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Questions About Practices Of Private Iraqi Banks

Iraq's private banks rarely engage in traditional banking activities such as offering loans and credit and have lost the trust of the Iraqi people, writes Omar Al-Shaher.
A cashier counts Syrian currency notes in Amman December 6, 2011. Jordanian money changers said on Tuesday demand on the Syrian pound has plummeted since unprecedented Arab economic sanctions against Damascus, and its exchange rate against the dollar has slipped on the black market by at least 7 percent to nearly 57 pounds.  REUTERS/Ali Jarekji  (JORDAN - Tags: BUSINESS POLITICS)
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Privately held Iraqi banks have almost entirely relinquished their traditional functions — such as giving out loans, lending credit and issuing letters of credit — due to default risks. Instead, they are resorting to profit making through participation in the currency auction regularly held by the Iraqi Central Bank.

Iraqi banks demand exaggerated guarantees for the granting of any loans to local investors, for fear of defaults on payments. According to banking experts, the value of some loans does not cover more than 40% of the guarantees the privately held banks are demanding, leading to a decrease in the number of loan operations conducted by these banks to a bare minimum.

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