HE Sh Abdulla Bin Saoud Al-Thani, Governor, Qatar Central Bank
22 Feb 03:16 AMSector : Banking & Finance Country : Qatar
You have stated that you will embark on a plan of partial privatization of state-owned energy companies, in part as a way of distributing Qatar's wealth to the rest of the population. Could you expand on this?
Qatar’s economic development strategy includes a 10-year plan which aims at partial privatization of state-owned energy companies. Its first phase started with the initial public offer (IPO) of Mesaieed Petrochemical Holding Company (MPHC), and the process will continue in the coming years. There are three main objectives of partial privatization: to distribute state wealth among citizens; to encourage citizens to save and invest more; and, through such IPOs, to expand the financial markets of Qatar.
With the QCB the main regulator of the financial sector, you are now essentially wearing three hats – as Governor of the QCB, and Chairman of the Qatar Financial Center Regulatory Authority (QFCRA) and the Qatar Financial Markets Authority (QFMA). How have you found the transition, and what are the challenges of holding these roles?
The transition is going smoothly, and the main focus is on enhancing coordination and cooperation between the three regulatory authorities which continue to work closely together. A College of Supervisors, which includes senior managers from the QCB, QFCRA, and the QFMA, was recently set up to harmonize regulations and enhance co-operation and collaboration.
Was there a pressing need for greater oversight by the regulator of the financial sector? If so, why?
The global financial crisis caused a lot of economic turmoil in both the advanced and developing economies across the world but it did not have much impact on Qatar. Qatar continued to show strong domestic performance with the non-hydrocarbon sector now accounting for 59 percent of GDP. The banking sector performed profitably and remained well-capitalized. In that sense, the financial sector of Qatar remained safe and sound under the regulatory oversight of QCB.
The regulations in force at the time of the global financial crisis did not adequately capture all the risks to which banks were exposed. In response, the Basel Committee on Banking Supervision (“Basel Committee”) drew up Basel III, a new and comprehensive framework that proposed a tighter regulatory environment with new capital and liquidity requirements. QCB is working in this area and the banks in Qatar are well-geared to adopt Basel III guidelines.
As all the different constituents of the financial sector business - insurance markets, capital markets, the banking sector and financial services - are inter-linked and in today’s connected world risks spread quick and fast from one pocket to another, it is imperative that the entire financial sector is treated comprehensively for better co-ordination between the different regulators. Within this backdrop, in January 2013, the QCB became the primary regulator of financial institutions operating in Qatar, and the QCB Law expanded its supervisory powers to cover the insurance sector and the Qatar Financial Center. The QCB Law will bring much stronger macro-prudential regulatory environment in Qatar as it addressed many issues for the first time, including Islamic banking, mergers and acquisitions of financial institutions, credit rating agencies, insurance, treating customers fairly and resolution of failing banks.
Qatar also launched a strategic plan for financial regulation in 2013. The plan established a framework for regulating the financial sector across the state and set a roadmap of strategic priorities for the next three years (2014-2016). The QCB, QFCRA and QFMA worked together to develop this strategic plan for financial sector regulation in the context of both the Qatar National Development Strategy 2011-2016 (NDS) and the Qatar National Vision 2030 (QNV2030).
Can you tell us more about the new strategic plan for the country's financial sector?
The Strategic Plan has been prepared within the context of the overall objectives of the QNV2030 and the NDS. It is underpinned by two recent revisions to the legal structure of the financial sector regulatory framework of the State: Law No. (13) of 2012 on the Qatar Central Bank and the Regulation of Financial Institutions, and Law No. (8) of 2012 (the QFMA law) on the Qatar Financial Markets Authority.
The Strategic Plan contains six critical goals:
Enhancing regulation by developing a consistent risk-based micro-prudential framework in line with global regulatory developments and by improving disclosure practices.
Expanding macro-prudential oversight by building a macro-prudential framework in line with international best practice.
Strengthening financial market infrastructure through enhancements to the payments and settlements system and initiatives to develop the debt market.
Enhancing consumer and investor protection by developing standards and codes of conduct, protecting credit information and raising public awareness and education.
Promoting regulatory cooperation among the three regulatory authorities and strengthening local and international cooperation.
Building human capital through training and professional development initiatives in the three regulatory authorities and in the financial sector more broadly.
In establishing these goals, the regulatory authorities are committed to developing a financial regulatory infrastructure that meets international standards and best practice. Achievement of the goals will be supported by specific strategies and work plans within each of the regulatory authorities in line with their respective statutory objectives.
Was the strategic plan driven in part with foreign direct investment (FDI) in mind, in relation to adopting international financial reporting standards (IFRS) to attract FDI?
The Strategic Plan has been developed in line with the NDS 2011-16 to realize the goals of the QNV 2030. It provides the mission, vision, values and objectives that will underpin a coordinated approach to strengthen the financial sector and foster stable and robust economic growth. At the core of this strategy is the development of a diversified and more resilient economy - which will have lesser reliance on hydrocarbon revenues - in which the financial sector will have a predominant role. In achieving the goals of the Strategic Plan, the financial regulatory infrastructure will meet international standards and best practices. Our endeavor is to provide a conducive and investor friendly environment through the implementation of NDS 2011-16.
The Economist Intelligence Unit warned recently that domestic banking competition is likely to become more intense, and as a result will increase pressure on the QCB's regulatory abilities. What is your response?
The regulations issued by QCB respond to the best international practices and requirements as put out by the international bodies, like the BCBS, FSB, IFSB etc. In this regard, the resources available with QCB are the on-site examiners and off-site examination unit to monitor the requirements and compliance with the risk-based supervision. Apart from these resources, external auditors have been required to audit/review some of the requirements from the point of compliance and proper application of the intent of the regulations. External auditors can also be required to undertake special assignments to examine specific aspects that may be required by QCB as it may be necessary.
Qatari banks have expanded internationally in recent years. Do you foresee further international expansion or more domestic consolidation, or a mix of both?
Banks may expand internationally or domestically as per business opportunities foreseen by the banks and their business strategy. QCB does not interfere in the business strategy of banks. However, banks are required to seek the prior approval of QCB and comply with the requirements of consolidated supervision.
Do you foresee greater inter-GCC banking and financial cooperation? Potentially even a GCC Central Bank?
There is already financial and banking cooperation between the GCC countries. As a part of efforts to increase economic integration between GCC nations, the Cooperation Council is in the process of harmonizing banking supervision through Banking Supervision Committee. This is intended to reinforce financial stability in GCC and an enabler for planned Monetary Union amongst participating Member States. A Monetary Council has been established to prepare blue-print for the creation of GCC Central Bank. These bodies meet frequently.
Has the QCB had to hire more staff to enforce regulations as well as to ensure a risk-based approach to supervision is being implemented? And how does Qatarization figure into this?
QCB’s Supervision and Control have been hiring qualified Qataris and carry out training continuously. Competence, training and continuing professional development are the pillars to ensure high standards.
The financial sector has grown by leaps and bounds over the past decade, but the insurance sector is still in its nascency. The insurance sector is now overseen by the QCB, and the strategic plan aims to bolster the sector. What are your aims and forecasts for the insurance sector in the years ahead?
The insurance supervision and control department aims generally to reach international insurance standards within the few following years. To do so we have developed the insurance and insurance related activities regulations which will be applied gradually. We have set capital requirement to strengthen the insurance companies financial stability, and we are intending to supervise the companies closely to ensure that they are complying with those regulations.