The World Bank Report No: ISR5808 Implementation Status & Results Iraq Iraq: Banking Sector Reform (P113337) Public Disclosure Copy Operation Name: Iraq: Banking Sector Reform (P113337) Project Stage: Implementation Seq.No: 5 Status: ARCHIVED Archive Date: 12-Oct-2011 Country: Iraq Approval FY: 2009 Product Line: Recipient Executed Activities Region: MIDDLE EAST AND NORTH AFRICA Lending Instrument: Emergency Recovery Loan Implementing Agency(ies): Central Bank of Iraq Key Dates Board Approval Date 14-Apr-2009 Original Closing Date 31-Oct-2010 Planned Mid Term Review Date 15-Jan-2012 Last Archived ISR Date 12-Oct-2011 Effectiveness Date 17-Apr-2009 Revised Closing Date 30-Jun-2013 Actual Mid Term Review Date Project Development Objectives Project Development Objective (from Project Appraisal Document) The Project Development Objective is to strengthen the supervisory framework for financial intermediation and to build capacity of financial institutions to support implementation of Phase I of the Iraq Banking Reform Strategy. Has the Project Development Objective been changed since Board Approval of the Project? Yes No Component(s) Component Name Component Cost Institutional and Operational Restructuring of the two State-owned Commercial Banks 5.00 Financial Restructuring of the Two State-owned Commercial Banks 1.00 Strengthening the Regulatory and Supervisory Functions of CBI 2.75 Project Management, Monitoring and Evaluation 0.75 Unallocated 0.50 Public Disclosure Copy Overall Ratings Previous Rating Current Rating Progress towards achievement of PDO Moderately Satisfactory Satisfactory Overall Implementation Progress (IP) Satisfactory Satisfactory Overall Risk Rating Moderate Moderate Implementation Status Overview The operation comes as a response to the request by the Government of Iraq to the World Bank for supporting the implementation of Phase I of the Iraq Banking Reform Strategy-� Action Plan (2008-2012). The project (US$ 10 million), is provided through the Iraq Trust Fund (ITF) to finance the costs and activities associated with the restructuring of Page 1 of 4 The World Bank Report No: ISR5808 the banking sector in Iraq. Specifically, it would support the restructuring of the two state-owned banks--Rashid bank and Rashidan Bank, as well as develop their activities in the financial sector in parallel with on-going efforts to strengthen the banking sector✇ s regulatory and supervisory framework of the Central Bank of Iraq (CBI), the implementing agency. Good progress has been made over the past months in the implementation of the banking sector reform program. The Bank has been providing technical support and advisory Public Disclosure Copy services to the Iraqi authorities to implement the First Phase of the Banking Reform Strategy-Action Plan (2008�� 2012) that was done in consultations with the Ministry of Finance, the CBI, the Board of supreme Audit (BSA), and the senior management of the two state-owned banks. This has been evident in the developments made in the institutional, operational and financial restructuring of the state-owned commercial banks--Rasheed Bank and Rafidain Bank through the capacity building of these banks at the head quarters and branch level in the different governorates. Moreover, at the CBI, the Supervision Department has been restructured and its capacity has been built, especially in the area of risk management. These developments have been reflected in improvements in numerous monitoring macroprudential indicators, including the rise in reserves-to-non-performing loans (NPLs) from 10% to 20%, the rise in the credit-to-GDP ratio from 4% to 6%, and capital adequacy ratios from zero to 4% during the same period from June 2006 (baseline) to December 2011. In addition, a recent major development is the decisions made by the Banking Restructuring Oversight Committee (ROC) on April 3 and 8, 2012 regarding the settlement of NPLs, and the overall financial restructuring of Rashid Bank and Rafidain, as well as the endorsement of the Organizational Structure of these two state-owned banks, aiming at improving their governance structure, and their overall performance. Locations No Location data has been entered Results Project Development Objective Indicators Indicator Name Core Unit of Measure Baseline Current End Target New organizational structures for the two state- Yes/No Value No Yes Yes owned banks are adopted Date 14-Apr-2009 29-Mar-2012 30-Jun-2013 Comments Number of staff trained in each bank would Number Value 0.00 222.00 200.00 reach at least 100 staff member. Date 14-Apr-2009 29-Mar-2012 30-Jun-2013 Comments Compliance supervisory and regulatory Yes/No Value No No Yes framework (Basle Code Principles) Date 14-Apr-2009 29-Mar-2012 30-Jun-2013 Comments Progress has been made by Public Disclosure Copy the Central bank of Iraq in moving towards a compliant supervision system. Intermediate Results Indicators Page 2 of 4 The World Bank Report No: ISR5808 Indicator Name Core Unit of Measure Baseline Current End Target Improvement in functioning of the two state- Percentage Value 0.00 6.00 6.20 owned commercial banks, evident in the Date 14-Apr-2009 29-Mar-2012 30-Jun-2013 Public Disclosure Copy increase in loan-to-GDP ratios from 4% in June Comments 2006 to 6% in October 2010. Build-up in provision levels at the two state- Percentage Value 0.00 20.00 30.00 owned commercial banks for new loans, Date 14-Apr-2009 29-Mar-2012 30-Jun-2013 reflected in the reserves-to-NPLs ratios, rising Comments from 10% in June 2006 to 20% in October 2010. Capital adequacy ratio in line with prudential Percentage Value 0.00 4.00 4.00 regulations, reaching up to 4% by October Date 14-Apr-2009 29-Mar-2012 30-Jun-2013 2010. Comments Recruitment of qualified staff capable of Yes/No Value No Yes Yes effectively managing the project. Capacity Date 14-Apr-2009 14-Jun-2011 31-Oct-2010 building granted to the Executive Steering Comments PMU is equiped with 4 Committee, supporting the reform program. Efficient and smooth execution qualified staff members, who are supporting the implementation of the program. Data on Financial Performance (as of 09-Apr-2012) Financial Agreement(s) Key Dates Project Loan No. Status Approval Date Signing Date Effectiveness Date Closing Date P113337 TF-94193 Effective 17-Apr-2009 17-Apr-2009 17-Apr-2009 30-Jun-2013 Disbursements (in Millions) Project Loan No. Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed Public Disclosure Copy P113337 TF-94193 Effective USD 10.00 10.00 0.00 6.25 3.75 63.00 Disbursement Graph Page 3 of 4 The World Bank Report No: ISR5808 Public Disclosure Copy Key Decisions Regarding Implementation Document can be disclosed Restructuring History There has been no restructuring to date. Related Projects There are no related projects. 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