Baghdad: The Central Bank of Iraq announced on Saturday that it has reached an understanding with the US Treasury Department to reinstate restricted Iraqi banks to non-US dollar correspondent banking channels.
According to National Iraqi News Agency, a statement from the Prime Minister's Media Office highlighted that this development followed the official visit of Prime Minister Ali Faleh al-Zaidi and his meeting with the President of the United States. Within the efforts to strengthen bilateral relations, the Governor of the Central Bank of Iraq conducted high-level meetings with US Treasury officials. These meetings culminated in a mutual understanding to reincorporate restricted Iraqi banks into non-US dollar correspondent banking channels, contingent upon their compliance with approved standards in compliance and governance. Additionally, the banks must complete the initial phase of the Central Bank's banking sector reform and relicensing program to regain eligibility for US dollar transactions upon fulfilling all related regulatory requirements.
The statement emphasized that this understanding aligns with the Central Bank of Iraq's strategy to modernize the banking sector, enhance its resilience, and improve efficiency, capacity, and competitiveness. This strategic approach aims to facilitate the full integration of Iraqi banks into the global financial system, bolster confidence in the Iraqi banking sector, and foster an environment conducive to its engagement with international financial institutions.
The Central Bank of Iraq reiterated its commitment to a comprehensive evaluation of all Iraqi banks while strengthening the supervisory and regulatory framework to ensure adherence to international standards. This includes governance, risk management, anti-money laundering, and counter-terrorism financing requirements. The statement underscored the bank's resolve to take necessary supervisory and regulatory actions against institutions failing to meet these standards, which could involve restricting or suspending access to international channels or revoking licenses under applicable legal frameworks.
The Governor of the Central Bank of Iraq, as per the statement, noted that seven banks currently qualify to return and operate within the external correspondent banking channel using currencies other than the dollar. These banks will eventually be permitted to engage in US dollar transactions upon meeting further compliance and governance criteria.