Iraq to hire foreign auditor to help with banking reforms

• Strengthening financial system
• Compliance with international standards
• Mistrust of banks high among Iraqis

Iraq intends to appoint an independent foreign auditor to oversee compliance by local banks with new capital requirements and the ongoing restructuring of the country’s ailing banking sector.

The Central Bank of Iraq (CBI) said it is pushing ahead with reforms as part of a “strategic vision” to strengthen the financial system and enhance the efficiency of banking institutions in accordance with best practice and international standards.

The CBI said in a statement that all banks operating in its jurisdiction must work towards fulfilling the requirements of the second phase of a reform programme launched in 2025.

This phase focuses on “strengthening compliance and governance levels, enhancing transparency, and improving institutional performance, thereby contributing to financial stability and strengthening confidence in the banking sector,” the CBI said.

“CBI is in the process of contracting with an independent and specialised auditing firm to conduct the final evaluation of banks that have met the criteria of the first phase of the reform programme. This evaluation will ensure their compliance with external transfer requirements and relevant international standards,” it said.

In August 2025, CBI governor Ali Al-Allaq ordered the liquidation of 10 banks after they failed to return funds to depositors.

Allaq said Iraqis no longer trust banks, with nearly 80 percent of their money kept at home instead of in the local financial sector.

“The reforms approved by the government in 2025 are intended to tackle imbalances and weaknesses in the banking sector … they also aim to upgrade banking services to international standards,” Allaq said.

In 2023, the US banned 14 Iraqi banks from accessing the dollar market on the grounds that they were acting as conduits to and from Iran.

The US management consulting company Oliver Wyman, which is involved in the restructuring scheme, has asked the CBI to force private banks to boost their capital through mergers, or risk losing their licences or being shut down.

Further reading:

• Iraq shuts 10 banks in restructuring scheme
• Iraq considers ‘wage stability fund’ as cash crisis worsens
• Iraq nominates banker for PM as cash crisis deepens

An adviser to Iraq’s caretaker Prime Minister Mohammed Al-Sudani said in 2025 that the London-based Ernst & Young (EY) was also carrying out a parallel study, which included restructuring the management of public banks and reducing the government’s share in the country’s largest public bank, Al-Rafidain Bank, to 24 percent.

Iraq has seven major government banks besides more than 50 national and foreign units, including 27 Islamic banks, according to the CBI.