Chapter 3

Trade Bank of Iraq

Unable to restore Iraq’s existing banks, the Coalition Provisional Authority forged ahead to create a new bank that allowed Iraq to import goods needed for reconstruction. On July 17th 2003, the Coalition Provisional Authority issued Order 20 to establish the Trade Bank of Iraq. Initially founded as temporary institution to handle trade finance, the bank witnessed tremendous growth and became a fixture of the Iraqi economy. By 2009, the bank held more assets than all of the other private banks in Iraq combined. By 2011, the TBI surpassed Rashid Bank to become Iraq’s second-largest bank by assets. Today, the Trade Bank of Iraq provides many essential services to the people and government of Iraq. The bank facilitates the import of billions of dollars’ worth of wheat, medicine, and construction materials every year. With over twenty-four branches across the country, the bank also services remittances, VISA credit and debit cards, automated teller machines, and payroll systems to Iraqi civilians. As the beating heart of Iraq’s financial system, the Trade Bank of Iraq has been integral to the country’s economic reconstruction.

In this section, I argue that the CPA banking regulations and JPMorgan’s technological and legal assistance contributed greatly to the Trade Bank of Iraq’s meteoric rise. Furthermore, I suggest that because of its success, the bank became a target for political intervention. A relic of the CPA urgent need for import finance at the outset of reconstruction, the Trade Bank’s lack of internal controls and poor corporate governance structure allowed for the takeover and subsequent exploitation of the bank.

The first portion of this chapter posits that the Trade Bank’s monopoly in the Iraqi banking system led to its takeover by the Prime Minister’s Office (“PMO”) and subsequent corruption. I begin by identifying how the TBI’s relationship with JPMorgan and favored status within CPA legislation caused the bank to become a monopoly. Then, drawing on interviews I conducted with Musab al-Kateeb and former TBI president Hussein al-Uzri, I contend that it was actually its dominance led to its takeover by the Iraqi administration. Connecting the increase of non-performing loans at the bank with interviews of former TBI employees, the section concludes with an investigation into corruption at the TBI after Prime Minister Nouri Maliki’s intervention.

The second portion of this chapter contends that the CPA’s hurried design of the Trade Bank of Iraq’s corporate governance structure led to the TBI’s inevitable annexation by the government. The provisions of Order 20 expressly avoided Iraq’s existing financial institutions to ensure that the bank would not be leveraged as a political instrument. However, the transfer of CPA’s authority to the Iraqi government placed the Trade Bank squarely under the thumb of the next administration. Poor segregation of executive duties and ineffective internal controls made the TBI a low hanging fruit for Maliki.