Iraq has enlisted the help of two prominent financial consulting firms, London-based EY and U.S.-based Oliver Wyman, to assist in the restructuring of its banking sector, which has been severely impacted by long-term instability.
The consultants are tasked with creating a roadmap that could potentially include the merger of Iraq’s two largest public banks, as well as the privatization of others. Mudhar Saleh, an adviser to Prime Minister Mohammed Al-Sudani, confirmed this development, outlining that the restructuring efforts are aimed at rejuvenating Iraq’s financial system.
Currently, Iraq has seven major state-owned banks, over 50 national and foreign banks, and 27 Islamic financial institutions. The government and monetary authorities are working collaboratively on these comprehensive reforms to improve the banking sector’s standing on the global financial stage.
EY will carry out an extensive evaluation of the state banks to establish a clear development strategy and their integration into the international financial system. Meanwhile, Oliver Wyman will conduct an in-depth study as part of the broader restructuring plan.
As part of these reforms, the Iraqi cabinet revealed plans to create a new, large institution: the First Rafidain Bank, with an initial capital of 500 billion Iraqi dinars ($382 million). This capital is expected to increase to 1 trillion dinars ($764 million). The government will hold a 24% stake in this new entity.
In addition, the restructuring proposal includes transforming the Industrial Bank into a private joint-stock company and seeking a strategic partner. Other public banks, including the Agricultural Bank, Real Estate Bank, and Housing Fund, will maintain their current structures.
An independent Iraqi economist suggested that the restructuring could involve merging Rafidain and Rasheed banks, Iraq’s two largest institutions. Salah Nouri from the Iraqi Institute for Economic Reform explained that the main aim of the merger would be to address the bad loans accumulated before the 2003 U.S.-led invasion. The plan might involve creating separate banks to house the bad assets before merging the healthy parts of Rafidain and Rasheed.
This overhaul is part of Iraq’s broader efforts to stabilize its banking system, following years of financial turbulence and international sanctions.
