Iraq's Banking Reforms Advance Amid Liquidity Strains

The Central Bank of Iraq, working with the U.S. Treasury, is accelerating reforms to bring the country's banking sector up to international standards. Seven Iraqi banks have received partial clearance for correspondent banking, a key step toward global financial integration. At the same time, several private banks are facing severe liquidity shortages, prompting concerns about their ability to meet domestic and international obligations. Industry sources say the shortfalls could lead to mergers, though deposits remain protected. To address the crisis, banks are intensifying anti‑money‑laundering and counter‑terrorist‑financing controls, tightening governance, and monitoring U.S. dollar transactions. Staff at affected institutions report long working hours as they strive to meet the Central Bank’s compliance deadlines. The reforms aim to strengthen corporate governance, curb illicit transfers, and restore confidence in Iraq’s financial system.