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Bond Ladys Corner » NEWS FROM IRAQ » Iraq General News, Economy & Oil News » The interbank market

The interbank market

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2The interbank market Empty Re: The interbank market Wed Mar 11, 2015 10:06 pm

tlm724

tlm724
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This is from 05 March 2014:



Iraq’s Missing Market

Posted on 05 March 2014. Tags: banking, CBI, interbank markets, Mark DeWeaver

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By Mark DeWeaver.

In my last post I argued that Iraqi banks’ high cash/deposit ratios are due to the absence of an interbank market. If that is the case, you might think it would be easy to get the banks to put more of their deposits to work in the “real economy.” Couldn’t somebody (e.g. the central bank) simply set up a system through which they could make short-term loans to one another?

A few years ago I met someone at a conference on Iraqi banking who said he had helped to set up just such a system. According to him, the IT platform he worked on was already in place. The banks just weren’t using it.

If the issue isn’t primarily technical, what is it? I think the root of the problem is the dominant role of the state banks, which together account for about 80% of system-wide deposits.

Without their participation, an interbank market would not work. There would be no guarantee that at the end of a given day the private banks collectively wouldn’t end up with a cash deficit while the state banks had a surplus. In a market with only the private banks, those with extra funds might not have enough cash to meet the demand of those with a shortfall.

So why not get the state banks involved? Unfortunately, that wouldn’t be ideal either. Like state-owned enterprises in general, these banks can always count on a bail-out if they get into trouble. This means that as interbank lenders they could afford to act recklessly, making funds available to anyone willing to pay a high enough interest rate, regardless of counter-party risk. The result would be an increase in the state banks’ non-performing loan ratios and a corresponding hit to the government budget.

The absence of an interbank market thus turns out to be symptomatic of much deeper problems in the structure of the Iraqi financial system. Until these are resolved, the banks are unlikely to begin either lending to one another or lending out a bigger share of their deposits to the non-financial sector.

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3The interbank market Empty Re: The interbank market Wed Mar 11, 2015 10:09 pm

tlm724

tlm724
ADMINISTRATOR
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Also see this :

The interbank market rise in the banking sector


3/3/2015 0:00


BAGHDAD

Inter-bank market plays an active role in the economy of countries, but are limited to activity between the Iraqi private banks requires strengthening of trust between central and local government and private banks, both to be activated.

Market represents between banks (inter -bank market) one part of the monetary policy of the Central Bank which is taken: the ends aimed at providing liquidity and determine the amount of interest on lending rate.

The activation of the role of this market among private banks of the important things that will determine the interest rate on amounts lending rates and provide liquidity to them.

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