According to the RFA, bidders must guarantee a minimum capital of NID 50,000 million (approximately $33 million) for the new businesses, although the CBI says commitments beyond the minimum requirement 'will be viewed favourably'.

There are three avenues into the country for foreign banks. They can acquire more than 50 per cent of an existing local bank, establish a new Iraqi subsidiary, or open a branch in the country.

The CBI is using a two-stage tender process for the licences. In the first stage, bids will be assessed according to selection criteria in six areas. The foreign banks must offer a range of products and be able to begin operations within six months of being granted the licence. Bids offering 'multiple branches with geographic diversity' will be viewed favourably, as will those with 'aggressive' lending policies. The CBI wants banks to accept deposits in US dollars and New Iraqi Dinars. Training and investment in modern banking techniques is demanded. Banks selected for the second stage will undergo detailed due diligence.

Foreign banks are likely to have plenty of opportunities to acquire local operations in the near future. Several local banks are understood to be preparing to raise their capital base. The share issues are likely to be open to foreign investors.

On 17 November, Bank of Baghdad (BoB), Iraq's largest private bank, hopes to double its NID 2,640 million (approximately $2 million) capital base with a rights issue. If the issue is not fully subscribed by existing shareholders the remaining shares will be offered to external investors. The bank then intends to raise its capital base to NID 10,000 million (approximately $7 million), with a second share issue in early 2004.

BoB on 28 October was one of four local banks to receive CBI authorisation to process international payments, remittances and letters of credit. A senior executive at BoB says agreements are already in place with a number of banks including Citigroup, National Bank of Kuwait and Housing Bank for Trade & Investment.

The three other local banks to receive authorisation are Credit Bank of Iraq, Dar Es Salaam Investment Bankand Iraqi Middle East Investment Bank. The CBI says that Iraq's 13 other private banks are preparing to provide these services.

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