The World Bank Report No: ISR10419 Implementation Status & Results Iraq Iraq: Banking Sector Reform (P113337) Public Disclosure Copy Operation Name: Iraq: Banking Sector Reform (P113337) Project Stage: Implementation Seq.No: 8 Status: ARCHIVED Archive Date: 24-Jun-2013 Country: Iraq Approval FY: 2009 Product Line: Recipient Executed Activities Region: MIDDLE EAST AND NORTH AFRICA Lending Instrument: Emergency Recovery Loan Implementing Agency(ies): Key Dates Board Approval Date 14-Apr-2009 Original Closing Date 31-Oct-2010 Planned Mid Term Review Date 12-Nov-2012 Last Archived ISR Date 21-Dec-2012 Effectiveness Date 17-Apr-2009 Revised Closing Date 30-Jun-2013 Actual Mid Term Review Date 09-Dec-2011 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 Satisfactory Moderately Satisfactory Overall Implementation Progress (IP) Satisfactory Moderately 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. The project (US$ 10 million), is provided through the Iraq Trust Fund (ITF) to finance the costs and activities associated with the restructuring of the banking sector in Iraq. Page 1 of 4 The World Bank Report No: ISR10419 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. The Bank has been providing technical support and advisory services to the Iraqi authorities to implement the First Phase of the Banking Reform Strategy, which was done in Public Disclosure Copy 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. Following the change in CBI management, the current Acting Governor has put banking sector reform as his top priority. In that context, he meets on a regular basis with all stakeholders to address challenges hindering reform implementation (internal CBI staff, BSA, state-owned banks, private banks, and the Banking Association). Concrete results are expected to be achieved over the coming months, in that regard. The project closing date is approaching in June 30, 2013. The Bank team discussed progress achieved to date toward the Project Development Objectives and their completion prior to the project closing date with the Iraq authorities, as well as on-going reforms in the banking sector after the conclusion of the project period. The World Bank team also presented to the Iraqi authorities and the different counterparts; namely the Prime Minister's Office, Prime Minister’s Advisory Commission (PMAC), the CBI, Ministry of Finance, Ministry of Planning and International Cooperation, Office of the Deputy of the Speaker, Parliament—Finance Committee, Rafidain Bank, and Rasheed Bank; the Financial Sector Reform Strategy—Action Plan, which highlights key recommendations on moving forward to ensure the soundness of the financial sector in Iraq, and enhance the role of the banking sector in economic development. 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 01-May-2013 30-Jun-2013 Comments Number of staff trained in each bank would Number Value 0.00 682.00 200.00 reach at least 100 staff member. Date 14-Apr-2009 01-May-2013 30-Jun-2013 Comments Public Disclosure Copy State-own commercial bank’s improved their Percentage Value 0.00 20.00 20.00 capital adequacy ratio (reserves-to-NPLs Date 14-Apr-2009 01-May-2013 30-Jun-2013 ratios) Comments Intermediate Results Indicators Page 2 of 4 The World Bank Report No: ISR10419 Indicator Name Core Unit of Measure Baseline Current End Target Improvement in functioning of the two state- Percentage Value 0.00 16.75 6.20 owned commercial banks, evident in the Date 14-Apr-2009 01-May-2013 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 01-May-2013 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 01-May-2013 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 09-Dec-2012 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 13-May-2013) Financial Agreement(s) Key Dates Project Ln/Cr/Tf Status Approval Date Signing Date Effectiveness Date Original Closing Date Revised Closing Date P113337 TF-94193 Effective 17-Apr-2009 17-Apr-2009 17-Apr-2009 31-Oct-2010 30-Jun-2013 Disbursements (in Millions) Project Ln/Cr/Tf Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed Public Disclosure Copy P113337 TF-94193 Effective USD 10.00 10.00 0.00 9.03 0.97 90.00 Disbursement Graph Page 3 of 4 The World Bank Report No: ISR10419 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. Public Disclosure Copy Page 4 of 4