"The Export Guarantee Fund of Iran (EGFI) and the Iraqi Trade Bank signed an agreement a few days ago," Dr. Nowrouz Kahzadi told IRNA.

Under the terms of the agreement, Iranian banks will facilitate the opening of letters of credit for Iraqi tradesmen in Iranian banks, he said.

The agreement lays down incentives for bolstering Iran-Iraq economic cooperation, Kahzadi added.

He noted that the religious and cultural commonalties enjoyed by the two countries provides the background for consolidation of bilateral trade ties.

"The Iraqi banking system was faced with crippling debts after the fall of the Iraqi Baathist regime and could not continue its banking activities," he added.

Alluding to the role of the Iranian banking system in bolstering its economic, political and cultural relations, Kahzadi said that Iraqi businessmen require financial support through the banks to activate their trade activities.

Trade exchanges between Iran and Iraq are set to undergo pivotal development with the help of their banking systems compared to mere border market transactions, he said.