Iraq’s banking sector could become more attractive to regional investors as the government moves ahead with reforms aimed at improving oversight and strengthening the financial system.
Last month, reports suggested that seven Iraqi banks that had previously faced restrictions were allowed to reconnect to the US dollar system. However, the US Treasury later pushed back on those reports, highlighting the significant influence Washington still holds over Iraq’s financial sector.
In recent years, several Iraqi banks have faced sanctions over allegations that they were being used to move funds linked to Iran. Iraq’s financial system also remains closely tied to the United States, as Iraqi oil revenues are deposited into an account managed through the Federal Reserve Bank of New York before being transferred to Baghdad.
Despite these challenges, the Iraqi government is working to improve governance and transparency in the banking sector. As part of a wider anti-corruption campaign launched by Prime Minister Ali al-Zaidi, authorities have introduced measures aimed at strengthening private lenders and restoring confidence in the financial system.
The government has also brought in international consulting firms Oliver Wyman and EY to support reforms at major state-owned banks, including Rasheed Bank and Rafidain Bank. These efforts are intended to modernize Iraq’s banking sector and create a more stable environment for future investment.
