The banking sector shifting gear in Syria

Addressing weakness and administering new procedures to develop and strengthen the banking sector in Syria were the goals of the BSSP II programme funded by the EU. The great success achieved encouraged the Central Bank of Syria to seek further support.

Samar Ezmechli - Damascus, Al-Hayat

For four decades, the Syrian banking sector has consisted of a number of state-owned banks, plus the Central Bank. Syria had to face a new challenge in the year 2000, with the opening of private banks and the introduction of measures to modernize the banking sector. Other burdens were also wreaking havoc on Syria, with the reduction of its oil production, the American sanctions, as well as the overall political situation in the region. Yet, after nine years of private banking, this major transformation proved to be successful, and private banks became major players in the Syrian market.

The 14 new private banks, among which 3 are Islamic, and 6 state-owned, were able to achieve great growth. Deposits in these banks exceeded 1.1 trillion Syrian pounds (around 21.6 billion US dollars) until last April. Bank deposits were only 973 billion in the same month last year.

The first stages of the operational modernization of the Syrian banking sector were assisted by a series of legislative measures. A national plan for modernization was established to implement the new information technology invading the world as well as managerial reforms. Contributing to Syria’s economic growth is the objective of the Banking Sector Support Programme II, funded by the European Union. This programme, with a total budget of 6 million Euros, lasted for three years and a half and was extended for another six months.

The programme finalized its actions in November 2009, but strived, during a period exceeding 4 years, to contribute to Syria’s economic development through assisting in the first stages of institutional, legislative and operational modernization of the banking system in the country. Banking services and products were improved, with special emphasis on the improvement of the skills of staff and management at different levels.

Programme’s achievements
The programme worked on implementing a financial monitoring and “prevision” system and developed the Research and Statistics Directorate of the Central Bank of Syria. This directorate was able to compete with equivalent administrations of world Central banks. Developing strategies and tools boosted the role of the Central Bank, being the main catalyst of fiduciary policy in the country. Thanks to the programme, the CBS was able of increasing the performance of the department supervising the work of commercial banks and their compliance to the regulations issued by the CBS, according to the international “Basil II “guidelines. A supervision department is responsible of financially monitoring the work of money exchange bureaus to help the money laundering control authority supervise money exchange operations, namely trading operations concerning foreign currencies entering the country. The programme supported the CBS in establishing a well defined settlement system, in an effort to develop in the future a Syrian financial market. The main goal is to support the CBS in its role as main catalyst and tailor of a financial market policy in the country.

Great success
Pinpointing the great success achieved by the programme, Project Director, Tayseer Arbini hopes in the closure event of the programme that “BSSP II be the perfect example of successful projects implemented in collaboration with the European Union”. He also noted that the support of the EU consisted of developing training sessions conducted by local and foreign experts. Training sessions and workshops aimed at developing the Banking Training Center and providing the technical assistance in line with international experiences in the field.

These sessions aimed as well at increasing the capacity of directorates’ staff by organizing field trips to Arab and foreign central banks. Arbini goes on to say that the action plan set in the framework of the cooperation between the CBS and the European Commission was entirely executed. Core banking solutions started to being implemented to solve problems in the directorates that needed support, namely the Supervisory department, the Research and Statistic Directorate and the Reserve Management department. Intensive training on the international Basil II standards targeted the staff of banking sector to coach the international accounting techniques and guidelines to be implemented in the respective departments. Improved techniques of Islamic financing and investment targeted Islamic banks and microfinance institutions. The Agricultural Cooperative Bank in Damascus also had its share of the support in gaining knowledge about risk management, principles and practices of banking and branch management.

Following the success of the programme, the CBS asked for further support from the European Commission to elaborate and execute more policies aiming at developing and modernizing the CBS and the financial sector. The new requirements focused on finding solutions to core financial and accounting issues, a better administration of resources, a developed reserve management as well as a modern payment system. New projects were on the agenda: implementation of the Real Time Gross Settlement System (RTGS) for fund transfer, electronic clearing system, national transfer system and risk management in line with Basil II standards and the International Financial Reporting Standards (IFRS).

Head of accounting division, Fadia Bayrakdar, considered that last year was a turning point in the CBS, due to the technical assistance and intensive training sessions that targeted bank officials and heads of departments and that aim at catering the future development of the sector. She notes:”This programme helped us acquire improved accounting and financial management techniques as much as it helped us define present and future challenges that face this sector. This happened after an accurate assessment of what is in use in all central banks, showing strong and weak points in the CBS, and recommending actions for the future.” Motih Abou Morra, an employee in the reserve management department, considered that the technical and vocational support provided by the EU aimed at “developing the Central Bank in Syria in accordance with international, non-traditional investment vehicles.”

The Bank Training Center
Established in 2005, the BTC is considered one of the main achievements of the programme. It is the first training center specialized in improving the vocational and technical capacities of the staff working in the banking sector in Syria. With a financial support of 2 million Euros representing 90% of the cost, the center was able to get equipped to conduct academic and vocational programmes, outlines head of the center, Roda Razouk. She explains that the center was inaugurated in 2007 and operates on providing the latest expertise in the principles and practices of banking. Accurate instructions were given about the latest developments in international financial markets.” She explains that the center has so far trained more than 3500 bank staff; many of those received degrees accredited by the Institute of Leadership and Management (ILM). She considers that the creation of the center was of crucial importance with the opening up and modernization of the banking and insurance sector in Syria.

Major regional and international cooperation ties were developed with the support of the programme; a partnership agreement was signed with the Center for Islamic Studies attached to the Central Bank of Malaysia. Negotiations are undertaken with Arab and foreign training centers such as “Charter Insurance” in Great Britain and the Bahrain Institute of Banking and Finance to sign partnership agreements and be able to grant internationally accredited degrees. Razouk affirms that the BTC is among the most competitive centers on the regional level in matter of banking training.

Refer to the project fact sheet: Banking Sector Support Program II (BSSP II) (Syria)

N.B: Text translated from Arabic by Eurojar team