01 October, 2010Iraqi banks may need $ 10 billion
Iraqi banks need to raise at least $ 10 billion in fresh capital over the next three years to prepare for an expected oil-fuelled construction boom and meet new regulatory requirements, an investor said.
Iraq has signed multi-billion-dollar deals with oil firms to boost output capacity to 12 million barrels a day in seven years.
This could give Iraq the money to rebuild after decades of war, sanctions and economic degradation, opening opportunities to the banking sector in financing projects.
Today, Iraqi banks are hardly lending to private companies due to limited capital.
"The banks so far have not been able to lend in any structured manner," Eric le Blan, chief operating officer of boutique investment firm MerchantBridge, said.
MerchantBridge owns a majority stake in an Iraqi lender, Mansour Bank, which plans to raise its capital to $ 150m.
Le Blan said that to meet the new regulatory requirements and an increased demand in lending by the private sector banks needed to raise at least $ 10bn over the next three years.
New rules by the central bank force Iraqi banks to raise their capital to at least 250bn Iraqi dinars ($ 214m) by 2013.
Capital could come from regional banks, in particular from Lebanon, as well as from some international banks, said Le Blan.
He said risks to foreign investors included Iraq's lack of experience with banking failures.
The higher capital requirements were expected to force Iraqi banks to consolidate.
"You are going to see a few leading banks surviving and the rest falling apart very quickly," he said.
"The central bank is still in training mode," he said.
Gulf Daily News
