Early Warning Indicators and Their Role in Identifying Deviations in the Banking Sector: An Analytical Study of Indicators Adopted by the Central Bank of Iraq Regarding Bank Performance for the Period 2018–2022

This research aims to assess the effectiveness of early warning indicators in predicting banking crises and identify the key indicators that help detect banking deviations in Iraq. It also seeks to evaluate the responsiveness of Iraqi banks to these indicators and their adoption of necessary corrective measures. The study employs a descriptive approach to analyze the financial data of Iraqi banks from 2018 to 2022, which was obtained from the Central Bank of Iraq. The analysis examines a range of financial indicators that the Central Bank uses to assess bank performance. The research identified several key findings, most notably an improvement in certain indicators, like the credit-to-deposit ratio, return on assets, and return on equity. Additionally, there was a reduction in the ratio of non-performing loans to both cash credit and asset size, along with increased profitability in private banks. Together, these factors indicate an overall enhancement in banking performance. However, some indicators point to weaknesses in money supply management, specifically the ratio of deposits included in the money supply to broad money (M2) and the ratio of currency held outside banks to broad money (M2).