The Role of the Central Bank in Supervising  Commercial Banks in Iraq

A thesis Submitted to the Council of the College of Administration and Economics, University of Karbala, as part of the Requirements for obtaining a Master’s Degree in Economics.

by the student

Duaa Hussein Shaheen

Supervised by

Professor Dr. Kazem Saad Al-Araji

Abstract

Banking supervision is an essential tool for achieving economic stability and building an efficient and effective banking sector, which results in reducing banking risks and managing them effectively, as well as reducing the negative effects that affect the performance of banks. Supervision is also a means of helping banks correct their mistakes in a timely manner, and guiding them to ways to avoid them in the future to reach a sound banking system.

The aim of the research is to shed light on the role of the Central Bank of Iraq in achieving banking stability, and to identify how the Central Bank exercises control over commercial banks, and to understand the mechanisms of regulatory intervention through laws and legislation during a specific period of time. The problem of the study is represented in the extent of stability of the banking sector in Iraq under the supervision of the Central Bank, and the ability of this sector to achieve financial and monetary stability and continuity in providing financial mediation services under that supervision. The study was based on several hypotheses, the most important of which is that the application of the Central Bank of Iraq of modern mechanisms for banking supervision had a positive impact on the safety and stability of the Iraqi banking system. The research followed the analytical approach.

The research reached several results, including: the low banking density in Iraq compared to the standard banking density, which led to weak banking awareness. Sound banking supervision is also an essential condition for the continuity of banking activity, which consists of office supervision and field supervision. Finally, the services provided by Iraqi banks are not compatible in terms of number and type, and also in terms of procedures and speed of provision with the requirements of the market economy, in addition to their weakness compared to the number and type of services provided by Arab and international banks.

The research also issued several recommendations, including: working to enhance banking governance by applying the standards stipulated in the Corporate Governance Guide issued by the Central Bank, as it works to increase the degree of disclosure and transparency in the financial statements, and this contributes to revealing the weaknesses that reduce the efficiency of banks’ performance, and also linking compliance employees to the Central Bank of Iraq so that they are independent from bank administrations, as this maximizes their freedom to submit reports transparently.

The Role of the Central Bank in Supervising  Commercial Banks in Iraq

A thesis Submitted to the Council of the College of Administration and Economics, University of Karbala, as part of the Requirements for obtaining a Master’s Degree in Economics.

by the student

Duaa Hussein Shaheen

Supervised by

Professor Dr. Kazem Saad Al-Araji

Abstract

Banking supervision is an essential tool for achieving economic stability and building an efficient and effective banking sector, which results in reducing banking risks and managing them effectively, as well as reducing the negative effects that affect the performance of banks. Supervision is also a means of helping banks correct their mistakes in a timely manner, and guiding them to ways to avoid them in the future to reach a sound banking system.

The aim of the research is to shed light on the role of the Central Bank of Iraq in achieving banking stability, and to identify how the Central Bank exercises control over commercial banks, and to understand the mechanisms of regulatory intervention through laws and legislation during a specific period of time. The problem of the study is represented in the extent of stability of the banking sector in Iraq under the supervision of the Central Bank, and the ability of this sector to achieve financial and monetary stability and continuity in providing financial mediation services under that supervision. The study was based on several hypotheses, the most important of which is that the application of the Central Bank of Iraq of modern mechanisms for banking supervision had a positive impact on the safety and stability of the Iraqi banking system. The research followed the analytical approach.

The research reached several results, including: the low banking density in Iraq compared to the standard banking density, which led to weak banking awareness. Sound banking supervision is also an essential condition for the continuity of banking activity, which consists of office supervision and field supervision. Finally, the services provided by Iraqi banks are not compatible in terms of number and type, and also in terms of procedures and speed of provision with the requirements of the market economy, in addition to their weakness compared to the number and type of services provided by Arab and international banks.

The research also issued several recommendations, including: working to enhance banking governance by applying the standards stipulated in the Corporate Governance Guide issued by the Central Bank, as it works to increase the degree of disclosure and transparency in the financial statements, and this contributes to revealing the weaknesses that reduce the efficiency of banks’ performance, and also linking compliance employees to the Central Bank of Iraq so that they are independent from bank administrations, as this maximizes their freedom to submit reports transparently.