Lebanese banks in Iraq must increase equity

One thousand percent per branch

Lebanese banks in Iraq will have to increase their equity from $7 million to $70 million for each branch, by the end of 2015. This measure comes in line with a recent decision by the Central Bank of Iraq (CBI) to organize the activities of foreign banks in the country.

“No negative impacts are expected to affect Lebanese banks in Iraq from the CBI decision, since they have the available liquidity to meet the equity increase requirement,” said Ayman Hodroj, Deputy General Manager at the Middle East and Africa Bank (MEAB).

“The CBI is encouraging foreign banks to enter the market by giving them the opportunity to open an unlimited number of branches, but with a limited equity,” said Fahim Mo’dad, Advisor to the Chairman at Blom Bank.

The Central Bank of Lebanon (BDL) said that each increase in banks’ equity in Iraq protects banks. It said that each bank should review its policy to stay or withdraw from the Iraqi market and should negotiate directly with the CBI to resolve any problems.

“Lebanese banks may only face legal and administrative measures, such as the currency of the equity, and other investments of banks related to others decisions issued by the CBI. Some difficulties facing Lebanese banks are negotiated between the monetary authorities of Lebanon and Iraq,” said Hodroj.

“Lebanese banks in Iraq are heading toward requesting longer deadlines from the CBI to increase their equity,” said Mo’dad. “These banks would be interested in opening more branches, although each bank has its expansion policy, taking into consideration its expertise in the market, risk factors, and the growth of the economy among others,” he said.

Blom Bank opened two branches in Baghdad and Erbil, while MEAB opened two branches in Baghdad and Basra. Bank Audi is preparing to launch seven new branches. Other banks also operating in Iraq include Byblos Bank, Crédit Libanais, BankMed, Bank of Beirut and the Arab Countries (BBAC), Banque Libano-Française (BLF), IBL Bank, and Fransabank.

Foreign banks operating in Iraq with $7 million in equity, currently, will have to increase this equity to $35 million by June 30, 2015 to reach $70 million by the end of 2015.