Assistant Lecturer Najlaa Salem Mousa Introduction Bank liquidity is considered one of the most important indicators reflecting the soundness of the financial system, as banks’ ability to continue their operations depends on the availability of sufficient cash to meet their obligations toward depositors and borrowers. In recent years, Iraqi banks have faced clear challenges in managing liquidity due to economic, financial, and regulatory factors, leading to liquidity crises that have affected the efficiency of the banking sector and its role in supporting the national economy. A liquidity crisis is represented by a bank’s inability to meet withdrawal demands or finance banking operations due to a shortage of readily available funds or weak asset and liability management. This article aims to explain the concept of liquidity crisis in Iraqi banks, its main causes, effects, and proposed solutions to enhance banking stability. First: The Concept of Bank Liquidity and Its Importance Bank liquidity is defined as the bank’s ability to provide cash or liquid assets quickly to meet obligations when due without incurring significant losses. Central banks pay great attention to liquidity levels to ensure financial system stability and prevent banking crises, inflation, or currency collapse. The importance of liquidity in banks is reflected in: Protecting depositors’ funds. Ensuring the continuity of daily banking operations. Enhancing confidence in the banking system. Supporting economic and investment activities. Second: The Reality of Liquidity in Iraqi Banks The Iraqi banking sector suffers from weak efficiency in liquidity management compared to advanced banking systems. This is due to the nature of the rentier economy and the state’s dependence on oil revenues, in addition to weak coordination between private and public banks. Moreover, low investment levels, weak asset and liability management, and poor monetary efficiency have negatively affected banks’ ability to face financial crises. Among the key problems facing the banking sector are: The government’s reliance on public banks more than private ones. Weak financial markets. Low confidence in private banks. This has led to an imbalance in liquidity distribution within the banking system. Third: Causes of the Liquidity Crisis in Iraqi Banks 1. Economic Causes Dependence on oil as the main source of income. Fluctuations in government revenues. Weak private sector. Low domestic and foreign investment. When oil revenues decline, government deposits in banks decrease, leading to liquidity shortages. 2. Banking and Administrative Causes Weak liquidity management within banks. Imbalance between lending and deposits. Heavy reliance on short-term financing. Weak governance and internal control. Studies have emphasized the importance of balancing liquidity and profitability, as excessive investment expansion may lead to liquidity shortages. 3. Regulatory and Legal Causes Weak implementation of banking governance standards. Lack of transparency and disclosure. Weak supervision of private banks. Poor governance increases financial risks and the likelihood of crises. 4. Monetary Policy Factors Restrictions on dealing in US dollars. Tight controls on foreign transfers. Changes in central bank regulations. These restrictions have increased pressure on liquidity in some banks. 5. Low Public Confidence in Banks Dependence on cash outside the banking system. Limited use of bank accounts. Spread of the informal economy. This reduces deposits and leads to liquidity shortages. Fourth: Effects of Liquidity Crisis on Banks and the Economy Difficulty withdrawing funds from banks. Reduced ability to grant loans. Weak investment activity. Increased risk of bank failure. Decline in confidence in the financial system. Banking crises directly affect economic stability and lead to financial stagnation and weak banking performance. Fifth: Solutions to the Liquidity Crisis in Iraqi Banks 1. Role of the Central Bank of Iraq Monitoring liquidity ratios. Providing financing windows for banks. Implementing international standards. Supporting monetary stability. Studies have emphasized the importance of using central bank tools to maintain liquidity stability in commercial banks. 2. Improving Liquidity Management in Banks Proper planning of cash flows. Diversifying funding sources. Reducing reliance on short-term financing.