General Information & Client Service
  • Americas: +1.212.553.1653
  • Asia: +852.3551.3077
  • China: +86.10.6319.6580
  • EMEA: +44.20.7772.5454
  • Japan: +81.3.5408.4100
Media Relations
  • New York: +1.212.553.0376
  • London: +44.20.7772.5456
  • Hong Kong: +852.3758.1350
  • Tokyo: +813.5408.4110
  • Sydney: +61.2.9270.8141
  • Mexico City: +001.888.779.5833
  • Buenos Aires: +0800.666.3506
  • São Paulo: +0800.891.2518
May 30, 2018

IMF published its staff report and selected issues report under the 2018 Article IV consultation with Qatar. Directors noted that the banking sector is healthy with high asset quality and strong capitalization. As at end-September 2017, banks had capital adequacy ratio of 15.4% and low non-performing loans (NPLs) ratio of 1.5%, with a reasonable provisioning ratio of NPLs (85%). Directors also highlighted that fintech, which will likely create new challenges and opportunities, will require additional regulatory capacity.

The staff report highlights that a robust regulatory framework and effective supervision have helped ensure the resilience of the financial system. Banks are under Basel III regulations for capital, liquidity, and leverage and banks meet the regulatory standards, even under shock scenarios. The banking system is characterized by high loan concentrations—particularly real estate loans—and connected lending. The ongoing efforts that focus on bolstering macro-prudential regulations and strengthening consolidated supervision would help to prevent and mitigate systemic risks. The Qatar Central Bank (QCB) introduced a new loan-to-deposit requirement of 100%, which came into effect in January 2018, to further improve the liquidity profile of the banking system and its asset quality. Basel IV, once adopted, could significantly increase risk-weights, thus impacting banks’ capital ratios, credit risk management, pricing, processes, and disclosure. Thus, an impact study by QCB of Basel IV on banks’ capital adequacy ratios would be useful to inform the appropriate speed of its implementation. In liquidity management, further progress in enhancing monitoring and forecasting would help in anticipating and planning for potential system-wide pressures. Furthermore, the Directors encouraged the authorities to continue to strengthen the AML/CFT framework and address the identified gaps.

The selected issues report highlights that the stress tests of QCB for December 2017 show that the banking system is resilient to severe shocks. QCB conducts stress tests of the banking sector on a regular basis and publishes the results in the Financial Stability Reports. The stress tests on September 2017 data for the banking system examined the impact on banks’ capital ratios of an increase in NPLs by 25% and additional provisioning ranging between 50% and 70%. This note uses publicly available bank-by-bank data, regression analysis, and a range of economic scenarios to revisit the possible impact of lower oil prices, lower economic and credit growth, and lower stock market prices on Qatari banks. Simulation results suggest that banks can comfortably withstand higher NPLs and lower profits. This finding owes to Qatari banks’ strong starting position, with low NPLs, adequate provisioning, and solid profitability. The average capital ratio remains above 16% over the projection period leading up to 2020 (baseline scenario). Moreover, the exercise reveals that the banking system would remain resilient even in the presence of a very severe shock to all the NPL macro determinants.

The staff concludes that QCB’s continued prudent approach to regulation and systemic risk management remains essential. Demonstrated resilience of the banking sector to both actual and hypothetical stress tests speak well of Qatar’s regulatory and supervisory framework. Macro-prudential regulation, particularly capital and liquidity buffers and countercyclical provisioning norms are essential for mitigating the impact of macroeconomic shocks on the banking system and the feedback effects of credit risks on the real economy.

 

Related Links

Keywords: Middle East and Africa, Qatar, Banking, Stress Testing, NPLs, Capital Adequacy, Basel IV, IMF

Related Insights
News

US Agencies Propose Revisions to FFIEC Reports 031, 041, 051, and 101

US Agencies (FDIC, FED, and OCC) propose to extend for three years, with revision, FFIEC 031, FFIEC 041, FFIEC 051, and FFIEC 101.

February 21, 2019 WebPage Regulatory News
News

OFR Adopts Data Collection Rule on Centrally Cleared Repo Transactions

OFR adopted a final rule to establish a data collection covering centrally cleared funding transactions in the U.S. repurchase agreement (repo) market.

February 20, 2019 WebPage Regulatory News
News

FHFA Finalizes Rule on Federal Home Loan Bank Capital Requirements

FHFA published, in Federal Register, the final rule to adopt, as its own, portions of the regulations of the Federal Housing Finance Board pertaining to the capital requirements for the Federal Home Loan Banks.

February 20, 2019 WebPage Regulatory News
News

PRA Publishes PS4/19 on Loss-Absorbency Mechanism Under Solvency II

PRA published a policy statement (PS4/19) that provides feedback on responses to the consultation paper (CP27/18) on adjusting for the reduction of loss absorbency where own fund instruments are taxed on write down under Solvency II.

February 20, 2019 WebPage Regulatory News
News

SRB Publishes Framework for Performing Valuations in Resolution

The framework provides independent valuers and the general public with an indication of the expectations of SRB on the principles and methodologies for valuation reports, as set out in the legal framework.

February 19, 2019 WebPage Regulatory News
News

BIS Paper on Effect of Securities Lending on OTC Market Liquidity

BIS published a working paper that studies how securities lending affects over-the-counter market (OTC) liquidity.

February 19, 2019 WebPage Regulatory News
News

US Agencies Extend Consultation Period for the Proposed SA-CCR

US Agencies (FDIC, FED, and OCC) extended the comment period for a proposed rule to update their standards for how firms measure counterparty credit risk posed by derivative contracts.

February 18, 2019 WebPage Regulatory News
News

FED Extends Consultation Period for Stress Testing Rule

FED has published in the Federal Register a notice proposing amendments to the company run and supervisory stress test rules.

February 15, 2019 WebPage Regulatory News
News

EBA Single Rulebook Q&A: Third Update for February 2019

EBA published answers to two questions under the Single Rulebook question and answer (Q&A) updates for this week.

February 15, 2019 WebPage Regulatory News
News

SEC Proposes Rule on Risk Mitigation Techniques for Uncleared SBS

SEC proposed a rule that would require the application of specific risk-mitigation techniques to portfolios of security-based swaps (SBS) that are not submitted for clearing.

February 15, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 2623