Iraq's banks look set to bounce back this year, shrugging off the crippling impact of nationalization, a decade of sanctions and a US-led invasion. Economic reforms introduced by the Coalition Provisional Authority and the US-appointed Iraqi Governing Council have opened the way for the entry of foreign banks and the consolidation of the local private banking sector.
In December the central bank closed the bidding process for foreign banks looking to enter the Iraqi market. When Euromoney went to press, successful applicants were yet to be announced. Licences are expected to be awarded this month. After this time no other foreign banks will be allowed to open branches in the country until 2009.
Licensees are expected to set up within six months, with a fast track entry process for two of the six banks. Iraq's finance minister, Kamel al-Gailani, says "prompt and substantial lending will be a significant criterion in early entry determinations".
Enabling legislation The central bank's ability to tender licences hinges on legislation introduced in September last year. As well as abolishing most restrictions on trade, capital flows and foreign investment, the reforms open the way for foreign banks to enter Iraq as branches, subsidiaries or representative offices or through joint ventures with 17 local private banks.