Abstract

This study explores the institutional properties of the commercial banks that participate in the foreign currency auction, supervised by the CBI. Designed initially as a monetary stabilizing mechanism, the auction has transformed into a recurring administrative institution with influence resting on a few banks, giving rise to issues of selective compliance, regulatory uncertainty, and governance efficiency. The study also intends to study whether the involvement of banks is an outcome of strategic re-engineering instead of information fidelities to oversight regime, and to analyze the role of regulations in deterring the frauds. Adopting a qualitative, document-based analysis design, the study relies on official communiqués, inspection reports and institutional materials between 2020-2024. Drawing on content thematic analysis shaped by Behavioral Theory and Agency Theory, our analysis reveals three underlying patterns: the concentration of behavior on the part of certain banks, the adaptive effort of the banks to manipulate regulations in the vacuum left by the regulations, and the weak constitution of the institutions adopted to impose the discipline. The evidence shows that Iraq’s auction system has evolved into one of routine strategic exploitation, where institutional incentives – rather than formal rules – drive bank behavior. The paper concludes with some policy recommendations on improving monitoring and makes some suggestions for further research on enforcement mechanisms and alternative models of auction regulation for weak economies.