Central Bank of Iraq

“ Modifying the Protection Granted to the Development Fund for Iraq and Certain Property in Which Iraq Has an Interest and Protecting the Central Bank of Iraq
By the authority vested in me as President by the Constitution and the laws of the United States of America, including the International Emergency Economic Powers Act, as amended (50 U.S.C. 1701 et seq.) (IEEPA) , the National Emergencies Act (50 U.S.C. 1601 et seq.) ”

“ Work closely with the Ministry of Finance and the Central Bank of Iraq to
ensure that assistance from the international financial institutions is
allocated consistently with the national budget, and in a manner that
supports the integration of capital improvements and operating
requirements into a unified national budget as soon as practicable ”

“ I hereby promulgate the following:
Section 1
Definitions
“CBI” means the Central Bank of Iraq.
“Conversion Period” means the period of time from October 15, 2003, up to and
including January 15, 2004. ”

“ Authorities and Duties Pertaining to the Issuance of
Government Debt Securities
1. The Minister shall have authority to issue Government Debt Securities as an
obligation guaranteed by the Government only in amounts reasonably necessary
for expenditures authorized by law and in amounts necessary to buy, redeem, or
refund outstanding Government Debt Securities.
2.
The issue and redemption of Government Debt Securities shall be managed by
the Central Bank of Iraq as the agent for the Government.
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ANNEX B
3. ”

“ A bank may be accepted as a Broker if
authorized to act in that capacity under the Banking Law.
11) “Bank” means an entity authorized by the Central Bank of Iraq to conduct
banking operations in Iraq.
12) “Company” means a joint stock Company that is an issuer of securities subject to
the provisions of this Law or a Company referred to in Section 5 (1) (b) (ii) of this
Law.
CPA/ORD/18 April 2004/74
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13) “Depository” means the Iraq Depository which will serve as the central clearing
and settlement facility for all securities transactions. ”

“ In order to implement the monetary policy of Iraq, the CBI shall, by regulation, require
that banks maintain reserves in the form of cash holdings or deposits with the CBI. Such
reserves shall be kept at prescribed minimum levels, calculated as the average of end-of-day
reserve levels over such time periods as determined by the CBI and which relate to the size,
type or maturity of the banks’ deposits, borrowed funds and such other liabilities as the CBI
may designate. Banks shall not be permitted to operate overdrafts on reserve accounts at any
time. ”

“ Subject
to these objectives, the CBI shall also promote sustainable growth, employment, and
prosperity in Iraq.
Article 4 Functions
1. The functions of the CBI in achieving the objectives set forth in Article 3 and as further
described in this Law, shall be to:
a. formulate and implement monetary policy, including exchange rate policy, for Iraq
in accordance with Section 6;
b. hold and manage all official foreign reserves of Iraq, other than working balances
of the government, in accordance with Article 27;
c. hold gold and manage the State reserves of gold ”

“ CBI unless:
a. the bank, in the opinion of the CBI, is solvent and provides adequate collateral, and
the request for financial assistance is based on the need to improve liquidity; or
b. such assistance is necessary to preserve the stability of the financial system and the
Minister of Finance has issued to the CBI a guarantee in writing on behalf of the
Government securing the repayment of the loan.
SECTION 7—CURRENCY
Article 31 Unit of currency
The national monetary unit in Iraq shall be the dinar. ”

“ The CBI may, by regulation, limit the amounts of banknotes and coins that must be
accepted as a legal tender in payment for an obligation and restrict the denominations of such
banknotes and coins in which payment may be made to specified amounts or a range of
amounts.
4. The CBI shall be responsible for the supply of Iraq’s banknotes and coins and shall
endeavor to maintain the availability of an adequate number of banknotes and coins in all
regions at all times.
Article 33 Printing of banknotes and minting of coins; accounting treatment of
currency issued
1. ”

“ In addition, the CBI may take whatever action it deems necessary to: (i) counter money
laundering and terrorist financing, and (ii) regulate and supervise lending companies,
microfinance companies, and any other non-bank financial institutions not otherwise
regulated under Iraqi law. ”

“ For the purpose of this Article, a banknote or coin issued in violation of Article 32 (1) , or
any other instrument or token intended for circulation in Iraq as money other than as
authorized by this section, is to be treated as counterfeit money or token for value.
Article 62 Administrative penalties
1. ”

“ At the October 2003 Madrid International Donors Conference, donors other than the United States pledged over $13 billion in assistance for the reconstruction of Iraq, including $8 billion from foreign governments and $5.5 billion in lending from the World Bank and International Monetary Fund, to be disbursed from 2004 through 2007. Iraqi business leaders are decidedly optimistic about the growth of the economy as well as the growth of their own businesses. ”

“ Establishing a bank in Iraq, including as a majority or wholly-owned subsidiary of a
foreign bank or bank holding company, shall require the prior issuance of a banking license
by the CBI. Establishing a branch or representative office of a foreign bank in Iraq shall
require the prior issuance of a permit by the CBI. The subsidiary of foreign owned banks
shall be required to have 50 billion dinars of capital. There is no restriction on where that
capital is invested. ”

“ More than 20,000 more police are on duty in other towns and cities across Iraq.
Every day, Iraq is making progress in rebuilding its economy. In Baghdad, the banks have opened, and other banks will open across the country in the coming months. This fall, new bank notes will be issued, replacing the old ones bearing the former dictator's image. And Iraq's energy industry is once again serving the interests of the Iraqi people. More than a million barrels of crude oil and over 2 million gallons of gasoline are being produced daily. ”

“ Iran and the United States (hereinafter "the parties") will immediately select a mutually agreeable central bank (hereinafter "the Central Bank") to act, under the instructions of the Government of Algeria and the Central Bank of Algeria (hereinafter "The Algerian Central Bank") as depositary of the escrow and security funds hereinafter prescribed and will promptly enter into depositary arrangements with the Central Bank in accordance with the terms of this declaration. ”

“ Permits for branches may be issued only to foreign banks that are subject to
comprehensive consolidated supervision by a supervisory authority in the country in which
the foreign bank’s head office is located.
5. Except as otherwise provided in this Law, subsidiaries and branches of banks in part or
totally owned by foreign persons are to be treated under the laws of Iraq no less favorably
than domestic banks. ”

“ Article 16 Other capital requirements
1. Each bank shall at all times maintain capital, including its unimpaired capital and reserves,
in Iraq of not less than the equivalent of 12 percent of the total value of its assets determined
on a risk-adjusted basis, or such higher percentage as specified by regulation of the CBI,
whereby not less than one-half of such capital shall consist of core capital. ”

“ Economy
Economy—overview: Iraq's economy has been dominated by the oil sector, which has traditionally provided about 95% of foreign exchange earnings. In the 1980s, financial problems caused by massive expenditures in the eight-year war with Iran and damage to oil export facilities by Iran led the government to implement austerity measures, borrow heavily, and later reschedule foreign debt payments; Iraq suffered economic losses of at least $100 billion from the war. ”

“ The primary responsibility and mandate of the Central Bank of Sudan shall be ensuring price stability, maintaining stable exchange rate, sound banking system and issuance of currency. The monetary policy shall rely primarily on market-based instruments instead of administrative allocation of credit. ”

“ There is no method whatever by which the volume of currency can be temporarily expanded by some credit device within the country to meet the regularly recurrent seasonal demands of trade. Cheque–using countries meet the difficulty by increasing the volume of credit created by the banks; most note–using countries meet it by the Central Bank’s discounting a greater volume of home bills than usual, and thus increasing its note circulation temporarily, without a corresponding increase in its metallic reserves. ”

“ The expectation that the Government will bring some of its gold to the rescue in extreme circumstances, has always been said to exert an enervating influence on the banks themselves in the matter of the precautions they take for times of crisis. The ultimate solution probably lies in the establishment of a Central Bank for India which shall be the Government Bank and shall hold the banking and currency reserves at the same time. ”

“ In countries where the Money Market is neither so highly developed nor, in relation to foreign countries, so self-supporting, the Central Bank, if it is to be secure, must take the matter in hand itself and, by itself entering the international money market as a lender at short notice, place itself in funds, at foreign centres, which can be rapidly withdrawn when they are required. ”

“ We're urging other nations to contribute to Iraqi reconstruction — and 37 countries and the IMF and the World Bank have so far pledged $13.5 billion in aid. America has dedicated more than $20 billion to reconstruction and development projects in Iraq. To ensure our money is spent wisely and effectively, our new embassy in Iraq will have regional offices in several key cities. These offices will work closely with Iraqis at all levels of government to help make sure projects are completed on time and on budget. ”

“ The absence of a State Bank makes it difficult for the Government to use its cash balances or any other part of its liquid funds to the best advantage,—since it cannot prudently place the whole of its free resources in the hands of a private institution.
(v.) The absence of a central banking authority leads to a general lack of direction in the banking policy of the country: it is no one’s business to look at the matter as a whole, to know the position of the [237] market’s component units, or to enforce prudence when it is needed. ”

“ Foreign borrowing by all sub-national levels of government shall be in a manner that does not undermine national macroeconomic policies and shall be consistent with the objective of maintaining external financial viability. All foreign borrowing transactions of sub-national levels of government shall conform to the Central Bank of Sudan specifications. ”

“ In order to promote equal access of domestic and foreign creditors to a universal pool of
assets of a bankrupt bank with cross border activities:
a. if a bankrupt domestic bank has branch offices or representative offices in a foreign
country, the CBI shall cooperate as much as possible with the authorities of that
country;
b. if a creditor of a bankrupt domestic bank has received partial payment on its claims
in a foreign country, the balance of its claims may be presented for payment together
with costs incurred in the proceeding in Iraq ”

“ It shall be prohibited for any bank without first obtaining the CBI’s prior written approval
to acquire stock or shares in a company established outside Iraq, except when such stock or
shares are transferred to it in the course of its banking operations.
Article 34 Bank holidays
All banks must open their doors for business with the public on all days and during all office
hours approved by the CBI, excluding Fridays and bank holidays. The CBI shall, by
regulation, announce the holidays to be observed by banks. ”

“ There has been some economic progress in Iraq, and Iraq has tremendous potential for growth. But economic development is hobbled by insecurity, corruption, lack of investment, dilapidated infrastructure, and uncertainty. As one U.S. official observed to us, Iraq's economy has been badly shocked and is dysfunctional after suffering decades of problems: Iraq had a police state economy in the 1970s, a war economy in the 1980s, and a sanctions economy in the 1990s. Immediate and long-term growth depends predominantly on the oil sector. ”

“ So stupid, these people, and Iraq has billions and billions of dollars now in the bank, and what did we do? We get nothing, we never get... but we do actually, we kept the oil here, okay? We did good. ”

“ The United States should support the World Bank's efforts to ensure that best practices are used in contracting. This support involves providing Iraqi officials with contracting templates and training them in contracting, auditing, and reviewing audits. ”

“ Despite these challenges, Iraq's economy is growing, supporting new businesses every month. Through persistent diplomatic and financial efforts, Iraq is getting control of its once-enormous debt burden. Inflation remains in check, and the international financial institutions have expressed their confidence that Iraq is on the right track. ”

“ Visibility would defeat its object. The Money Masters had read history and knew that the American people stood four square against a Central Bank. If their monster of pillage were called a Central Bank they knew it would die in the legislative womb. ”

“ Things are moving forward on the economic front. In 2005, the Iraqi economy grew by an estimated 2.6 percent in real terms and the International Monetary Fund has estimated that it will grow by more than 10 percent this year. ”