Iraqi authorities have issued an arrest warrant for the head of one of the nation's biggest banks, which is under investigation for alleged irregularities, a government source and the bank's lawyer said on Sunday.

An Iraqi government source said Hussein al-Uzri, president and chairman of the state-owned Trade Bank of Iraq (TBI), had fled to Lebanon. He did not answer calls to his mobile phone.

Prime Minister Nuri al-Maliki ordered a judicial inquiry into TBI on Thursday, after a committee including officials from Iraq's anti-corruption commission and audit authority reported violations at the institution.

The move comes as Maliki faces growing discontent over rampant corruption and poor public services in oil-exporting Iraq. Protests erupted against his fragile coalition government earlier this year.

A British adviser to TBI's board told Reuters on Sunday the investigation was politically motivated and came after the bank had resisted government pressure to engage in highly dubious and irregular operations.

Sir Claude Hankes said the investigation could damage Iraq's ties with the international banking community. He said Uzri was safe outside Iraq but was not in Lebanon.

POLITICAL GAME

The political game is to discredit the bank, he said.

Hankes, a former Chairman of the Management Committee of Price Waterhouse and Partners, said he believed the government probe was part of a campaign to deflect public anger over corruption away from Maliki and his associates onto scapegoats.

Why else would they be trying to destroy a bank that is one of the success stories of Iraq and is key to the wellbeing of the Iraqi people? he said.

This is putting the clock back for Iraq.

A spokesman for Maliki rejected such suggestions. We want to confine our action to the wrongdoers only and we want to save the bank so it can play its role in the reconstruction, said Ali al-Moussawi, media adviser to the prime minister.

Tareq al-Maamouri, TBI's legal adviser, confirmed the arrest warrant against Uzri and said the bank chairman had been suspended from his duties.

Set up in 2003, after the U.S.-led invasion that toppled Saddam Hussein, TBI has developed a reputation as one of Iraq's most successful financial institutions. It is involved in financing food supplies and securing private sector financing for power and other reconstruction projects.

A senior Iraqi government source said authorities had information that Uzri had gone to Beirut.

The judiciary issued an arrest warrant against those people who could be detained on the basis of the evidence against them and one of them is the chairman of the bank, he told Reuters.

TBI, with 14 branches across Iraq, reported total assets of $15 billion for 2010, a 16 percent increase over 2009. It reported an 18 percent increase in 2010 profits to $361 million.

On Thursday, an Iraqi banking source said the violations related to billions of Iraqi dinars in irrecoverable bad debts owed by Iraqi companies. Charges included poor administration and non-compliance with banking regulations, the source said.

(Additional reporting and writing by Pascal Fletcher; editing by Andrew Roche)

Iraq Criminal Law