08 February 2016
DOHA: The decline in oil revenue has not led Qatar to significant spending cuts, rather the government was embarking on a strategy of prioritising expenditures to improve investment efficiency.
Although the drop in oil prices has induced a fall in export earnings and government revenues and consequently government deposits, the country's banking system's liquidity has been comfortable so far partly reflecting QCB's active liquidity management operations, Qatar Central Bank (QCB) Governor H E Sheikh Abdulla bin Saoud Al Thani (pictured) has stated.
Sheikh Abdullah said QCB has been actively managing liquidity to ensure monetary and financial stability. He said the $4.1bn bond issuance in September 2015 was part of that broader strategy of liquidity management. Despite this issuance, the banking system liquidity was in a primary surplus position as reflected in the sum of net Qatar Money Rate (QMR) deposits and excess reserves with QCB at QR5.4bn at end-September 2015.
In an interview published by international research firm The Business Year, he said the banks' liquid asset to liabilities continues to be stable at around 50 percent, while the quality of banking assets has continued to improve; the gross NPL ratio has declined to its lowest level since 2011. At the same time, reflecting the implementation of Basel III framework since January 2014, banks remained capitalized , significantly above the current regulatory requirement of 12.5 percent and profitable. This suggests the continued robustness of Qatar's financial sector.
On the Qatar-based banks' international expansion plans , the central bank Governor said the expansion plans are indications of the increasing strength and confidence of these banks to compete with other banks in the international arena. However, as a regulator, QCB is ensuring that the expansion should be prudential. Limits have been fixed on the foreign currency gap. The ratio of foreign currency asset to foreign currency liability of each bank should be at a minimum of 100 percent. This means that short positions are not allowed, but long are allowed.
The ratings of Qatar-based banks continue to remain high. Qatari banks have been playing an important role in the development of the economy. They have been extending credit to both the hydrocarbon and the non-hydrocarbon sector to meet productive needs. The current high growth in credit to the private sector reflects the support they are providing to the diversification of the economy.
In the year ahead, banks will have to maintain additional capital to meet the countercyclical capital requirements. Moreover, domestic systemically important banks (D-SIBs) have already been instructed for maintenance of additional capital from next year onwards. On the monetary policy front, QCB will continue to actively manage liquidity in the system in order to ensure a stable interest rate environment and thereby facilitate adequate flow of credit to the productive sectors of the economy. If low oil prices persist for long, policy space available in terms of both fiscal buffers and QCB's liquidity management operations could be used flexibly.
On the impact of the newly enacted laws on the performance of the Qatar Stock Exchange, the central bank Governor said the introduction of concerned laws helped Qatari bourse to record high levels in traded volume and index in September 2014. The Strategic Plan also aims to maintain a conducive and investor-friendly environment. The liquidity provision scheme of 2013, together with the new rules on margin trading introduced by the Qatar Financial Markets Authority (QFMA) offer a number of advantages for the market and investors, such as increasing trading volumes and liquidity, and should help to reduce price volatility and promote confidence among investors, thereby ensuring a fair and orderly market.
DOHA: The decline in oil revenue has not led Qatar to significant spending cuts, rather the government was embarking on a strategy of prioritising expenditures to improve investment efficiency.
Although the drop in oil prices has induced a fall in export earnings and government revenues and consequently government deposits, the country's banking system's liquidity has been comfortable so far partly reflecting QCB's active liquidity management operations, Qatar Central Bank (QCB) Governor H E Sheikh Abdulla bin Saoud Al Thani (pictured) has stated.
Sheikh Abdullah said QCB has been actively managing liquidity to ensure monetary and financial stability. He said the $4.1bn bond issuance in September 2015 was part of that broader strategy of liquidity management. Despite this issuance, the banking system liquidity was in a primary surplus position as reflected in the sum of net Qatar Money Rate (QMR) deposits and excess reserves with QCB at QR5.4bn at end-September 2015.
In an interview published by international research firm The Business Year, he said the banks' liquid asset to liabilities continues to be stable at around 50 percent, while the quality of banking assets has continued to improve; the gross NPL ratio has declined to its lowest level since 2011. At the same time, reflecting the implementation of Basel III framework since January 2014, banks remained capitalized , significantly above the current regulatory requirement of 12.5 percent and profitable. This suggests the continued robustness of Qatar's financial sector.
On the Qatar-based banks' international expansion plans , the central bank Governor said the expansion plans are indications of the increasing strength and confidence of these banks to compete with other banks in the international arena. However, as a regulator, QCB is ensuring that the expansion should be prudential. Limits have been fixed on the foreign currency gap. The ratio of foreign currency asset to foreign currency liability of each bank should be at a minimum of 100 percent. This means that short positions are not allowed, but long are allowed.
The ratings of Qatar-based banks continue to remain high. Qatari banks have been playing an important role in the development of the economy. They have been extending credit to both the hydrocarbon and the non-hydrocarbon sector to meet productive needs. The current high growth in credit to the private sector reflects the support they are providing to the diversification of the economy.
In the year ahead, banks will have to maintain additional capital to meet the countercyclical capital requirements. Moreover, domestic systemically important banks (D-SIBs) have already been instructed for maintenance of additional capital from next year onwards. On the monetary policy front, QCB will continue to actively manage liquidity in the system in order to ensure a stable interest rate environment and thereby facilitate adequate flow of credit to the productive sectors of the economy. If low oil prices persist for long, policy space available in terms of both fiscal buffers and QCB's liquidity management operations could be used flexibly.
On the impact of the newly enacted laws on the performance of the Qatar Stock Exchange, the central bank Governor said the introduction of concerned laws helped Qatari bourse to record high levels in traded volume and index in September 2014. The Strategic Plan also aims to maintain a conducive and investor-friendly environment. The liquidity provision scheme of 2013, together with the new rules on margin trading introduced by the Qatar Financial Markets Authority (QFMA) offer a number of advantages for the market and investors, such as increasing trading volumes and liquidity, and should help to reduce price volatility and promote confidence among investors, thereby ensuring a fair and orderly market.
© The Peninsula 2016
