QCB issued a package of instructions for financial institutions operating in the State of Qatar to ease the impact of COVID-19 outbreak. The package of instructions cover guidance on business continuity plans, repayment of loan installments, national guarantee program, management of Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) risks, and certain other areas of concern. QCB also published a presentation on procedures to combat the risk of COVID-19 pandemic.
Repayment of Loan Installments
All banks and finance companies that operate in Qatar shall postpone the repayment of loan installments due and interest/returns on those loans for the affected sectors, for a period of six months from March 16, 2020, for desiring customers with low interest/return and without charging any commissions or delayed fees and without any adverse impact on their credit rating. A repurchase window (repo) with an amount of QAR 50 billion, at a zero interest rate, has been a;sp allocated for providing liquidity to banks at zero cost. This will enable banks to commit to reducing the interest/return rate for customers of the affected sectors and for those who benefit from the decision to postpone repayment and the sanctioning of new loans without fees or commissions to clients of the affected sectors with an interest/interest rate not exceeding 1.5%. This is in case these loans are repriced after the end of a period of six months as from March 16, 2020 or the end of the repo facilities or by a notice from QCB, whichever being announced first. These instructions are effective as from the issuance date.
National Guarantee Program to Support Private Sector
In response to the COVID-19 outbreak, QCB decided to launch a national guarantee program to support private-sector companies affected by the current conditions to enable them to obtain the necessary and immediate finance needed to pay the salaries to their employees and pay rents, if any. Qatar Development Bank will manage the National Guarantee Program to support the private sector and issue the related guidance in this regard. According to the national guarantee program, the concerned banks must accept the finance applications submitted to them by beneficiary companies and the benefits shall be granted according to the following conditions and guarantees:
- The maximum funding limit for a single company and its group of subsidiaries is QAR 7.5 million, payable over three months, with a maximum of QAR 2.5 million per month.
- The provision is for a guarantee of 100% of the total financing by the Qatar Development Bank on behalf of the Government of Qatar, without the relevant banks bearing any fees or commissions.
- Finance is to be paid over a maximum of three years, starting from the last installment of finance, so that the first year will be a grace period.
In addition, the following conditions have been specified for how banks can calculate interest or return on balance of the finance:
- At a rate not exceeding 1.5% for the first six months (the grace period) to be paid by Qatar Development Bank and borne by the government of the State of Qatar. during the second half of the first year (grace period)
- During the second half of the first year (grace period), the interest is calculated at a rate not exceeding (1% + QCB Lending Rate) from which the Qatar Development Bank pays a value of 1.5% and is borne by the government of the State of Qatar and any excess over 1.5% shall be paid by the customer.
- During the remaining two years, at a rate not exceeding (2% + QCB Lending Rate) borne by the customer and paid with monthly installments.
Keywords: Middle East and Africa, Qatar, COVID-19, Banking, AML/CFT, Credit Risk, Loan Guarantee Loan Moratorium QCB
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