Wed Mar 28, 2012 10:00am EDT
* Owners claim bank victimised by authorities
* Central bank insists it's protecting financial sector
* Controversy could shake faith in privately held banks
* Dispute politicised by sectarian charges
* Warka's fate may become clearer in a few weeks
By Suleiman Al-Khalidi
AMMAN, March 28 (Reuters) - Iraqi banker Saad al-Bunia says the country's largest privately owned bank, which was placed in insolvency proceedings by authorities this month, is a victim of its own success: its growth threatened the near-monopoly of state banks.
"They don't want a strong bank to operate and compete with state banks," said British-educated Bunia, a member of one of Iraq's old and wealthy merchant families, who accuses authorities of waging a campaign to undermine the bank.
The rise and fall of Warka Bank for Investment and Finance - and the struggle to ensure it rises again - underline the opportunities and obstacles in Iraq's chaotic business environment as the country recovers from years of war and economic sanctions.
The saga also shows how political divisions plague business in Iraq. The controversy over Warka has polarised government officials and members of parliament, highlighting a rift between the Shi'ite-led government and a Sunni Muslim community which lost political dominance because of the U.S. invasion in 2003 but retains considerable economic power.
The central bank took custody of Warka, in which the Bunia family owns a 56 percent stake, early this month; an external auditor will study how to restructure it and whether it needs to sell assets to raise capital. Warka's board of directors filed suit last week to try to reverse the central bank's decision.
Central bank deputy governor Mudher Kasim said the custodianship decision was prompted by growing liquidity problems at Warka, its difficulties in meeting depositor withdrawals, and its failure to reach an agreement in talks with Standard Chartered Plc on the foreign bank acquiring a majority stake.
"The bank expanded by giving loans - it appeared collateral for these loans was weak. What concerns us foremost is the stability of the financial sector and depositors' rights, and thirdly shareholders' rights," Kasim told Reuters by telephone from Baghdad.
"This is not a bad bank and was one of the best private banks in terms of assets, technology and the number of its branches, which constituted more than a quarter of private bank branches" in the country, Kasim said.
He strongly denied any suggestion that authorities were victimising Warka. "The bank's investment ability weakened and if capital drops even by 5 percent, the central bank can put any bank under custodianship. We gave the bank several chances to restructure but this did not work."
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