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Qatar Central Bank (QCB) has announced a series of monetary policy and borrower support measures to mitigate the impact of the Iran war on the banking system and ensure adequate liquidity.
The central bank, in a review of the financial system, said liquidity remains strong and capital levels continue to exceed regulatory requirements. The QCB added that banks maintain substantial equity positions in both domestic and foreign currencies.
Despite this, the external environment remains uncertain, and conditions may change, it said. In light of this, the central bank decided to introduce a few precautionary measures.
As part of the package, QCB will reduce the reserve requirement on deposits to 3.5% from 4.5%, releasing additional liquidity into the banking system.
The central bank will also offer an unlimited amount of Qatari riyal (QAR) repurchase (repo) facilities against eligible securities held by banks, to maintain QAR liquidity in the local market.
In addition to the existing overnight repo facility, QCB will introduce a term repo facility with maturities of up to three months, enabling banks to manage cash flows with greater certainty during the current period.
On the borrower support front, QCB will allow banks to offer customers affected by the conflict the option to defer loan principal and interest payments for up to three months.
Earlier this month, the UAE Central Bank rolled out a resilience package aimed at reinforcing liquidity in the banking system.
(Writing by Brinda Darasha; editing by Seban Scaria)
