Featured Product

    IMF Publishes Reports on 2019 Article IV Consultation with Qatar

    June 03, 2019

    IMF published its staff report and selected issues report under the 2019 Article IV consultation with Qatar. The IMF Directors noted that banks remain sound, underpinned by strong profitability and capital as well as high asset quality. The emphasis on risk-based supervision is important, as it provides the opportunity to detect vulnerabilities at earlier stages. The loan-to-deposit (LTD) ratio should be enforced to encourage banks to reduce leverage. In the backdrop of risks and vulnerabilities arising from financial innovation, it is important to further strengthen the financial supervision and the regulatory framework.

    The staff report highlights that the authorities have implemented many of the recommendations put forward in the 2018 Article IV consultation. The policy framework is being strengthened, including financial regulation, supervision, and macro-prudential policies. The banking system has adjusted to the diplomatic rift, as non-resident deposits and placements edged upward. With improved liquidity conditions of banks, public-sector deposits placed in the banking system in response to the diplomatic rift have been reduced. At the end of September 2018, banks had high capitalization (capital adequacy ratio of 16%) and maintained strong profitability (return-on-assets, or ROA of 1.6%), and low non-performing loans (NPLs ratio of 1.7% and a reasonable provisioning ratio of 83%). Banks are comfortably liquid, with a liquid-asset-to-total-asset ratio of 29.7%. Nonetheless, strong credit growth that outpaced deposits resulted in the system-wide LTD ratio of 103%, which slightly exceeds the Qatar Central Bank's (QCB’s) guidance of 100%. 

    The staff and the authorities agreed on the importance of strengthening the regulatory and supervisory framework to bolster financial stability. Banks in Qatar are now compliant with IFRS 9  and the overall impact of IFRS 9 on the capital adequacy of banks has been limited. The Financial Stability and Risk Control Committee is fully operational and has been meeting regularly to assess financial stability and inter-regulatory co-ordination. The banking sector is adjusting to the decline in real estate prices by reducing credit allocation to contractors and real estate sector. Safeguarding the stability of the financial system and enhancing its resilience would encompass developing additional indicators such as continuing to ensure adequate provisioning and early risk recognition by banks, particularly those with a higher exposure to the real estate sector. The authorities noted that bank supervision is increasingly conducted on a risk-based approach with thematic inspections, based on continuous monitoring of bank financials. The central bank is paying close attention to the real estate exposures of banks and is developing additional metrics to supplement its existing real estate price index.

    The changes in the funding environment for banks in Qatar suggest a need for an enhanced liquidity management framework. The monetary authorities continue to work on enhancing the liquidity management framework. QCB has developed an analytical framework to help guide the conduct and implementation of liquidity forecasting. Staff welcomed this development and emphasized the importance of strengthening the existing infrastructure by further improving the exchange of information between the central government, QCB, and Qatar Investment Authority (QIA). In implementing the Second Strategic Plan for the financial sector, the authorities are focusing more on deepening domestic financial markets to promote savings, offer borrowing and investment opportunities, and achieve greater financial inclusion. Staff noted that fntech could help to increase financial inclusion by, for example, helping to ensure increased lending to small and medium enterprises, which remains very low in Qatar at about 2% of total credit. Nonetheless, fintech brings risks to data privacy and cybersecurity and, in this regard, staff supported the authorities’ approach of initial testing of fintech within a sandbox environment and in cooperation with the international regulators.

     

    Related Links

    Keywords: Middle East and Africa, Qatar, Banking, IFRS 9, CAR, NPL, Liquidity, Fintech, Financial Inclusion, Macro-Prudential Policy, QCB, IMF

    Featured Experts
    Related Articles
    News

    ECB Amends Guideline on Temporary Collateral Easing Measures

    ECB published Guideline 2021/975, which amends Guideline ECB/2014/31, on the additional temporary measures relating to Eurosystem refinancing operations and eligibility of collateral.

    June 17, 2021 WebPage Regulatory News
    News

    EIOPA Releases Report on Artificial Intelligence Governance Principles

    EIOPA published a report, from the Consultative Expert Group on Digital Ethics, that sets out artificial intelligence governance principles for an ethical and trustworthy artificial intelligence in the insurance sector in EU.

    June 17, 2021 WebPage Regulatory News
    News

    HKMA to Increase Focus on Suptech and Regtech Cloud Adoption

    HKMA published the seventh and final issue of the Regtech Watch series, which outlines the three-year roadmap of HKMA to integrate supervisory technology, or suptech, into its processes.

    June 17, 2021 WebPage Regulatory News
    News

    EC Consults on Improving Transparency in Secondary Markets for NPLs

    EC launched a targeted consultation to improve transparency and efficiency in the secondary markets for nonperforming loans (NPLs).

    June 16, 2021 WebPage Regulatory News
    News

    BIS and Nordic Central Banks Launch Innovation Hub in Stockholm

    BIS, Danmarks Nationalbank, Central Bank of Iceland, Norges Bank, and Sveriges Riksbank launched an Innovation Hub in Stockholm, making this the fifth BIS Innovation Hub Center to be opened in the past two years.

    June 16, 2021 WebPage Regulatory News
    News

    FDIC Tech Sprint Aims to Explore Technologies to Reach Unbanked

    FDITECH, the technology lab of FDIC, announced a tech sprint that is designed to explore new technologies and techniques that would help expand the capabilities of community banks to meet the needs of unbanked individuals and households.

    June 16, 2021 WebPage Regulatory News
    News

    EC Releases Sustainable Finance Taxonomy Compass

    EC released the EU Taxonomy Compass, which visually represents the contents of the EU Taxonomy starting with the EU Taxonomy Climate Delegated Act.

    June 16, 2021 WebPage Regulatory News
    News

    FDIC Proposes Amendments to Real Estate Lending Standards

    FDIC is seeking comments on a rule to amend the interagency guidelines for real estate lending policies—also known as the Real Estate Lending Standards.

    June 15, 2021 WebPage Regulatory News
    News

    EIOPA to Consider Liquidity Risk in Stress Test for 2021

    EIOPA published its annual report, which sets out the work done in 2020 and indicates the planned work areas for the coming months.

    June 15, 2021 WebPage Regulatory News
    News

    ESRB Paper Discusses Measurement of Impact of Bank Failure via Lending

    The ESRB paper that presents an analytical framework that assesses and quantifies the potential impact of a bank failure on the real economy through the lending function.

    June 15, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7116