November 9, 2017 / 11:50 AM / a month ago

UPDATE 1-Iraqi central bank orders private banks to close Kurdistan branches

(Adds quote, details, background)

BAGHDAD, Nov 9 (Reuters) - Iraq’s central bank has ordered private banks to close their branches in the Kurdistan region within a week to avoid a ban on dollar sales, Iraqi banking sources said on Thursday.

The central bank’s deadline expires on Nov. 14 and all banks must report back with confirmation they have closed their branches to avoid penalties, the sources said.

The new measures are part of financial restrictions imposed by Baghdad in retaliation for a Kurdish referendum held on Sept. 25, in which the region voted overwhelmingly for independence.

In Oct. 16, a lightening advance by Iraqi government forces captured the Kurdish-held city of Kirkuk and many disputed territories in response to the Kurdish referendum.

Iraqi banking sources said the new measures are intended to control the flow of hard currency into the Kurdish region.

“Central bank seeks to re-organise relations with Kurdistan regional banking industry,” said a government financial advisor who is close to central bank policy.

Central bank sources said a decision in October to stop selling dollars to four leading Kurdish banks was still effective.

The Baghdad government has also imposed a ban on direct international flights to and from the Kurdish region.

The Shi‘ite, Arab-led Iraqi central government has rejected an offer by the Kurdish government to discuss independence.

Backed by Iran and Turkey, Baghdad has demanded that the Kurdish authorities cancel the referendum result or face continued sanctions and international isolation. (Reporting by Ahmed Rasheed,; editing by Larry King)

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