How to Establish a Bank in Iraq: Investor & Regulatory Guide

How to Establish a Bank in Iraq: Investor & Regulatory Guide Establishing a bank in Iraq is a highly regulated investment activity governed by the Iraqi Banking Law and supervised exclusively by the Central Bank of Iraq (CBI). Any entity seeking to establish a local bank, Islamic bank, or foreign bank presence must obtain prior licensing approval from the CBI and demonstrate financial strength, transparent ownership, sound governance, and long-term operational viability. The licensing framework is designed to protect financial stability, depositors’ interests, and the integrity of the Iraqi banking system, making regulatory compliance a central requirement for investors. Types of Banks Permitted in Iraq: Investors may apply to establish or operate the following types of banks, subject to CBI approval: Commercial Banks Islamic Banks Foreign Bank Subsidiaries Foreign Bank Branches (subject to additional conditions)   Each category is subject to specific licensing, capital, and operational requirements determined by the Central Bank of Iraq. Key Regulatory Requirements: To qualify for a banking license, applicants must demonstrate compliance with the following core requirements: Minimum capital in accordance with CBI regulations Clear and transparent ownership structure Fit and proper shareholders, free from regulatory or criminal concerns Qualified Board of Directors and senior management Robust governance framework, including risk management and internal controls Comprehensive AML/CFT compliance systems Viable business plan aligned with Iraqi market conditions   Foreign investors are subject to enhanced due diligence and additional disclosure requirements. Step-by-Step Licensing Process Initial Application to the Central Bank of Iraq: Investors submit a formal application outlining the proposed bank type, shareholders, capital structure, and strategic objectives. Submission of Business Plan & Supporting Documents: Applicants must provide detailed documentation covering: Proposed banking activities Financial projections Governance and organizational structure Risk management and compliance frameworks   Regulatory Due Diligence: The CBI conducts a thorough assessment of: Shareholders and sources of funds Board members and executive management Compliance readiness and internal controls   Capital Deposit: Following preliminary approval, the required capital must be deposited with a bank designated by the CBI. Company Incorporation: The bank is incorporated under the Iraqi Companies Law and registered with the Companies Registration Department. Final Licensing Approval: Upon satisfaction of all conditions, the CBI issues the final banking license, authorizing operations. Operational Readiness: Before commencing business, the bank must finalize systems, staffing, internal policies, reporting mechanisms, and any branch approvals. Ongoing Regulatory Obligations: Licensed banks in Iraq are subject to continuous supervision and must comply with: Capital adequacy and liquidity requirements CBI reporting and inspection regimes AML/CFT and sanctions compliance Corporate governance and board oversight Audit and disclosure obligations   Failure to comply may result in regulatory sanctions, fines, or license suspension. Investment Timeline (Indicative): While timelines vary depending on complexity and regulatory review, the licensing process typically takes several months from initial application to final approval, subject to CBI discretion. Why Regulatory Preparation Matters: Banking license applications are assessed on a substance-over-form basis. Strong legal structuring, governance design, and compliance readiness significantly increase the likelihood of regulatory approval and long-term operational stability. How Etihad Can Assist Etihad provides legal and regulatory advisory services to banks, financial institutions, and businesses, supporting compliance with applicable laws, regulations, and regulatory guidance issued by any competent authorities.