Iraq
Banking sector profile — Middle East & North Africa
Data as of October 2026 • TGB Intelligence Unit
Policy rate as of 7 October 2026: 6.25% (source: Central Bank of Iraq)
Banking sector at a glance
Structure and performance
Iraq's banking sector is dominated by state-owned banks and remains small relative to the economy. Total assets of banks operating in Iraq were IQD 184.7tn (about US$142bn) in April 2026, some 54% of 2025 GDP, of which state banks – led by Rafidain, Rasheed and the Trade Bank of Iraq – held 73%. The CBI register lists eight state banks (one not yet operating), 55 private domestic banks, most of them Islamic, and 16 foreign-bank branches, several of which are in liquidation or under guardianship.
Banks' access to US dollars depends on meeting US compliance and governance requirements: the CBI register marks 30 of its 79 banks as barred from dealing in US dollars, and in July 2026 the CBI agreed with the US Treasury the conditions under which restricted banks can return to correspondent banking. Account ownership rose to 30% of adults in 2024 from 19% in 2021.
Reported prudential metrics combine high capital with weak asset quality. IMF Financial Soundness Indicators for end-2024 show a regulatory capital ratio of 30.0%, a Tier 1 ratio of 25.5% and non-performing loans of 16.5% of gross loans, with liquid assets at about 48% of total assets and a return on equity of 32.1%. Sector assets fell 6.3% in the year to April 2026.
The 2026 regional conflict has coincided with a fall in official reserves: CBI official reserves declined from IQD 132.8tn in February to IQD 100.8tn by 10 September. Banks face liquidity, sovereign-exposure and correspondent-banking risks.
Structural trends
The shifts shaping banking in Iraq.
State dominance persists: state-owned banks held 73% of sector assets (IQD 134.9tn) in April 2026, against IQD 49.7tn for private banks.
Balance sheets are contracting: total bank assets fell 6.3% year on year to IQD 184.7tn in April 2026.
Dollar-access restrictions remain extensive: 30 of the 79 banks on the CBI register in September 2026 were barred from US-dollar transactions, including 28 private domestic banks.
Account ownership is rising from a low base: 30% of adults held an account in 2024, up from 19% in 2021, according to the World Bank's Global Findex.
Leading institutions
State-owned banks held 73% of banking-sector assets in April 2026 (Central Bank of Iraq).
Supervision and capital rules
The CBI regulates and supervises banks and reports risk-weighted capital adequacy alongside Basel III-style liquidity metrics (LCR and NSFR) in its Financial Stability Report. It addresses weak banks through guardianship and liquidation, placing Al-Taif Islamic Bank under guardianship in September 2026 while stating that depositors' rights are protected. Its banking reform programme is central to restoring correspondent access: in July 2026 the CBI and the US Treasury reached an understanding under which restricted banks that meet compliance and governance standards and complete the first phase of the CBI's reform and relicensing programme can return to non-dollar correspondent channels, and can regain eligibility for US-dollar transactions once all remaining requirements are met. The CBI said seven banks qualified for the first step. It has also recently issued circulars on due diligence for politically exposed persons. In June 2026 the FATF agreed a joint action plan with Iraq to strengthen its anti-money-laundering and counter-terrorist-financing regime.
What changed in 2026
- March 2026: The CBI raised its policy rate to 6.25% from 5.50%, the first change since October 2024.
- June 2026: Nazar Nasser Hussein took office as CBI governor, succeeding Ali Mohsen Al Alaq.
- September 2026: The CBI placed Al-Taif Islamic Bank for Investment and Finance under guardianship on 3 September and said depositors' rights were protected.
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