A tricky operation

DURING the looting that followed the fall of Baghdad in April last year, the ten-storey headquarters of the Central Bank of Iraq (CBI) was burgled and torched before it collapsed into a pile of soot-stained rubble. Fourteen months later, the charred ruins have been cleared, and the CBI's staff work on American-provided computers in a building nearby.

Rehousing the central bank is one thing. Rebuilding an entire banking system is quite another. Despite the focus on military and political matters, the task has been surprisingly high on the American-led coalition's to-do list: even before George Bush declared that “major combat operations have ended” in May 2003, American advisers were preparing in neighbouring Kuwait. The job is all the more formidable because under Saddam Hussein Iraq had no independent banks to speak of. From the CBI to the lending policies of the six state-owned institutions that controlled most bank assets, the system was under Mr Hussein's thumb. Lending was based on cronyism, not credit quality.