Implementation of Technical and Banking Solutions in Iraqi Banks through Partnership with Leading Solution Providers

1. Implementation of Technical and Banking Solutions in Iraqi Banks through Partnership with Leading Solution Providers DuhaAbdul Kareem Head of Payments Department Iraq Finance 2014, Dubai

2. Central Bank of IraqTechnology Vision The Central Bank of Iraq has been working since 2004 to develop and integrate its technology infrastructure through: • Legal and regulatory frameworks • Communication network • Modern systems • Global standards • Capacity building The CBI approach and vision is becoming a role model for other Iraqi government institutions on how to cooperate to integrate e-governance components

3. Central Bank of IraqObjectives The CBI has five key primary objectives: • Stabilise the exchange rate • Implement the monetary policy efficiently • Manage foreign reserves • Issue and manage the currency • Control the banking sector to promote a competitive and stable financial system.

4. Central Bank of IraqObjectives In its quest to achieve its primary goals, the CBI has taken on several projects, including: • Establishing an efficient and effective Payments System. • Achieving the requirements for automation of currency counting, sorting and classification. • Usage of the international payment techniques SWIFT. • Implement modern infrastructure, including: • acquiring modern banking systems and networks • encouraging and compelling banks to implement banking technology and core banking systems. • Modernization of the banking operations according to international standards in the practices of electronic banking through the acquisition of the National Switch and Mobile Payments. Bank Bank Iraqi Payment Systems Customer Customer Individuals Businesses Government Individuals Businesses Government

5. Iraq Payment System

6. Wholesale and inter-bank payment systemsCreation Electronic wholesale and inter-bank payment systems implemented components in Iraq: • RTGS – Real Time Gross Settlement for high value and urgent payments in real-time - implemented in 2006 • CACH – Cheque Enabled Automated Clearing House for lower value, bulk payments and cheques – implemented in 2008 • Electronic Check Clearing system – implemented by private banks in 2011 and by State-owned banks in 2013 • CSD – Central Securities Depository registration of the securities issued by CBI and MoF implemented in 2008 • RPSI – Retail Payment System Infrastructure – currently in progress Inter-bank clearing and settlement RTGS PKI CSD CACH Payment systems are integrated using PKI (Public Key Infrastructure) encryption

7. Central Bank of IraqBenefits of the Payment Systems The Iraqi payment systems provide major benefits to the banks, businesses and people of Iraq • Holistic information about cash management • Maintain the confidentiality of the information and reduce the risks of the paperwork • High value transactions and low value transactions processed quickly, securely and transparently • Connects all banks directly to CBI • Reduces dependency on banknotes and instruments • Improves the climate for investment in Iraq.

8. Wholesale and inter-bank payment systemsEfficiency and impact • The wholesale and inter-bank payment systems are critical enablers which underpin the whole banking and economic system in Iraq • Low payment volumes are indicate low banking and economic activity–Iraq remains a ‘cash economy’ • Volume will increase by: • Mandating migration from cheques to electronic payments • implementing retail payment systems and making them universally available

9. Integrated Iraq Payment System

10. Retail Payment Systems InfrastructureCreation Pilots of the RPSI will start in Summer 2014: • INRS – Iraqi National Retail Switch will support EMV smart card transactions via ATMs, POS and the Internet • IIMPS – Iraqi Interoperable Mobile Payment System will support mobile payments without depending on conventional banks accounts • The RPSI will be interoperable with mandatory national standards • All transactions cleared and settled in Iraq • Participation will be universal after the pilots Acquiring banks Card transactions RTGS Net INRS Settlement PKI Authorization and clearing CSD CACH Issuing banks Mobile Networks IIMPs

11. Retail Payment Systems InfrastructureCore banking systems • The development of banking services, and the implementation of the RPSI, are dependent on the implementation of core banking systems by Iraqi banks • Almost all private sector banks now have core banking systems

12. Retail Payment Systems InfrastructureVendor support and partnership with participants • The CBI is consider as first Iraqi governmental institutions which is adopting the suppliers services continuously to maintain what have been achieved • Almost all Iraqi private banks now have core banking systems, although state-owned banks are still in the process of implementing it • The CBI and Iraqi banks are using the support of major technology partners or software of 3rd party or equipments to implement effective and universal payment and banking systems • CBI is committed to respect the intellectual property rights by owning and renew different software licenses. Main Suppliers Infrastructure

13. Retail Payment Systems InfrastructureVendor support and partnership with participants • Central Bank urges and encourages all financial and banking institutions to own technology and in accordance with international standards and the continuing work on the maintenance and perpetuation of its work and developing it so as to ensure the development of banking work to reach the universal banking • The CBI is depending on the services of experienced and reputable vendors headed by BPC Russian Company to supply the Retail Payment Project • The USAID has supported the implementation of the Retail Payment Project the beginning Main Suppliers Infrastructure

14. Retail Payment Systems InfrastructureThe Iraqi Inter-Bank Network • The CBI built the IIBN in partnership with the World Bank, the Ministry of Communications and the Media and Communications commission • The IIBN uses Wi-MAX which is one of the modern generations of communications and high bandwidth technology to transmit high volume data in between digital devices and computers and to control the banks data since 2008 • The number of the main branches of the banks connected to the IIBN were 25 banks in 2008 and it has increased to 48 banks until now( the network also connect the Ministry of Finance, the General Commission of Taxes and The General Commission of Customs) • Preparations are underway to contract to develop the plans and designs for the future of banking network, which will use fiber-optic technologies instead of wireless technologies

15. Future Development For Central Bank Of Iraq

16. Central Bank of IraqFuture development of the payment systems Development of the payment systems is continuing with: • Preparation of legislation and regulations for electronic payment systems. • Modernize and sustain the Iraqi payments system and the banking system of the Central Bank of Iraq. • The use of a securities trading system (related to the CSD). • The establishment and management of a National Retail Switch (INRS) for card based payments. • Payments by mobile phone supported by the Iraqi Interoperable Mobile payment System (IIMPS) • Development of automated clearing system to facilitate processing transactions between ministries and institutions. • Participation in the Arab regional payment system

17. CBI information technology infrastructureFuture plans • Future CBI projects will continue the development of the banking sector in Iraq: • Development of a Credit Information Bureau and system. • Introduction of the financial electronic reporting using the XBRL standards • Adopting the International Bank Account Number IBAN • Unify checks security features • The systems are resilient and use backup technologies main sites and disaster recovery alternative sites in compliance with international standards .

18. CBI information technology infrastructureFuture plans • Keep pace with technological developments in the field of Anti laundering and prevent the financing of terrorism in accordance with the standards and multiple lists universally adopted, and work on integrate it with operating systems which are planned to be owned. • Systems are reliable and comply with the international principles and standards • The systems are characterized by being capable of endurance and continuity in the work and the use of technology backups and alternative sites. • New cultures are being established in banks based on new technologies and associated data.

19. Summary • The successful implementation of wholesale and inter-bank systems, and the installation of core banking systems, has laid the foundation for the introduction and growth of modern banking services in Iraq • The RPSI will bring electronic payments to consumers and businesses, leading the migration from cash and driving economic growth • Effective partnership with leading technology vendors and strong project management will be used to ensure success in Iraq’s challenging operating environment • Continue to cooperate with everyone through studyingthe experiences of other countries and international organizations and this will contribute in reducing differences and take advantage of the accumulated experiences in order to avoid obstacles. • Share the acquired experiences and the ongoing training and the active and continues follow-up with the banks to help them , step by step and provide the advice .

20. Open Discussion