Legal challenges facing the establishment of the transitional bank and ways to address them

Some banks face difficulties in fulfilling their financial obligations to depositors, as a result of their mismanagement. This matter constitutes a lack of confidence among depositors and investors in the banking system, which prompts the Central Bank to take a series of necessary measures to rehabilitate the troubled bank, including establishing a transitional bank to address the financial distress of the bank placed under guardianship. However, the ambiguity in the texts regulating the transitional bank in the Iraqi Banking Law No. (94) of 2004 is an existing problem facing the Central Bank of Iraq when resorting to establishing a transitional bank to rehabilitate the financially troubled bank, which requires removing obstacles before the Central Bank to register and grant legal personality to the transitional bank by reviewing the texts regulating the transitional bank.The mechanism for using the process of establishing a transitional bank as a procedure for rehabilitating a troubled bank faces legal challenges, as a result of the shortcomings and ambiguity of the legislative texts that dealt with the organization of the transitional bank in the Iraqi Banking Law No. (94) of 2004, as amended, which cast a shadow over the difficulties of implementing the decision of the Central Bank of Iraq to establish a transitional Hammurabi Bank in 2018, as an experiment to rehabilitate Al-Salam Investment Bank after its inability to fulfill its obligations towards depositors.