On Thursday 3 September 2026 the Central Bank of Iraq announced that Al-Taif Islamic Bank for Investment and Finance had been placed in receivership following the discovery of serious violations affecting its financial position and depositors’ funds. The CBI cited Article 59 of Banking Law No. 94 of 2004 as amended, and appointed Imad Muhammad Hamad as custodian for 18 months under CBI Board of Directors Resolution No. 130 of 2026. The Iraq Stock Exchange suspended trading in the bank’s shares the same day.
For a foreign company operating in Iraq, the useful question is not about this bank. It is about what the Banking Law does automatically, to every customer, creditor and contractual counterparty, the moment any such appointment is made against any licensed bank. Those consequences sit in the statute, they are not discretionary, and most of them are unfamiliar to companies whose experience of bank failure comes from other jurisdictions.
Control changes immediately, and instructions given afterwards may be void
Under Article 61, the CBI’s decision takes effect immediately unless it says otherwise. The powers of shareholders at the general meeting are suspended. The powers of the bank’s administrators are suspended and transferred to the appointee. Then comes the provision that catches counterparties: acts taken by or on behalf of the bank after the decision takes effect are null and void unless taken by, or with the authority of, the CBI or the appointee. There is a carve-out for money and securities transfer orders covered by Article 83, but it is narrow. An instruction accepted at a branch in the ordinary way is not automatically an instruction that will stand.
The 60 business days before the decision are not settled either
Article 62 provides that legal acts of the bank taken within 60 business days before the date of the appointment decision shall, on the appointee’s application, be declared null and void by the CBI where the bank and its counterparty knew or should have known at the time that the act would damage the interests of the bank’s creditors. This is a look-back, and it turns on what the counterparty should have known. Diligence on a bank is therefore not only a question about its condition today. It is a question about what a court or regulator would later say you were on notice of.
Your contract may be terminated, and your damages are capped by statute
The same article allows the appointee to unilaterally terminate current contracts, or portions of contracts, within a reasonable time not exceeding 60 business days from appointment. A counterparty may claim for breach, but the statute limits compensation to actual direct compensatory damages up to the date of termination, with interest to the date of payment. It expressly excludes punitive damages, damages for pain and suffering, lost profits and lost opportunities. That is a materially different outcome from the one a well-drafted commercial contract would otherwise produce.
Nor does the usual drafting response solve it. Subject to Article 88, the appointee may enforce a contract of the bank notwithstanding any provision allowing termination, default or acceleration by reason of insolvency or of the appointment itself. In other words, the counterparty may be held to the contract it wanted out of, and released from the contract it wanted to keep, and the choice is not its own.
There is a clock
Article 63 allows the appointment decision to be submitted to the Financial Services Tribunal for review, and the persons who may do so are not limited to the bank. A creditor, a depositor or a shareholder may apply, within 20 business days from the date of service of the decision. This is a review of the appointment itself, not a claims or proof of debt process, and it is short. Article 60 is worth reading alongside it: the appointment runs for a term not exceeding 18 months, which the CBI may extend once for a further period not exceeding 18 months. The 18 months reported in the press is the maximum first term, not the outer limit of the situation.
Why this matters more from October
Under the advance customs payment mechanism approved by the Council of Ministers on 18 August 2026 and announced to take effect on 1 October 2026, importers deposit foreign transfer funds with authorised banks, and those transfers are not released until estimated customs duties and tax deposits are settled through the ASYCUDA platform. The measure was described by the Ministry of Finance on 3 September as still under active review, so it is announced rather than in force. If it does commence as announced, more of an importer’s working capital will sit with an Iraqi bank, for longer, before goods move. The identity of that bank stops being a back-office choice and becomes a commercial term worth diligencing and worth documenting.
Three practical questions
- Which Iraqi banks currently hold your deposits, letters of credit, escrow, payroll float and customs deposits, and what is your concentration with any single institution?
- What do your contracts say about substituting a bank, and can you move a facility quickly without breaching an obligation to a customer, lender or ministry counterparty?
- If an appointment were made tomorrow against a bank you use, who in your organisation would know within 24 hours, and would anyone notice the 20 business day window in Article 63?
Iraq Gate Legal Consulting advises foreign companies and investors on counterparty and banking due diligence in Iraq, payment and security structures, and commercial contract terms that survive a counterparty’s distress. To discuss your position, visit iraqgatelegalconsulting.com/contact/.
Sources
- Iraq Business News, “Al-Taif Islamic Bank put into Receivership,” 3 September 2026, sourced to the Central Bank of Iraq: iraq-businessnews.com
- Banking Law No. 94 of 2004 (English text), Section 11 Conservatorship, Articles 59 to 63: cbi.iq
- Iraq Business News, “Customs Automation Push: ASYCUDA Expansion and Pre-Payment Plans,” 3 September 2026: iraq-businessnews.com
- Rabee Securities, Iraq Stock Exchange market report, week ending 3 September 2026: iraq-businessnews.com
Disclaimer
This article is provided for general informational purposes only and does not constitute legal advice. Reading it or contacting Iraq Gate Legal Consulting does not create an attorney-client relationship. No outcome is guaranteed. The position is stated as at 5 September 2026 and may change. The grounds for the Central Bank’s decision are described only as reported in the Central Bank’s own announcement, and nothing further is asserted or implied about the bank, its management, its depositors or its counterparties. No other financial institution is named or characterised. The statutory provisions summarised above are described in general terms; the position of any particular contract, deposit or claim depends on its own facts and terms, and on the text of the decision as served. The advance customs payment mechanism referenced was approved by the Council of Ministers on 18 August 2026 and announced to take effect 1 October 2026; it is not yet in force.