How does the future of government banks look like in Syria? | economy

Syrian government banks are preparing to restructure according to an official endeavor to advance their performance and develop their efficiency, in line with the technological developments witnessed by the banking sector in the world.

“The central bank is in the process of restructuring state -owned banks and expanding Islamic banking services by granting banks that provide traditional services the option of opening Islamic bank branches, due to the presence of a segment of Syrians that avoid the use of traditional banking services,” Reuters news agency quoted the governor of the Syrian Central Bank, Maysa Sabreen.

According to the source, work is underway to prepare a draft amendments to the Central Bank law to enhance its independence, including granting it more freedom to make decisions on monetary policy.

For its part, Türkiye has shown its full readiness to help support the financial system that will be established by Syria, and to build a system for open and digital banking services by benefiting from its experience in this regard.

“The adoption of Syria as a financial system similar to the Turkish regime in open and digital banking services will enable it to cut within 3 or 5 years what it will cut in 20 years by traditional means,” said the director of the financial office in the Turkish presidency.

He explained that the banking services system to be established will be at low costs and lower human resources, according to Anatolia.

In a similar approach, the Arab Banking Union expressed the possibility of helping to restructure the Syrian banking sector through a development project that includes the sector’s infrastructure, and training and qualifying banking cadres with the participation of the German Central Bank.

The Union believes that the new Syrian government is facing a heavy economic legacy, most notably the banking crisis, which cast a shadow over all Syrian banks since it imposed international sanctions on the previous regime in 2011, which led to the inflation of troubled debt and the decline in the value of the lira.

The Secretary -General of the Federation, Wissam Fattouh, pointed to the need for effective debt processing strategies by establishing companies specialized in managing non -assets, a model used by other countries such as the United States, after the banking crisis in the eighties, as Malaysia used it in 1989, and Ireland after the 2009 financial crisis.

Fattouh added in press statements that one of the possible solutions is to allocate part of the unparalleled debts to the non -asset management companies, which will help Syrian banks reduce the effects of the financial crisis.

He pointed out that the Syrian banking sector needs to enhance capital to enable it to bear the increasing risks, while going to gradually privatize public banks to improve efficiency and increase confidence.

From banks to government services departments

Syria is classified as one of the first countries to witness banking and financial relations since the early 20th century, as it began its banking dealing with the establishment of the Ottoman imperial bank in 1856, which obtained an exclusive concession for the monetary issuance that extended until 1925, then partly until 1935 the French Mandate period.

The Syrian businessman and consultant, Fares Mansour, explained in a study entitled “The Banking Sector in Syria History and Dimensions” that the Ottoman bank later turned into the Syrian Bank, then to the Syrian Bank and the Great Bank, and controlled the cash and banking liquidity in the country for 100 years (1856-1956).

He pointed out that the peak of banking work was in 1957, the year in which the number of European banks operating in the country rose to 7 banks, in addition to 9 Arab banks and 5 Syrian banks.

But the success achieved by the sector quickly declined in the time of the Syrian unity

Egyptian 1958-1961 after witnessing major changes in the quality of banks and the cash field ended with their nationalization and assembly under the authority of the state.

With the Baath Party arrived in power in 1963, he restored all banks operating in the country with legislative decree, and turned them into groups, as it summarized the commercial from the Syrian Commercial Bank, and organized the work of other banks according to its industrial and agricultural jurisdiction, savings and credit.

According to Fares Mansour, the government then justified its procedures that it must be completely controlled by the economy sectors, and its direct spending on its plans and programs to develop it, and thus its lack of need for the private sector and banking competition.

As a result – Mansour continues – the private sector’s share of bank loans fell to 16% in 1962, and the central bank lost its role in monitoring and organization, and turned like other banks and companies into a government services department.

The decline in government banks

Throughout the period of the Assad family’s rule, 1970-2024, the public banking sector suffered from a structural defect despite the introduction of some updates on its system, but it remained in the entirety of its role as his role as a government service provider, at a time when private banks that started work since 2004 were able to exercise a more independent and flexible role than its governmental counterpart, and to become in a later stage a major shareholder in the gross domestic product after they have grown Its assets in general.

The public banking sector in Syria consists of 6 state -owned banks, the oldest of which is the Agricultural Cooperative Bank, which was established in 1888, along with 3 modern commercial, industrial, real estate, and banking banks.

Added to 11 private banks and 4 Islamic banks was established in the period between 2004-2023 after the ousted illegal system gave private banks, and allowed licenses to foreign banks in December 2002 under a law allowing the establishment of private and joint banks.

Weak diversity of banking products

A study conducted by the European Investment Bank in 2006 described the Syrian banking sector and its ability to meet the financial services that the private sector needs in terms of the size and diversity of banking products, the suitability of services provided to these needs, the extent of their quality and the possibility of relying on them with relatively weak.

The report – which was accomplished with governmental and private participation – ended with conclusions, the most important of which are:

• The presence of deep -rooted systematic weaknesses at the organizational and institutional levels.
• The weakness of public administration and the severity of government intervention.
• Failure to match the efficiency of bank workers with international banking standards.
• Weak information and information system.
• The limited link between lending and cash liquidity.
• Weak risk management.
• Lack of international accounting standards.

The report also made recommendations to the Syrian government – then – stressed the necessity of restructuring the banking public sector through possible integration operations between the existing banks, in addition to:

• Establishing a asset management company to which non -operating loans in banks are converted to processing and restoring them.
• Establishing a Syrian bank for development and support for small and medium companies.
• Reconsidering the interest policies adopted by the Monetary and Credit Council.
• Allow the issuance of negotiable deposit certificates.
• Adopting effective risk management systems.
• Create a national deposit insurance system.

Restructuring necessities

For his part, the Syrian academic Dr. Ibrahim Qoshji believes that the global economic and technical development and the task of reconstruction left by the defunct system requires the development and reform of the existing banking system, and work to create an integrated banking network so that the banking system takes its desired role in reviving the Syrian economy.

In his interview with Al -Jazeera Net, Gosheji pointed out the importance of government banks to be integrated into two giant banks, and to turn them into a private or entirely joint sector.

This means reassessing fixed assets and selling the surplus of them to enhance the financial position, thus creating an opening budget and offering it to public subscription.

He suggested that the first bank be real estate investment in Islamic formulas and supports the rebuilding of cities that were destroyed during the war, and the second bank is a commercial investment in Islamic formulas as well and supports local and foreign trade and government business in reconstruction and the development of the economy.

Qoshji considered that the proposed formula for integration will enter the Syrian banking market, a private banking institution entirely owned by the Syrians, as well as Arab and international banks.

As for the development of the performance of the central bank – according to the academic Qoshji – it is suggested that the government commission be undertaken by banks, by setting performance standards, solvency and liquidity standards for banks – the year of them – according to a new cash law.

It is assumed that the government commission will regain its function after it has been distributed during the past years between 4 sides, which are the ministries of economy and finance, the central agency for financial supervision and the Central Authority for Control and Inspection.

Weak government banks’ interaction with technology

The developments of information technology, the Internet and the accelerated communication networks are receiving great attention. During the past two decades, it has led to a qualitative boom in terms of services provided by the global banking sector.

A report by the United Nations Conference on Trade and Development (UNCTAD) published earlier that the spread of mobile phones and the use of applications pushing banks to improve and develop all their services significantly.

In this regard, the expert on information technology, Rashid Al -Bani, stressed that the investment of digital technology was not only intended to attract new customers as much as electronic services achieved a competition for the banking scene by creating updated services and ensuring their quality.

In his interview with Al -Jazeera Net, Al -Bani added that these services have become a burden on government banks, because they were unable in the pre -war stage to keep pace with the rapid development in technology and interact with their innovations, because they found themselves restricted and do not have the necessary experiences and competencies.

Regardless of the institutional and organizational imbalance that banks suffer – according to Al -Buna – they also lack electronic dealings that determine the customer’s need and meet his desires without referring to the bank that provides him with services.

He pointed out that banking technology opened the door wide for customer service, and was also able to change the regular or traditional concepts of banking work.

In his speech to Al -Jazeera Net, Al -Bani criticized the weak interaction of public sector banks until now with technological systems, and their inability – for example – to provide the service of the phone bank, as well as its lack of electronic financial transfer, or depositing funds via ATMs, which are modern services used on a large scale in neighboring countries.