QCB Updates Capital Adequacy Rules for Islamic and Conventional Banks
The Qatar Central Bank (QCB) issued two circulars on the implementation of capital adequacy requirements (Pillar 1), based on Basel framework revisions as well as on the Islamic Financial Services Board (IFSB) 23 standard. One of the circulars applies conventional banks while the other one applies to Islamic banks, with rules coming into effect from January 01, 2024.
Banks are required to maintain and report their capital adequacy ratios in light of these instructions on a quarterly basis at the solo and consolidated level. This will replace the “Implementing Instructions—Basel III framework for Islamic and Conventional Banks—Pillar 1,” which was issued in January 2014. The capital adequacy ratio will be calculated as the ratio of eligible capital to total risk-weighted assets. For the purposes of capital adequacy requirements on a solo basis, any subsidiaries will be de-consolidated for regulatory capital purposes. As per the rules, banks are required to deduct, from common equity tier 1, the full amount of any capital shortfalls of subsidiaries that are regulated entities and are subject to capital requirements.
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Keywords: Middle East and Africa, Qatar, Banking, Basel, Regulatory Capital, Islamic Banking, IFSB 23, Risk Weighted Assets, CET 1, Pillar 1, QCB
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