Senior banks may not meet opening deadline in Iraq (14/07/04)

HSBC and Standard Chartered Bank have told authorities in Iraq that they may not be able to meet a deadline to open branches in the country by the end of the year due to a lack of adequate security, a senior Iraqi finance official declared over the weekend.

"They informed the central bank it will be difficult to open as their licenses required with Iraq were still unstable," said the official, who declined to be named. The two UK-based banks were given permission to set up in Iraq by the US-led occupation in January, along with the National Bank of Kuwait. Both banks were given until the end of the year to establish themselves in the country.

HSBC is the second largest bank in the world

Each bank pledged a minimal capital investment of $25 million after beating 12 other foreign banks which also applied for banking licenses.

An HSBC executive said that the bank - the second largest in the world - was working on opening in Iraq "one way or another" by the end of the year. Iraqi banking sources say that this could result in HSBC entering through a 'tie-up' with a domestic bank.

Standard Chartered said in May that it would ask the central bank to extend the deadline, and had withdrawn its two workers from Iraq for security reasons. A spokeswoman in London said that Standard Chartered was aiming to open a branch by the deadline but "we can't say we will make that no matter what".

Standard Chartered is involved in financing Iraqi public sector imports through the Trade Bank of Iraq, but operating directly in the country according to the licence depends on sufficient security to make sure staff are safe, the spokeswoman said.

Officials from the central bank officials have refrained from discussing when the three banks would open in Iraq, but say that they could grant more licenses to other foreign banks that have applied. Central bank chief economist Mudhir Kasim told reporteres in May that HSBC and the National Bank of Kuwait were looking to enter Iraq through a tie up with a domestic bank.

Kasim said that the banking permits would be withdrawn if the banks did not meet the deadline. However, Iraqi banking sources say the central bank will extend the deadline, as it is still keen to see foreign investment in the country.

"We remain committed to our original plan," an HSBC spokesman in London said. "Entering Iraq in partnership with an Iraqi bank is certainly something we would consider," he added, declining to comment on whether the bank might miss the deadline.

Source: Khaleej Times