The problem of banksEconomical 12/05/2023
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There has been a lot of talk about banking reform and the importance of the banking system returning to the banking services for which it was established.
In an unprecedented manner, the government is urging steps to achieve this goal after realizing the importance of the banking sector in achieving comprehensive development programs, so that international investment companies wishing to enter the Iraqi market cannot do without solid banks that provide advanced services to facilitate the work of companies and as the strong arm of the Iraqi private sector in dealing and partnership. With external and internal investments.
From this standpoint, the government seeks to activate this role and achieve the desired reform, but what are the challenges facing achieving this goal?
The most prominent challenges facing the banking sector are (loss of confidence) depositors’ confidence in banks and, in return, banks’ confidence in their customers. Of course, this phenomenon has many causes that are inherited from the time of the era preceding the period of change and extended more widely during the transitional period and up to the present day.
It is known and declared axiom that the legally issued monetary mass exceeds 100 trillion dinars. It is also known that 70 percent of this mass is outside financial circulation, outside the financial market, and hoarded by the public.
Efforts are being made to attract this mass, or at least part of it, to deposit it in banks with the aim of investing it and recycling it in construction and development, but there is a reluctance among the public to deal with banks.
The reason, as I mentioned, is lack of trust.
Here, with the aim of achieving reform of the banking system and making it effective in performing its duties and providing banking services, the steps that must be followed from our point of view are:
First: To correct and activate banks in performing their duties by providing real banking activities and services, urgent government measures must be taken to restore the confidence of the public and the depositors.
Secondly - The larger goal of engaging banks in implementing sustainable development programs requires attracting the public’s accumulated cash mass so that it can be invested in implementing development programs.
To achieve these two goals, the government must:
1 - The agreement between the government and Parliament to sign a code of honor not to expose and attack banks in the media in a way that harms the banks’ reputation and leads to the public’s reluctance to deposit their money in them, because conflicting statements contribute to deepening the loss of confidence in banks.
2 - The government and the Central Bank must amend the banking law to provide protection and guarantees for banks when financial crises occur, which is what is done in countries of the developed world, and this is what encourages the public to go to banks and deal with them.
3 - Obliging banks to carry out their true banking activities and services with full transparency and clarity by devising various and well-known means of encouragement.
4 - The Central Bank and the government must push towards stimulating free competition between banks to attract depositors.
It is noted that whenever the curtain falls on the phenomenon of lack of confidence in banks and things are going well, this confidence collapses quickly with any fluctuation in the exchange rate that occurs for reasons that can be addressed by monetary policy, but the media attack by Iraqi officials and parliamentarians at various levels with all the accusations confuses the market and the effect of this is stronger. Many rumors hinder the procedures, so we call for a code of honor not to discuss matters and leave them to those responsible for monetary policy and handle them without chaos and side effects. This is one aspect of achieving banking reform
Which is targeted by the government and gains priority to advance an advanced reform program.
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