Developing a comprehensive legal framework on deposit guarantee in Iraq with special reference to Jordanian and Malaysian laws

Abstract

An effective legal framework for deposit guarantee is essential in the event of a bank's failure. This study delves into the legal framework of deposit guarantee in Iraq, which comprises several laws governing specific aspects of the system. Iraq has a special regulation that focuses on the most crucial provisions of deposit guarantee. However, there are significant issues that need attention. For instance, certain uncovered deposits, inadequate coverage amounts, unspecified foreign exchange rates, non-mandatory Islamic bank participation, and management issues pose challenges in Iraq's deposit guarantee system. Addressing these issues is crucial to strengthening the system, ensuring comprehensive coverage, clear regulations, and depositor confidence for financial stability. This study explores the principles of bank deposit guarantee, analysing Iraq's legal framework, evaluating the impact of Jordan and Malaysia's frameworks on Iraq, and proposing solutions based on their experiences. To achieve these objectives, it utilises mixed doctrinal and qualitative methods to analyse banking laws in Iraq, Jordan, and Malaysia. It employs semi-structured interviews with stakeholders in the Iraqi legal system and banking experts to address challenges in Iraqi banking deposits. In Jordan and Malaysia, deposit guarantee frameworks involve multiple laws governing specific aspects alongside dedicated laws for deposit guarantee. Iraq can learn from their experiences; special laws are more effective than regulations. They provide broader deposit coverage, encouraging deposits due to comprehensive protection. Effective management involves two entities overseeing the Deposit Guarantee Corporation, with clear roles. Additionally, a clear Sharīʿah ruling governs the relationship between Islamic banks and deposit guarantee corporations in Jordan and Malaysia. By integrating these insights, Iraq can enhance its deposit guarantee system, expand coverage, bolster coverage amounts, improve deposit guarantee entity management, and clarify ties with Islamic banks. These improvements will foster trust and stability in Iraq's banking sector. Drawing from Jordan and Malaysia's experiences, it is clear that enacting a dedicated comprehensive law for deposit guarantee would benefit the country. This law would build a firm legal basis, rectifying issues and learning from both nations. Inspired by the successful special law in Jordan and Malaysia's comprehensive legal framework, Iraq can set distinct provisions, coverage caps, and regulations, ensuring ample guarantees for depositors. By adopting these practices, Iraq can boost depositor trust, stabilize the financial sector, and establish a stronger, dependable deposit guarantee system.