Syrian Bank Reform Scenarios After Oliver Wyman

Economic and banking expert Dr. Ibrahim Nafea Qushji told Enab Baladi that Syria’s banking system has been subjected over the past two decades to deep pressures that have led to:

This reality has prompted consideration of a comprehensive restructuring of state-owned banks and the recapitalization of private banks, with the aim of restoring trust and enhancing efficiency.

State-owned banks face a set of imbalances that have accumulated over many years, including:

All of this, according to Qushji, has made the banking system unable to perform its role in financing investment or supporting monetary stability.

Options and Weak Trust Between Banks and the Central Bank

Weak coordination between state-owned banks and the Central Bank has reduced the effectiveness of monetary policy. Banks have become hesitant to lend because of the absence of clear guarantees over exchange rate stability, while the Central Bank finds it difficult to impose its monetary tools on institutions suffering from liquidity shortages and capital erosion.

This distance between the two sides has created a state of paralysis in productive lending and stripped monetary policy of its ability to influence economic activity.

The option of converting state-owned banks into state-owned joint stock companies is an attempt to separate ownership from management, so that the state remains the owner of the bank while the institution is managed according to modern governance rules.

According to Qushji, this model allows for the formation of independent boards of directors, the adoption of flexible salary structures, and the application of international accounting standards without resorting to full privatization. The fundamental difference between this model and privatization is that the state retains full ownership, while privatization aims to transfer ownership to the private sector.

The options range between restructuring, privatization, and strategic partnerships with external investors.

In the current Syrian context, the option of restructuring and conversion into joint stock companies appears to be the most realistic, given the lack of a political and economic environment that would allow full privatization or broad foreign investment, according to Qushji. Strategic partnerships also need a stable legal environment and the lifting of some restrictions and sanctions, which is not available at present.

Economic and Social Risks of Privatization

Privatization under current conditions carries major risks, according to Qushji, including:

For that reason, privatization at this stage may do more harm than good.

Qushji explained that the entry of foreign banks could raise the level of banking technology and improve the quality of services, but it could also lead to profits being transferred abroad, lending becoming concentrated in the most profitable sectors, and financial dependency if these banks become dominant.

He believes that in Syria’s case, foreign banks can be useful only after the legal and regulatory framework is reformed and the state’s ability to control capital movement is ensured.

Restructuring, meanwhile, will lead to the reclassification of jobs, higher salaries for qualified staff, and broad training programs, with the possibility of limited layoffs for unnecessary positions, according to Qushji. He stressed that converting banks into state-owned joint stock companies limits social shocks compared with privatization, which could lead to radical changes in employment.

Syria’s Private Banks Are the Size of One Jordanian Bank

The need for reform is not limited to the public banking sector, but also extends to operating private banks. Total equity for all Syrian private banks reached 8.7 trillion old Syrian pounds by the end of the fourth quarter of 2025, equivalent to only about $795 million.

According to a study prepared by Karam Shaar Advisory, this figure is roughly equal to the equity of one bank in Jordan, Egypt, or Tunisia, placing the Syrian banking sector as a whole in the bottom quarter of the list of the 100 largest Arab banks.

Despite the limited size of this overall capital base, most banks formally comply with local regulatory capital requirements. Syrian legislation sets the minimum capital requirement at 10 billion old Syrian pounds for conventional banks, about $0.9 million, and 15 billion old Syrian pounds for Islamic banks, about $1.3 million.

Private banks meet or exceed these limits, with some maintaining paid-up capital several times above the required minimum.

In 2010, the exchange rate was 47 Syrian pounds to the dollar, meaning the minimum capital requirement was equivalent to $212.7 million for conventional banks and $319.1 million for Islamic banks, levels that were largely close to the requirements applied in neighboring countries at the time.

With accelerating inflation and the deterioration of the currency’s value, the stated minimum capital now represents only a small fraction of its pre-war value in dollar terms. It has also remained exceptionally low compared with banks in neighboring countries, with the exception of Lebanon, which is experiencing an acute banking crisis.

Private Banks Unable to Lend

Private banks were not in a much better position, despite entering the Syrian market at the beginning of the millennium as a lever for banking modernization. They currently face major challenges, most notably:

Over time, Qushji believes, private banks have become unable to expand productive lending and have concentrated their activity on basic services, while their ability to compete or innovate has declined. This has created an urgent need to recapitalize them, update their systems, and strengthen oversight of their performance to ensure their ability to continue operating in a highly volatile economic environment.

International Experiences in Banking Sector Reform

Countries such as Egypt, Jordan, and Pakistan have witnessed banking reforms under the supervision of the International Monetary Fund. These reforms succeeded in improving efficiency and governance, but they depended on a stable legal environment and strong regulatory institutions.

In some cases, according to Qushji, privatization improved performance but was accompanied by broad layoffs, confirming the need to take the social dimension into account in any banking reform.

For Syria, the expected Oliver Wyman recommendations face major challenges, most notably:

Based on the above, banking reforms in Syria appear to be a mix of internal need and external pressure, amid the sharp decline in purchasing power, banks’ inability to finance investment, and the loss of public trust in the banking sector as a whole.