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An Overview of the Banking System in Syria After a Decade of Unrest

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An Overview of the Banking System in Syria After a Decade of Unrest International Journal of Law, Government and Communication (IJLGC) Volume 5 Issue 19 (June 2020) PP. 68-84 DOI 10.35631/IJLGC.519005 International Journal of Law, Government and Communication (IJLGC) Journal Website: http://ijlgc.com/ eISSN: 0128-1763 AN OVERVIEW OF THE BANKING SYSTEM IN SYRIA AFTER A DECADE OF UNREST Omar Farouk Al Mashhour1*, Muhammad Imam Asalie2, Ahmad Shamsul Abd Aziz3, & Nor Azlina Mohd Noor4 1 School of Law, Universiti Utara Malaysia, Malaysia Email: [email protected] 2 Islamic Business School, Universiti Utara Malaysia, Malaysia Email: [email protected] 3 School of Law, Universiti Utara Malaysia, Malaysia Email: [email protected] 4 School of Law, Universiti Utara Malaysia, Malaysia Email: [email protected] * Corresponding Author Article Info: Abstract: Article history: After a decade of crippling international sanctions and devastating conflict, Received date: 02.03.2020 the Syrian economy has been largely in shambles. Nevertheless, the Syrian Revised date: 21.04.2020 banking industry has largely weathered the storm. This article attempts to Accepted date: 20.05.2020 illustrate a comprehensive view of the banking sector in Syria and how well Published date: 10.06.2020 has one of the oldest banking systems in the middle east fared over the years and how has it survived the seemingly insurmountable challenges. To cite this document: Additionally, The article targets to show the role of the central bank of Syria Al Mashhour, O. F., Asalie, M. I., in supervising the banking industry as well as a view on the recent Abd Aziz, A. S., & Mohd, N. A. development of the legal and financial orientation. The researchers have (2020). An Overview of The Banking faced issues related to the absence of information due to its limits on what the System in Syria After A Decade of central bank is publishing. Also, it is found that lack of English annual reports Unrest. International Journal of Law, and missing reports for some years, will lower the chances of attracting Government and Communication, 5 investors. The article suggested a set of recommendations that may elevate (19), 68-84. the condition of the Syrian banking system by issuing a new law enforcement division to track down any unlawful activities. DOI: 10.35631/IJLGC.519005. Keywords: Central Bank of Syria, Syrian Banks, Governance, Legislations, Syrian Pound, Financial Reports, Decree Introduction Providing a robust financial infrastructure that can assist the private and governmental projects has always been the ultimate goal for any economy. The prerequisite for a growing Copyright © GLOBAL ACADEMIC EXCELLENCE (M) SDN BHD - All rights reserved 68 International Journal of Law, Government and Communication (IJLGC) Volume 5 Issue 19 (June 2020) PP. 68-84 DOI 10.35631/IJLGC.519005 economy is a healthy banking sector that offers a variety of services with the banks’ financial performance by higher profitability (Hamza & Khan, 2014). The theory of economic growth according to (Schumpeter, 1949), considers the bank to be one of the most important financial institutions that contribute in improving the productivity of the economy in addition to being an essential source of fund. Therefore, banks play a crucial role in the development of each countries’ economy. The importance of the banking sector derives from its role in attracting depositors and providing loans for investors to support and increase the investment and the production of the country as well as participate in achieving growth in all the sectors of the economy (Rudevska & Khlan, 2019). Hence, the banking sector plays a pivotal role in any economy, and failure of the banking system is likely to have dire consequences on the entire economy. Problem Statement In Syria, the banking sector was for many years owned and run by the public sector through a number of banks of different types and tasks until the private banks were established and licensed under decree No. (28) of 2001. The Syrian banking sector has gone through several stages of vicissitudes during the ongoing war that has considerably affected Syria’s economy and left it in unenviable condition (Al-Jafari & Alchami, 2014). In the corporate world, annual reports are the most significant component for understanding the solvency, strengths, and strategies of each bank or company. Having access to comprehensive annual reports enables investors to make accurate, well-informed and swift decisions. Scarcity or unavailability of financial information creates a foggy environment that are likely to scare away most of potential investors. This situation will eventually reflect on the financial visibility of the investors and deprive the banks of potential growth (Antalóczy, Sass & Szanyi, 2011). Before and after the outbreak of the war, there was a huge lack of information, data, and researches about the banking sector in Syria. The bulk of information available about the Syrian banking sector was confined to some official publications released by the Central Bank of Syria (CBS) and official newspapers. There is a marked paucity for academic articles targeting the Syrian banking industry. The existing research results are limited and outdated, which makes them irrelevant and of little use for explorers or research workers. This absence of information regarding the Syrian banking sector represents a problem for researchers in their evaluation process of the sector. In addition, the absence of enough annual reports in English has discouraged many investors to invest their money in the Syrian banks due to the lack of sufficiently adequate information about the banking sector and its development in light of the current situation. This article attempts to provide an overview of the Syrian banking system and its components. It also outlines the banking sector under the current situation. Reaching that goal requires an explanation of the entire banking sector and its different types and functions. The research also aims to see whether the current banking practices are in keeping with the global ones. Research Significance The importance of this research emanates from the scarcity of information provided in regards to the banking sector in Syria and related structure as well as the current status. The research explains the current banking structure and the applied laws and regulations. It also explains the rationale behind the establishment of each of them. It also provides an overview of the latest situation of the Syrian economy and its reflection on the value of the currency. Copyright © GLOBAL ACADEMIC EXCELLENCE (M) SDN BHD - All rights reserved 69 International Journal of Law, Government and Communication (IJLGC) Volume 5 Issue 19 (June 2020) PP. 68-84 DOI 10.35631/IJLGC.519005 The research also provides a number of recommendations that can be considered essential in order to improve banking practices and achieve more productivity and transparency in this highly important sector. Furthermore, we will shed light on the performance of the Syrian banking industry in order to work up the appetite of future researchers to produce more valuable information about the Syrian economy in general. The information presented in this article could hopefully act as an eyeopener for the authorities to take corrective actions and to strengthen the role of the Central Bank of Syria. Central Bank of Syria (CBS) The central bank of Syria was established on March 28th 1953, under the legislative decree No. (87) of 1953, which clearly identifies its duties and responsibilities. In addition, the above-mentioned legislation focused on publishing a new currency called the Syrian Pound or Lira. Decree 87 was later repealed and replaced by Law No.(23) of 2002 and its amendment (Legislative decree No. (21) of 2011) was introduced and is still applied until the present time. As an essential part of CBS, the Credit and Monetary Council (CMC) enjoys top-notch experts working within the council. The objectives of CMC are concerned with crafting strategic monetary policies that are capable of achieving financial goals at the national level. In addition, the committee is responsible for setting interest rates to be followed by the operating banks in Syria (CGAP, 2008). Moreover, within the CMC, Shariah Advisory Board was established to advise the central bank regarding any Shariah issues related to Islamic financial businesses or activities made by the bank (CBS, 2020). On the first of April of 2009, CBS has issued comprehensive governance guidelines for the licensed banks to promote the application of high standards of corporate governance. The guidelines imposed duties on the operating banks to publish their annual reports in Arabic and English and to present sound financial reports that aim to use proper financial analysis without delay. In addition, they laid down the roles and procedures for internal and external audit committees (CBS, 2009). According to Law No. (23) of 2002 and the Legislative Decree No. (21) of 2011, the tasks and duties of the Central Bank of Syria are as follows: Roles and Functions 1- Issuing the Syrian national currency: The central bank of Syria is holding the exclusive legal right to issue and manage the Syrian currency accordingly. 2- Ensuring a robust and resilient financial sector: CBS is the official authority responsible for creating and fostering a sound and progressive financial sector. 3- Developing and strengthening the Syrian financial infrastructure: One of the major roles of CBS is to expand the access to finance and financial services to all segments of society. Consequently, CBS established different types of public banks such as the Commercial Bank of Syria, Real Estate Bank, Agro Bank, and others. Monetary and Economic Policy 1- Enhance the formulation of monetary and credit policies, including issuance of national bonds and contribution to the international financial negotiations as well as managing the country’s international reserves Copyright © GLOBAL ACADEMIC EXCELLENCE (M) SDN BHD - All rights reserved 70 International Journal of Law, Government and Communication (IJLGC) Volume 5 Issue 19 (June 2020) PP.
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