dr. Saman Shali

Developing the banking sector

(Part 5)

The banking industry must be developed for a nation's economy to grow overall. Investment made in a strong and well-regulated banking industry provides easier financial stability. These are the main strategies and factors to take into account when growing the banking industry in Iraq and the Kurdistan Region the Central Bank of Iraq (CBI):

1. Central Bank Independence:

• Ensure the central bank's independence to make monetary policy decisions without political interference which weakens the ability of the CB to function as independent instituted.
• Assign the central bank responsible for supervising and regulating banks based on international regulations.

2. Regulatory Framework:

• Establish a sound regulatory framework that ensures the stability and integrity of the banking sector.
• Enforce prudential regulations to manage risks and maintain financial stability.

3. Bank Supervision and Regulation:

• Strengthen the supervisory and regulatory capacity of relevant authorities to oversee banks effectively.
• Regularly assess and update regulatory frameworks to address emerging risks from misuse of the bank regulations.

4. Risk Management:

• Promote effective https://cbi.iq/page/122 practices within banks to identify, assess, and mitigate risks.
• Require banks to maintain adequate capital and liquidity buffers to ensure the customer's capital from bankruptcy.

5. Financial Inclusion:

• Promote financial inclusion by expanding access to banking services, particularly for underserved and rural populations.
• Encourage the use of technology, such as mobile banking and digital payments, to reach remote areas.

6. Competition and Innovation:

• Encourage competition among banks to improve efficiency and customer service.
• Foster innovation in banking, including fintech solutions and digital banking services.

7. Prudent Lending Practices:

• Promote responsible lending practices to prevent excessive risk-taking and protect borrowers from over-indebtedness.
• Develop credit bureaus and reporting systems to assess borrowers' creditworthiness.

8. Financial Stability:

• Establish mechanisms to monitor and address systemic risks in the banking sector.
• Develop a deposit insurance system to protect depositors in case of bank failures.

9. Cross-Border Banking:

• Encourage cross-border banking activities to attract foreign investment and diversify banking services.
• Ensure compliance with international banking standards and agreements.

10. Financial Education and Consumer Protection:

• Promote financial literacy and education programs to empower consumers to make informed financial decisions.
• Enforce consumer protection regulations to prevent abusive practices.

11. Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT):

• Strengthen AML and CFT measures to prevent illicit financial activities within the banking sector.
• Enhance due diligence requirements for customer identification and transaction monitoring.

12. Infrastructure Investment:

• Invest in financial infrastructure, including payment systems, to enhance the efficiency and security of banking operations.
• Develop modern banking infrastructure, such as real-time gross settlement systems (RTGS) and electronic funds transfer systems.

13. International Cooperation:

• Collaborate with international financial institutions and regulatory bodies to align banking standards and practices with global norms.
• Seek technical assistance and expertise when needed.

14. Corporate Governance:

• Promote strong corporate governance practices within banks, including establishing independent boards and influential risk management committees.

  15. Sustainable Banking:

• Encourage banks to adopt sustainable and responsible banking practices, including environmentally and socially responsible lending.

  16. Crisis Management and Resolution:

• Develop a crisis management framework to address banking sector crises promptly.
• Establish a resolution authority to manage the orderly wind-down of failing banks.

Developing the banking sector is a complex and ongoing process that requires careful planning, effective regulation, and continuous monitoring by the Iraqi Central Bank. A well-developed banking sector can catalyze economic growth, attract investment, and provide essential financial services to individuals and businesses.

Previous Parts : 

https://www.mirs.co/details.aspx?jimare=217

https://www.mirs.co/details.aspx?jimare=213

https://www.mirs.co/details.aspx?jimare=223

https://www.mirs.co/details.aspx?jimare=225 

Saman Shali has a Ph.D. in Science (1981) from the University of Sussex. Dr. Shali worked as an Assistant Researcher and Assistant Professor at the University of Sussex, King Saud University, and Pennsylvania State University. He is also a senior fellow at the Mediterranean Institute for Regional Studies.