CENTRAL BANK OF IRAQ: ANNEX A

SECTION 1—DEFINITIONS, AUTONOMY, OBJECTIVES AND FUNCTIONS

Article 1 Definitions

The following terms shall have the meanings set forth below:

“Appointing Authority” means the head of the Government.

“bank” means a person holding a license or permit under the Banking Law to engage in banking business and other banking activities;

“banking business” means the business of receiving deposits of money or other repayable funds from the public for the purpose of making credits or investments for its own account;

“Board” means the Board of Directors of the CBI;

“CBF” means the Central Bank of Iraq;

“credit” means any disbursement or commitment to make a disbursement of a sum of money in exchange for the right to repayment of the amount disbursed and outstanding and to payment of interest or other charges on such amount, whether secured or unsecured, any extension of the due date of a debt, any guarantee issued, and any purchase of a debt security or other right to payment of a sum of money that may provide for the payment of interest either directly or by a discounted purchase price;

“currency” means the monetary unit of a country;

“deposit” means a certain sum of money paid to a person, whether or not evidenced by any entry in a record of the person receiving the sum, on terms under which the deposit will be repaid or transferred to another account, with or without interest or a premium, either on demand or at a time or in circumstances agreed to by or on behalf of the depositor and that person;

“Deputy Governor” means a Deputy Governor of the CBI;

“dinar” means the Iraqi dinar;

“fit and proper person” means a person who is regarded as honest and trustworthy and whose professional qualifications, background and experience, financial position, or business interests do not disqualify that person in the judgment of the Appointing Authority or, with respect to Article 64, the Minister of Justice, provided, however, that no person shall be regarded as a fit and proper person if the person:

(i) has been convicted by a criminal court of an offense for which the person was or could have been sentenced to imprisonment for a term of one year or more without

the option of a fine unless such sentence, in the judgment of the Appointing Authority, or, with respect to Article 64, the Minister of Justice, was or would have been motivated by his religious or political views or activities;

(ii) has been declared bankrupt by a court of law within the past seven years;

(iii) has been disqualified or suspended by a competent authority from practicing a profession on grounds of personal misconduct unrelated to his religious or political views or activities; or

(iv) has been declared unfit to manage a company by a court of law or under an order issued by a competent agency;

“foreign exchange” means any bank note or coin, cheque, draft, promissory note, bill of exchange, payment order, credit, balance of account or any other means of effecting payments in any currency other than the Iraqi currency;

“Government” means the entity exercising temporary governmental authority in Iraq on the date this law enters into force and then the transitional Iraqi administration upon the transfer to it of full governmental authority and the recognition of the sovereignty of that administration by the CPA, and then the internationally recognized representative government of Iraq once it assumes the responsibilities of such authority;

“Governor” means the Governor of the CBI;

“legal tender” means banknotes and coins which any creditor is obligated to accept in payment for a debt denominated in Iraqi dinars;

“Legislature” means the principal legislative body of Iraq, or a component or subordinate body thereof empowered for purposes of oversight of the CBI pursuant to this Law.

“Official Publication” means the Official Gazette or such other general publication of wide circulation as specified by the Appointing Authority;

“State” means the Republic of Iraq;

“Tribunal” means the Financial Services Tribunal as described in Articles 63 through 70 of this Law.

Article 2 Legal capacity and autonomy

The CBI, established under the Central Bank of Iraq Law, Law No. 64 of 1976, as amended from time to time, is a legal entity with the full capacity to enter into contracts, to sue and be sued, and to carry out its functions under this and any other law. In carrying out its functions, the CBI may: (i) administer and hold property, (ii) hire staff, define their duties,

and determine their compensation; and (iii) determine and fund its own budget. Nothing in this Law shall be construed to interfere with the continuation of the existence of the CBI as a legal entity under prior law, or with any of the authority, rights, duties or obligations of the CBI under prior law, except as otherwise provided for under this Law.

In the pursuit of its objectives and the performance of its tasks, the CBI shall be autonomous and accountable as provided for in this Law. Except as otherwise specified in this Law, the CBI shall not take instructions from any other person or entity, including government entities. The autonomy of the CBI shall be respected and no person or entity shall seek improperly to influence any member of a decision-making body of the CBI in the discharge of his duties towards the CBI or to interfere in the activities of the CBI.
The CBI’s head office shall be located in the City of Baghdad and, in order to discharge its functions within Iraq and abroad, it may open such branches, agencies and bureaus, and appoint such correspondents as it may require.

Article 3 Objectives

The primary objectives of the CBI shall be to achieve and maintain domestic price stability and to foster and maintain a stable and competitive market-based financial system. Subject to these objectives, the CBI shall also promote sustainable growth, employment, and prosperity in Iraq.

Article 4 Functions

The functions of the CBI in achieving the objectives set forth in Article 3 and as further described in this Law, shall be to:

a. formulate and implement monetary policy, including exchange rate policy, for Iraq in accordance with Section 6;

b. hold and manage all official foreign reserves of Iraq, other than working balances of the government, in accordance with Article 27;

c. hold gold and manage the State reserves of gold;

d. provide services as advisor and fiscal agent to the Government in accordance with Section 4;

e. provide liquidity services to banks in accordance with Articles 28 and 30;

f. issue and manage Iraqi currency in accordance with Section 7;

g. compile and publish data on the banking and financial system and the economy in accordance with Article 41;

h. establish, oversee and promote sound and efficient payment systems in accordance with Article 39;

i. issue licenses or permits to banks and to regulate and supervise banks as further specified in this Law and in the Banking Law;

j. open and maintain accounts on the books of foreign central banks and international financial organizations;

k. open and maintain on its own books accounts for foreign central banks, foreign governments and international organizations; and

l. carry out any ancillary tasks or transactions incidental to the exercise of its functions under this Law.

In addition, the CBI may take whatever action it deems necessary to: (i) counter money laundering and terrorist financing, and (ii) regulate and supervise lending companies, microfinance companies, and any other non-bank financial institutions not otherwise regulated under Iraqi law.
The CBI shall have the power to issue regulations for the purpose of implementing this Law and carrying out its functions under this Law. Regulations issued under this Law, and any subsequent amendments thereto, shall be published in the Official Publication.
If the CBI proposes to issue a regulation pursuant to this Law, it shall publish a draft of the proposed text of the regulation in a form and in a manner determined by it to be best calculated to bring the proposed regulation to the attention of the domestic financial sector and the general public. The draft shall be accompanied by an explanation of the purpose of the proposed regulation and a request for comments within a specified time of not less than one month after the date of publication of the draft. The CBI shall have regard to any comment received and issue the final text of the regulation accompanied by an account in general terms of the comments. The procedure set out in this paragraph shall not apply if the CBI determines that the delay involved would be a serious threat to the interests of the financial system or hinder the effective conduct of monetary policy, provided that such decision by the CBI shall be explained in the preamble to the regulation.
In carrying out its functions in accordance with the provisions of this Law, the CBI shall have the power to issue legally-binding orders addressed to specified individuals or entities and directing such persons or entities to undertake specific actions which are in accordance with this Law.
The CBI shall have the power to issue internal rules or guidelines on the organization and administration of the CBI.

SECTION 2—CAPITAL, RESERVES AND NET PROFITS

Article 5 Capital and reserves

The authorized capital of the CBI shall be 100 billion dinars and shall be fully paid in by the State in exchange for one hundred percent of the CBI’s capital stock.
The authorized capital stock of the CBI shall held solely by the State, shall not pay a dividend, and shall not be transferable or subject to encumbrance.
The authorized capital may be increased by such amounts as the Minister of Finance may approve upon the recommendation and approval of the Board.
The CBI shall hold a general reserve account, an unrealized profits reserve account and such other reserve accounts as may be appropriate under international accounting standards.

Article 6 Computation of profits and losses; allocation of net operating loss

Within three months after the end of each financial year, the CBI shall determine in accordance with the rules set out in Articles 7 and 45 its net profits available for distribution or its net losses.
If the CBI incurs a net operating loss for any financial year, that loss shall first be charged to the general reserve and subsequently to capital.

Article 7 Treatment of unrealized gains

Where unrealized gains for a financial year on assets or liabilities of the CBI that are recorded at fair value or are denominated in foreign currency are included in the net income of the CBI for that year, the net profits of the CBI available for distribution under Article 8 shall be determined as follows:

a. by deducting from the net income the total amount of any unrealized gains included in the net income, and by allocating an equivalent amount to the unrealized profits reserve account; and

b. by deducting from the unrealized profits reserve account and adding to the net profits available for distribution as determined in sub-paragraph (a) the amount of any unrealized gain that was deducted from the net income for one or more previous years and was realized during the financial year.

No other deductions shall be made from the unrealized profits reserve except those permitted under this Article.

Article 8 Distribution of net profits

Within three months after the end of each financial year, the Board shall distribute the net profits available for distribution as follows:

a. 80 percent of any net profits available for distribution shall be transferred to the general reserve account until such time as the general reserve account of the CBI reaches a sum equal to 10 percent of the total assets of the CBI;

b. any remaining net profits available for distribution shall be transferred to any other reserve account that may be established by the CBI pursuant to paragraph (4) of Article 5.

No distribution shall be made out of retained or current income of the CBI, except as permitted by paragraph (1). No distribution of net profits shall include any portion of unrealized gains.
No distribution shall be made under paragraph (1) if, as a result thereof, the assets of the CBI would be less than the sum of its liabilities and unimpaired capital and reserves.

Article 9 Coverage of shortfalls in capital

In the event that the audited annual balance sheet of the CBI prepared in accordance with paragraph (3) of Article 45 shows that the value of its assets falls below the sum of its liabilities and unimpaired authorized capital, the Board shall, with the advice of the external auditor of the CBI, assess the situation and prepare a report on the causes and extent of the shortfall. If the Board determines that a capital contribution is required, the Board shall consult with the Minister of Finance and request a capital contribution be made on behalf of the State. Upon the receipt of this request, the Minister of Finance shall, within a period of no more than two months, make a request to the Legislature for the approval of the capital contribution for the CBI over such period and in such amount as is necessary to remedy the shortfall.

SECTION 3—MANAGEMENT

Article 10 Board of Directors and committees

The Board shall be responsible for conducting the business, and carrying out the responsibilities of the CBI, as further described in this section.
The Board may, as it deems necessary, establish committees composed of members of the Board to consider particular issues and to make recommendations to the Board, and to grant such committees executive authority to take decisions, within guidelines established by the Board.

Article 11 Composition of the Board

The Board shall consist of nine members as follows:

a. the Governor as chairman of the Board;

b. two Deputy Governors;

c. three Senior Managers of the CBI, including Branch Managers on a rotating basis; and

d. three other individuals with suitable monetary, banking or legal expertise and who have not been employed by the CBI in any capacity within one year of the date of their nomination to the Board.

Article 12 Eligibility for appointment and service

The Governor, the Deputy Governors and other members of the Board shall be persons of recognized integrity who hold a university degree or who have extensive professional experience in a field related to banking, economics, finance, commerce, or law.
A person shall be ineligible for appointment to serve on the Board if, in the judgment of the Appointing Authority:

a. the person is not a citizen of Iraq;

b. the person is not a fit and proper person; or

c. the person, or any person who is related to the person by marriage, blood or kinship, including adopted children or foster children of the person, and any other person residing in such person’s household, holds direct or indirect business interests that would make it necessary for that person to refrain, to an unacceptable extent, from taking part in the decision-making of the Board.

The Governor, the Deputy Governors and other members of the Board shall not, during their tenure:

a. hold any employment other than with the CBI, whether remunerated or not, except that they may engage in a limited amount of lecturing and other academic activity so long as such activity is not remunerated and does not interfere with the performance of the individual’s duties and responsibilities at the CBI;

b. hold any position, other than with the CBI, in public service, except as nominee of the CBI;

c. be a member of the Legislature;

d. be an employee or official of the Government; or

e. be a director, officer, employee or shareholder of any bank or other entity subject to the supervision of the CBI.

Article 13 Appointment and terms of service of Board members

The Governor, the Deputy Governors and the other members of the Board shall be nominated by the Appointing Authority and confirmed by the Legislature. The Appointing Authority shall consult with the Governor and his two Deputies with respect to the nomination of Senior Managers as Board Members. All members of the Board shall have a five-year term of office and may be re-appointed upon the recommendation of the Appointing Authority and confirmation by the Legislature, provided that, in order to achieve staggered terms of office, the initial terms of office shall be: (i) for the Governor, five years; (ii) for one Deputy Governor, four years and, for the other Deputy Governor, three years; (iii) for one Senior Manager five years, for another Senior Manager, four years, and for the third Senior Manager, three years; and (iv) for two of the Board Members appointed pursuant to Article 11, paragraph (d), three years, and for the other Board Member appointed pursuant to Article 11, paragraph (d), two years.
Any vacancy on the Board shall be filled by the appointment of a new member of the Board to serve the remaining term of the Board member replaced.
The Governor shall determine in advance the order in which the Deputy Governors shall succeed the Governor during any period of the Governor’s absence or disability.
The Appointing Authority shall establish the terms and conditions of service of the members of the Board. When establishing the remuneration for the members of the Board, the Appointing Authority shall be guided by need to attract and retain highly qualified individuals to serve as members of the Board.
The remuneration and other terms and conditions of service of a Board member shall not be rendered less favorable during the term of office for which the Board member has been appointed.

Article 14 Resignation and removal of Board members

The Governor, a Deputy Governor or any other member of the Board may resign his office after giving at least one month written notice to the Appointing Authority, if such resignation is accepted. If the Appointing Authority does not accept such resignation, the relevant member of the Board may be required by the Appointing Authority to serve not more than three additional months from the date of the member’s original resignation notice.
The Governor, a Deputy Governor or any other member of the Board shall be removed from office by the Appointing Authority only if the person:

a. has been convicted by a criminal court of an offense for which the person was or could have been sentenced to imprisonment without the option of a fine unless, in the judgment of the Appointing Authority, such sentence was motivated by his religious or political views or activities;

b. has been declared bankrupt by a court of law;

c. has been found guilty by a court of law of conduct involving a lack of probity in financial matters or other serious misconduct;

d. has been disqualified or suspended by a competent authority from practicing a profession on grounds of personal misconduct unrelated to his religious or political views or activities;

e. has been declared unfit to manage a company by a court of law or under an order issued by a competent agency;

f. has taken up any office, position or employment in violation of paragraph (3) of Article 12 or paragraph (3) of Article 21;

g. is suffering from such mental or physical infirmity which, in the opinion of the Appointing Authority, renders him unfit to discharge his duties under this Law;

h. has been found by the Appointing Authority to have violated the provisions of paragraphs (1) or (2) of Article 15; or

i. has been absent from meetings of the Board for a consecutive period or more than three months without approval of the Board.

No member of the Board shall be removed from office on any ground specified in paragraph (2) without first being given the opportunity of hearing before the Appointing Authority.
Any decision on removal from office under paragraph (2):

a. shall be made public along with a statement of the reasons for removal, and any written response received from the Board member concerned; and

b. may be appealed to the Court of Cassation within two months of service of the decision.

Any member of the Board having been removed from office shall continue to receive remuneration and other benefits applicable under the terms and conditions to a member of the Board until such time that any hearing or appeal in the matter, whichever is later, has been decided.

Article 15 Disclosure of interests

Each member of the Board shall, upon his appointment and annually thereafter, declare in writing to the Board, in compliance with any instructions that may be issued by the Board, the direct and indirect business interests that he or any person who is related to the Board member by marriage, blood or kinship, to the extent provided by regulation, may hold, and the Board shall submit such declarations for information to the Appointing Authority, the Minister of Finance and to the external auditor.
Before a matter concerning a declared interest as mentioned in paragraph (1) is raised for discussion by the Board, the Board member concerned shall again disclose his interest and shall not thereafter participate in any discussion or decision on that matter.
For a period of one year immediately following his or her departure from the CBI, no former Governor, Deputy Governor or chief internal auditor shall serve or represent another bank or other entity subject to the supervision of the CBI or deal with the CBI in any way in connection with any matter or issue the former Governor, Deputy Governor, or chief internal auditor worked on or was otherwise involved in while employed by the CBI, without the prior written consent of the Board. The Board may establish the remuneration to be paid to such former Governor, Deputy Governor or chief internal auditor together with any other terms and conditions that shall be applicable during this period. In the event the Board does elect to provide such remuneration, this remuneration shall be automatically reduced by an amount equal to any income the former Governor, Deputy Governor or chief internal auditor may receive from any employment while he or she is receiving the remuneration.

Article 16 Powers and functions of the Board

While observing the primary objective and other objectives set out in Article 3, the Board shall, within the limits set out in this Law:

a. develop and define the primary monetary policy objective;

b. formulate policies to attain the primary monetary policy objective, including the exchange rate policy, limits on open market operations to be conducted by the CBI, policies regarding interest rates for other provisions of funds to the banking sector, and the types and levels of reserves that banks will be required to maintain; except that the Board shall not have the power to enter into a fixed exchange rate regime, such as a monetary union or currency board.

c. decide on the issuance of Iraqi banknotes and coins in accordance with Article 32;

d. issue licenses or permits and adopt procedures to regulate the safety and soundness of banks as further specified in the Banking Law;

e. determine the terms for the provision of services as banker, advisor and fiscal agent to the Government in accordance with Section 4;

f. adopt the rules for payment systems in accordance with Article 39;

g. approve all reports and recommendations that the CBI is to make to the Government or the Legislature;

h. decide on the participation of the CBI in international organizations whose membership is open to central banks;

i. decide whether the CBI will open and maintain an account on its books for a foreign central bank, foreign government or international organization, and also whether the CBI will open and maintain an account in its name on the books of a foreign central bank or international financial organization;

j. decide whether debt securities should be issued by the CBI, and if so, the terms and conditions thereof;

k. determine the categories of assets that shall be suitable for the investment of the foreign exchange reserves and other financial resources of the CBI;

l. determine the terms pursuant to which discount operations may be engaged in by the CBI in accordance with Article 28;

m. approve, with the consent of at least three-fifths of the members of the Board present, each loan or guarantee to be extended to a bank under Article 30;

n. adopt by-laws, internal guidelines and rules applicable to the administration and operation of the CBI, and determine the organizational structure of the CBI, including the locations of any CBI branches;

o. approve procedures to be followed in the CBI’s internal decision-making process;

p. approve systems of internal controls within the CBI;

q. determine the annual budget and the personnel plan of the CBI;

r. approve, issue and publish the annual report and the annual financial statements;

s. adopt all regulations and guidelines of general application to be issued by the CBI; and

t. take action upon any other matter, within the competence of the CBI, responsibility for which is not specifically assigned in this Law to any other person or group.

Article 17 Meetings

The Board shall convene upon the initiative of its chairman or upon the initiative of at least one-third of its members but in any event at least once a month.

Article 18 Quorum

A quorum shall exist for the Board’s meetings when at least a majority of its members, including the Governor or, in his absence, a Deputy Governor acting as chairman, are present.

Article 19 Decisions of the Board

Board decisions shall be adopted by majority vote of the members present. If the vote is evenly divided, the chairman’s vote shall be the deciding vote.
Board decisions shall take effect in whatever way and at whatever time as may be directed by the Board as recorded in the minutes of the meeting or, absent such direction, immediately. Any abstentions or dissenting opinions shall be recorded in those minutes.

Article 20 Governor as chief executive

The Governor shall, as chief executive of the CBI, be responsible for the implementation of the decisions of the Board. The Governor shall conduct the day-to-day operations of the CBI and may exercise any powers delegated to the Governor by the Board.
The Deputy Governors shall assist the Governor in conducting the day-to-day operations of the CBI.
The Board may establish provisions regulating the extent to which the Governor may delegate any of his powers to other members of the Board or to senior staff of the CBI, including whether delegation may be made to a single person, or to two persons jointly.
The Governor shall appoint and terminate the appointment of the employees, agents and correspondents of the CBI, within the general terms and conditions of the personnel plan and other guidelines, if any, adopted by the Board.

Article 21 Conflicts of interests

During their service or employment by the CBI, the Governor, Deputy Governors, other members of the Board, and employees of the CBI shall not receive credit from any bank or other entity subject to the supervision of the CBI, except with the prior approval of the Board. The person to receive such credit shall not participate in any decision by the Board concerning such credit. The Board shall authorize routine borrowings made on market terms from such institutions to enable the borrowers to finance the purchase of a residence for the borrower’s own use, to pay for educational or medical expenses, and for other family purposes. The Board may establish internal guidelines specifying relevant criteria for such credits.
The Board may establish a facility to provide credits on market terms to the Governor, Deputy Governors, other members of the Board, and employees of the CBI for the purchase of a residence for the borrower’s personal use, to pay for educational or medical expenses, and for other family related purposes. The Board shall establish and publish internal guidelines specifying relevant criteria for such credits.
While holding office, the Governor, the Deputy Governors, and other members of the Board shall devote the whole of their professional services to the CBI, and none of them shall occupy any other office or employment, whether remunerated or not, except (i) as nominee of the CBI or (ii) a limited amount of lecturing and other academic activity so long as such activity is not remunerated and does not interfere with the performance of the individual’s duties and responsibilities at the CBI.
No employee of the CBI shall simultaneously have any other employment, whether gainful or not, provided, however, that the Board may establish internal guidelines exempting certain categories of staff positions or certain categories of other employment, such as teaching, from this requirement if the Board is satisfied that no conflict of interest will arise.
No Governor, Deputy Governor, other member of the Board, or employee of the CBI shall accept any gift or credit for himself, or on behalf of any person with whom he has family, business or financial connections, if the acceptance thereof would result, or give the appearance of resulting, in diminishing his impartial devotion to his duties to the CBI.

Article 22 Confidentiality and exchange of information

No person who serves as Governor, Deputy Governor, other member of the Board, or employee, agent or correspondent of the CBI, shall:

a. permit access to, disclose or publicize nonpublic information which was obtained in the performance of official duties except when required to do so pursuant to paragraph (2) of this Article, as necessary for the fulfillment of any duty or responsibility imposed by this Law, the Banking Law, or any other relevant legislation; or

b. use such information, or allow such information to be used, for personal gain.

The CBI may exchange information on supervisory matters, preferably based on a memorandum of understanding, with central banks and with financial supervisory authorities. The exchange of such information may include confidential information, provided that the CBI has satisfied itself that reasonable steps have been taken to ensure the confidentiality of any such information submitted.
The CBI may enter into memoranda of understanding with central banks or with financial supervisory authorities setting out the scope, procedures and further details for the exchange of information.

Article 23 Immunity from legal action

No member of the Board, employee or agent of the CBI shall be personally liable in damages for any act or omission taken in the discharge or purported discharge of official functions within the scope of his employment or engagement under this Law.
The CBI shall indemnify a member of the Board, employee or agent of the CBI against any legal costs incurred in the defense against legal action brought against such person in connection with the discharge or purported discharge of official functions within the scope of his employment or engagement under this Law, provided that no such indemnification shall apply if such person has been convicted of a crime arising out of the activities that are covered by such legal action.

SECTION 4—RELATIONS WITH THE GOVERNMENT

Article 24 Consultation with the Government

The Governor and other representatives of the CBI and officials of the Government shall hold regular meetings to exchange information and opinions on the extent to which monetary and fiscal policies can, each within their own areas of responsibility, be coordinated, and on other matters of mutual interest and responsibility.
The Governor and the Deputy Governors may, upon invitation by an official of the Government, attend meetings with the Government at which they may provide, on behalf of the CBI, advice and information within the CBI’s area of competence.

Article 25 Actions on behalf of Government

The Government may entrust the CBI with the following:

a. hold the Government’s accounts;

b. engage in and manage, as fiscal agent, domestic and foreign borrowings by the Government;

c. participate with other representatives of the Government or, with the Government’s permission, represent the Government in negotiations with foreign countries as well as with international institutions on monetary and financial issues;

d. perform financial operations, at market rates, in relation to deposits, foreign exchange operations or other operations based on payment, clearing or economic agreements arising out of international financial arrangements concluded by the Government with foreign parties, provided that (i) the Government shall bear all financial obligations and liabilities incurred by the CBI with respect to such performance and (ii) the CBI shall not perform any financial operation which involves bearing financial obligations or liabilities (direct or indirect) on behalf of the Government ; and

e. perform, to the extent the Government determines, tasks derived from the State’s membership in international, financial and monetary institutions.

The CBI shall be remunerated by the Government on a cost recovery basis for carrying out the functions under this Article.

Article 26 Prohibition on lending to the Government

The CBI shall not grant any direct or indirect credits to the Government or any other public agency or State-owned entity, except that the CBI may provide liquidity assistance under Article 30 to government-owned commercial banks that are subject to the supervision of the CBI, provided that such assistance is granted on the same terms and conditions as would be extended for the benefit of privately-owned commercial banks.
The CBI may purchase government securities provided that such purchases are only made in the secondary market and are only made in connection with market operations.
Nothing in this Article 26 shall be construed to prohibit the use of government securities in connection with any aspect of open market operations or as collateral for standing facilities.

SECTION 5—OFFICIAL FOREIGN RESERVES

Article 27 Management of official foreign reserves

The CBI shall conduct transactions in foreign assets and manage all official foreign reserves of the State consistent with international best practices and subject to the objectives of monetary policy. The Board may invest such reserves in any or all of the following assets:

a. monetary gold held in the vaults of the CBI;

b. banknotes and coins in foreign currencies normally used in the making of international payments held by or for the account of the CBI;

c. credit balances that are payable on demand or within a short term in foreign currencies normally used in the making of international payments and that are maintained in accounts of the CBI, or otherwise invested through repurchase agreements, with foreign central banks, international financial organizations or major international banks designated by the Board;

d. special drawing rights held in the account of Iraq in the International Monetary Fund;

e. the reserve position of Iraq in the International Monetary Fund; and

f. any readily-marketable debt securities issued by, or bearing the full faith and credit of, foreign governments, central banks, or international financial institutions, that are paid in foreign currencies normally used in the making of international payments and that are held by or for the account of the CBI.

SECTION 6—MONETARY FUNCTIONS

Article 28 Open market operations and standing facilities

The CBI may, for the achievement of its objectives, (i) perform open market operations with commercial banks that are licensed or hold permits issued by the CBI under the Banking Law or, at the discretion of the CBI and subject to regulations set forth by the CBI, other appropriately licensed financial intermediaries; and (ii) provide standing facilities to commercial banks that are licensed or hold permits issued by the CBI under the Banking Law and subject to regulations set forth by the CBI by:

a. purchasing or selling outright (spot and forward), or under repurchase agreements or other similar financial instruments, debt securities issued by the CBI or by the Government, bearing market yields provided that purchases of debt securities issued by the Government through open market operations shall only be made in the secondary market.

b. purchasing or selling outright (spot and forward) foreign exchange;

c. discounting bills of exchange or promissory notes;

d. making loans fully secured by pledges of collateral; and

e. accepting interest-bearing deposits from banks.

Article 29 Reserve requirements

In order to implement the monetary policy of Iraq, the CBI shall, by regulation, require that banks maintain reserves in the form of cash holdings or deposits with the CBI. Such reserves shall be kept at prescribed minimum levels, calculated as the average of end-of-day reserve levels over such time periods as determined by the CBI and which relate to the size, type or maturity of the banks’ deposits, borrowed funds and such other liabilities as the CBI may designate. Banks shall not be permitted to operate overdrafts on reserve accounts at any time. These required reserve levels shall be the same for all banks for each category of liabilities and may be remunerated.
The CBI may impose on and collect from any bank that fails to maintain required reserves at the minimum levels prescribed in accordance with paragraph (1) a penal interest rate on the shortfall in such bank’s required reserves, until the shortfall is corrected.

Article 30 Lender of last resort

In exceptional circumstances, the CBI may, on such terms and conditions as it determines, act as lender of last resort for a bank that is licensed or holds a permit issued by the CBI under the Banking Law. Such support may be provided by granting financial assistance to the bank, or for the bank’s benefit, for periods not exceeding three months that may be renewed by the CBI on the basis of a program specifying the measures that the bank concerned will be taking, provided, however, that no such commitment shall be made by the CBI unless:

a. the bank, in the opinion of the CBI, is solvent and provides adequate collateral, and the request for financial assistance is based on the need to improve liquidity; or

b. such assistance is necessary to preserve the stability of the financial system and the Minister of Finance has issued to the CBI a guarantee in writing on behalf of the Government securing the repayment of the loan.

SECTION 7—CURRENCY

Article 31 Unit of currency

The national monetary unit in Iraq shall be the dinar.

Article 32 Issuance of currency

The CBI shall have the exclusive right to issue banknotes and coins intended for circulation in Iraq. Banknotes issued under this Article shall be a first charge on the assets of the CBI. The CBI shall make appropriate arrangements for the issue of its banknotes and coins as required for circulation in Iraq. Banknotes and coins issued by the CBI and intended

for circulation in Iraq are not promissory notes, bills of exchange, or any other type of commercial document under the applicable commercial law, and the CBI is obligated to honor them only as provided for in this Law.

Only banknotes and coins issued by the CBI that have not been demonetized shall be legal tender in Iraq.
The CBI may, by regulation, limit the amounts of banknotes and coins that must be accepted as a legal tender in payment for an obligation and restrict the denominations of such banknotes and coins in which payment may be made to specified amounts or a range of amounts.
The CBI shall be responsible for the supply of Iraq’s banknotes and coins and shall endeavor to maintain the availability of an adequate number of banknotes and coins in all regions at all times.

Article 33 Printing of banknotes and minting of coins; accounting treatment of currency issued

The CBI shall determine by regulation the denominations, measures, form, material, content, weights, designs, and other features of banknotes and coins. The plates necessary to print or mint the currency and the intellectual property rights to the designs of the currency shall be the property of the CBI.
The CBI shall arrange for the printing of banknotes and the minting of coins, and for the security and safekeeping of banknotes and coins that have not yet been issued.
The CBI shall be exclusively responsible for the safe and secure destruction of banknotes and coins and for the custody and destruction, as may be necessary, of plates, dies, and retired banknotes and coins. The CBI shall have the exclusive right to melt coins and to sell the metals derived thereby.
Upon request by any individual or entity, the CBI shall exchange, free of charge or commission, banknotes and coins with other banknotes or coins in equivalent amounts.
The aggregate amount of circulating banknotes and coins issued by the CBI shall be noted in the financial statements of the CBI as a liability; such liability shall not include banknotes and coins in the currency reserve inventory.

Article 34 Withdrawal of unfit banknotes and coins

Banknotes and coins in circulation that are unfit for circulation shall cease to be legal tender. Subject to paragraph (2) of this Article, the CBI shall withdraw, destroy, and replace, with banknotes or coins of an equivalent amount, any banknotes or coins presented to it that are unfit for circulation.
The CBI may decline to replace an unfit banknote or coin if its designs are illegible, misshaped or perforated, or if more than fifty percent of its surface has been lost; such a banknote or coin shall be withdrawn and destroyed without indemnity to the owner, unless there is evidence satisfactory to the CBI that the missing portions have been totally destroyed, in which case the CBI may, in its sole and absolute discretion, grant compensation in whole or in part.
The CBI shall not be required to provide any compensation for banknotes or coins that were lost, stolen or destroyed; it may confiscate without compensation any banknotes that have been altered in their external appearance, including in particular banknotes that have been written on, painted on, overprinted, stamped or perforated, or to which adhesive matter has been applied.

Article 35 Disposition of Counterfeit Currency

Every person who comes into possession of counterfeit banknotes or coins shall forward to the CBI all such counterfeit banknotes or coins.

Article 36 Redemption of currency

The CBI may decide to redeem banknotes or coins by issuing, free of charge, other banknotes or coins in equivalent amounts. A decision to redeem banknotes or coins shall be issued in the form of a regulation of the CBI specifying the period during which the exchange shall take place and the locations and times at which withdrawn banknotes or coins shall be presented for redemption.
At the end of the exchange period, or at any other time specified by the CBI, redeemed banknotes and coins shall be demonetized and cease to be legal tender.
The CBI shall notify the public, by publication in the Official Publication, of the banknotes and coins that are legal tender.

Article 37 Freedom of currency

Parties to a contract or any other voluntary undertaking or transaction, including a bill, note or instrument or security for money, may denominate a payment obligation in any currency agreed upon. Payment in discharge of any debt or liability arising from a contract or any other voluntary undertaking or transaction, including on a bill, note, instrument or security for money, may be made in any currency agreed upon as the currency of payment. An agreement under this Article may be express or implied from surrounding circumstances including course of dealing, usage of trade, or course of performance.

Article 38 Enforcement of foreign currency obligations

A foreign currency obligation may be enforced according to its terms. When a person obtains an order to enforce an obligation in a foreign currency, the order shall require payment of an amount in the currency of Iraq sufficient to purchase the amount of the obligation in the foreign currency at a bank in Iraq at the close of business on the first day on which the bank quotes a dinar rate for purchase of the foreign currency before the day payment of the obligation is due to be received by the creditor, provided, however, that if the court determines that such method would, under the circumstances, be inequitable, it shall select a method of conversion that is equitable.

SECTION 8—OTHER FUNCTIONS

Article 39 Payment systems

The CBI shall establish and maintain or promote the establishment and maintenance of sound and efficient systems for the clearing and settlement of payment transactions in accordance with international standards and best practices.
The CBI shall be exclusively responsible for the regulation, registration, licensing, and supervision of payment systems operated by parties other than the CBI.
In connection with its supervision of payment systems and payment system operators, the CBI may by regulation:

a. require the registration or licensing of any payment system or payment system operator; and

b. require any payment system or payment system operator to observe such safe and sound conditions and requirements as may be established by the CBI, including those designed to facilitate supervision of such operators by the CBI and to preserve the safety of the assets entrusted by the public to their care.

The CBI shall be authorized to take such action as it deems necessary to carry out the tasks described in paragraph (1), including promoting, organizing, participating in and operating payment systems and establishing the applicable charges.
The CBI may make arrangements to facilitate:

a. the integration of its payment system and related arrangements with other payment systems;

b. the development of new methods and technologies for payments in domestic or foreign currencies; and