Iraq's central bank says it has given licences to the National Bank of Kuwait, Standard Chartered and HSBC, heralding the entry of foreign banks into the country for the first time in decades. "They can start operations as of the middle of March. There will be another three foreign licences announced shortly," an aide to central bank governor Sinan al-Shabibi stated on Saturday. The US-installed monetary authorities have invited international banks to apply for six five-year licences. Each of the 15 foreign banks that applied pledged to have minimum capital in Iraq of $25 million (£13.7 million).
Joe Sarrouh, executive adviser at Beirut's Fransabank, said conditions for qualification focused on banks with expertise outside their home country and a commitment to invest in Iraq despite security risks. "Iraq is definitely very interesting. We are talking about billions. They need everything, including capital and every type of finance. Everyone is trying to get in one way or another," Sarrouh said. Standard Chartered has been expanding in the Middle East, opening branches in Jordan and Lebanon in recent years and focusing on retail. HSBC already operates in 12 Middle East countries. The National Bank of Kuwait is one of the largest Gulf banks. Kuwait hopes to act as a base for companies keen to contribute in Iraq's reconstruction but worried over security.
Socialist governments that took control of the economy expelled foreign banks from Iraq in 1960s. Saddam Hussein allowed private Iraqi banks to operate in the 1990s, but 13 years of UN sanctions and over-regulation greatly damaged the banking system, which badly lags behind the world. Banks entering Iraq will face a landline network that has been mostly out of commission since the US-led invasion, a rudimentary settlement mechanism and widespread lawlessness. Iraqi business figures say it is unclear whether foreign banks will choose to open branches first in Baghdad or in more secure areas such as Iraqi Kurdistan.
Source: Reuters
