27 Aug 2017 - 16:09
Despite fall in global oil prices, Qatar’s public expenditure witnessed a remarkable growth in 2016. The country’s public expenditure in the fiscal year witnessed an increase of 11.6 percent compared to the previous year.
28 Aug 2017 - 10:00
Qatar Central Bank Governor H E Sheikh Abdullah bin Saoud Al Thani, has stated that the local banks are capable of facing any possible ‘abnormal conditions’ resulting from the siege imposed on the country. The Qatari banking system is strong and efficient as proved by stress tests carried out routinely by QCB, he said.
In an exclusive interview with the QNA, the central bank Governor said the banks are highly solvent and profitable. The deposits in the bank are in excess of QR39.3bn. Other data on bank liquidity are available to everyone, through the monthly report released by QCB that also includes data on the monetary base. On the decision of Moody’s credit agency to lower the credit rating of Qatari banks, Sheikh Abdullah said that the current geopolitical risks were a big factor in the agency’s decision. QCB believes the agency will amend that change in the very near future.
In terms of banking regulations, the central bank is strictly following in international standards, especially in capital adequacy and liquidity. In addition, QCB has taken extra precautionary measures in the face of the negative impact of the oppressive siege.
One of those measures, the QCB Governor said, was holding regular meetings with CEOs of banks operating in the country. Another measure was regulating daily the liquidity levels and cash transfers in the sector. A third measure was carrying out stress tests for the worst case scenarios. There is also a detailed monitoring of the movement of deposits and foreign exchange dealings. Emergency plans were placed to face any potential risk.
Sheikh Abdullah noted that the international reserves of Qatar Central Bank were in line with international standards. He described foreign currency reserve levels for banks as excellent and added that it covers the market’s needs. Despite the fact that those reserves were 240 percent of the monetary base, they only represented 10 percent of the State of Qatar’s reserves
On the Qatari Riyal’s peg to the US dollar and maintaining capital inflows to the state, the QCB Governor said that the foreign reserves available to banks in general and to the central bank in particular were the guarantee to maintaining the peg. The surpluses in the current account, balance of payment, and the capital account support the reserves. He noted that the central bank is working on achieving financial stability in the country through many mechanisms. Those include issuing regulatory instructions to the banking and financial sector in Qatar, in order to increase confidence in the sector and its capability of dealing with potential risks.
The central bank also issued its instruction on how banks can evaluate their capital adequacy internally. There were also instructions on how to evaluate the need to add to reserve that is supportive in cyclical fluctuations. The central bank is also using its policy tools to periodically evaluate banking and financial institutions. Those also provide data to Qatar Central Bank, which the latter revise through foreign auditors as part of the end of year audit.
On the central bank’s strategy for regulating the financial sector, Sheikh Abdullah said that QCB is preparing to launch its second Strategic Plan for Financial Sector Regulation (2017-2022). The strategy is a result of successful cooperation between three regulatory bodies. Those bodies are the central bank, Qatar Financial Markets Authority (QFMA), and Qatar Financial Center Regulatory Authority. The strategy is also implemented in the context of Qatar National Vision 2030 and the active role the financial and banking sector plays in diversifying the economy and increasing the contribution of the private sector in Gross Domestic Product.
He added that the new strategy involves the latest methods of discovering money laundering and terrorism financing. It also focuses on human capital in the financial sector, by looking to develop highly-professional cadres.
With regards to the issuance of government debt instruments such as bonds, treasury bills and sukuk, the central bank Governor said that the bank issues government debt instruments on behalf of the government and therefore the proceeds do not return to the bank. The Bank has started to issue these instruments for monetary policy reasons such as managing liquidity in the banking system. The government also uses it to finance the budget as one of the available sources.
Regarding the reports about the refusal by many exchange companies to sell the dollar after the siege and on whether the Central Bank of Qatar had a role in this regard, he said that he does not believe there were any financial or banking institution in Qatar, including money exchange companies, that stopped selling the dollar or any other currency. He added that some of those companies might have tried to take advantage of the crisis, but the bank’s strict instructions in this regard acted as a deterrent to such behavior.
Regarding the role played by the Central Bank of Qatar in banking governance, which is attracting a great deal of attention of the regional and international supervisory authorities and control, the Governor of the Central Bank of Qatar pointed out that the functions of the Central Bank in this regard include, in accordance with the provisions of the Law No. 13 of 2012, supervising all financial institutions licensed to practice financial services and activities to enhance the financial stability system. His Excellency highlighted the Bank’s commitment to following the best international practices when issuing regulatory directives to banks, other financial institutions and insurance companies.
Sheikh Abdullah referred to a number of examples carried out by the Central Bank in this regard. Those included its decision to regulate the shares ownership of the financial institutions subject to its control and listed on Qatar Exchange. There were also instructions issued that the bank or the investment company founder or manager of the investment fund and all its subsidiaries may not own more than a 10 percent of the total shares outstanding in the fund, and to complete the application of Basel III criteria, particularly second Pillar, on capital adequacy and internal capital adequacy assessment procedures.
He also pointed out that Qatar Central Bank has issued the principles of corporate governance for the insurance companies. It included the general framework, rules, regulations and comprehensive procedures through which insurance companies carry out their activities and management, its structure, the relationship between the different parties and the distribution of powers and responsibilities, in particular members of the board of directors, executives, shareholders, stakeholders or customers.