Syria’s central bank has begun a review of its systems and compliance framework, entrusted to one of the world’s major consulting firms.
The move, according to bankers and economic experts, is critical to rebuilding international trust and kick-starting economic recovery.
US consulting firm Oliver Wyman confirmed it began a gap assessment of the central bank in February, a development first reported by The National in an interview this week with central bank governor Abdulkader Husrieh.
A gap assessment is a diagnostic review that maps the reforms an institution needs to meet international regulatory and compliance standards.
“We will be working on addressing any compliance, governance and transparency benchmarks identified in their report,” Mr Husrieh told The National.
Informed sources said the review would take several months.
Oliver Wyman has conducted extensive financial sector reviews and regulatory assessments across the Middle East, including in the Gulf, Lebanon and Iraq.
Despite the lifting of far-reaching Western sanctions, foreign banks have been slow to re-establish ties with Syrian counterparts due to risk perceptions and overcompliance. Long isolated from most international transactions, foreign lenders fear Syria’s struggling banking sector may not be able to meet international standards. In practice, this means many Syrian banks still struggle to transfer and receive money abroad.
As the regulator of the financial system, a review of the central bank’s framework, including compliance, governance, anti-money laundering and counter-terrorism financing controls, is seen as pivotal to reviving ties with international correspondent banks and institutions such as the US Federal Reserve and the European Central Bank.
“This would help ease the concerns of correspondent banks,” Thaer Laham, deputy chairman of Fransabank Syria, told The National, describing the step as a milestone in rebuilding trust.
“It is always helpful to receive an assessment from a neutral third party that can attest the Syrian banking sector is ready to re-engage with the international banking community,” he added.
Syrian private banks have been informed of the initiative and told they will be involved at a later stage.
‘US pressure’
An informed source told The National that the gap assessment, reportedly costing $1.7 million, has been funded by Qatar and was undertaken amid growing US pressure last year.
“No financial entity in the world would risk going to Syria only to find there is no compliance,” the source clarified.
Washington has been co-ordinating closely with Damascus since the fall of the Bashar Al Assad regime, after decades of isolation. This included several high-profile diplomatic visits and meetings between President Donald Trump and his counterpart Ahmad Al Shara.
But the dilapidated state of Syria’s banking sector remains a major obstacle to economic recovery and to managing the billions of dollars in foreign investment expected to flow into the war-torn country to fund reconstruction.
“Without that, no funding for the reconstruction will materialise. The bottom line is that everyone, including the US, wants to keep Syria economically stable, which is why the initiative was proposed,” the source added.
Under Assad, Syria was closely aligned with heavily sanctioned Iran and its proxies, with the economy mostly relying on a multi-billion-dollar captagon trade that served as a vital financial lifeline amid draconian Western restrictions.
“Under Assad, Syria’s financial sector gathered a lot of dirt,” the source said. “US banks will want to be 100% sure the market is clean and that any re-engagement does not expose them.”
Benjamin Feve, a senior research analyst at Karam Shaar advisory, based in Istanbul, said the gap assessment would be “useful” for Syria’s financial sector, providing “a structured risk report with documented evidence of the current situation and a clear road map to strengthen controls”.
“It can help improve external perceptions of the central bank’s compliance efforts and make it easier for US and European banks to justify a cautious re-engagement with the Syrian banking sector,” he added.
But challenges remain, including security risks for the US company to perform on-site visits.
In January, clashes between the Syrian army and the Kurdish armed group that controlled Syria’s north-east led to the cancellation of a business trip in Damascus, which included German bankers. The visit was seen as vital to help reconnect Syria with international banks.
An integration deal was signed in January between the Kurdish-led administration and the central government, but other security concerns, including the looming threat of an ISIS resurgence, have resurfaced.