QCB faced a historic problem when the blockade began. What policy tools were used to defend the riyal and Qatar's banking system?
Qatar's economy responded well to the initial disturbances associated with the blockade and overcame the negative effects before the end of 2017. The blockade was handled successfully by various policy measures taken by the government and QCB. To ensure price stability, arrangements were made to establish alternative supply chains for the smooth supply of goods. We rerouted trade channels and initiated fresh trade relationships with other countries to avoid disturbance to external trade. The government also provided the necessary support to the SME sector to set up domestic production facilities. New ports were commissioned and warehouse facilities were improved. The Qatar banking sector, the mainstay of the financial sector, has remained sound and liquid, part of which was because of the introduction of Basel III guidelines back in 2013/2014, which ensured a strong capital base for the banks. The pool of high-quality liquid instruments with the introduction of treasury bills and bonds in 2011 also enabled the banks to withstand the sudden liquidity pull back from the blocked countries. QCB has also set up an internal emergency committee to monitor the developments in various segments of the financial sector. Based on its assessment by analyzing high-frequency data on select financial sector parameters, the committee provided suggestions for policy measures that could be taken by QCB. In response to a withdrawal of funds by the blockade countries, liquidity management measures were taken by QCB and supported by the government and public-sector entities. A speculative attack on the currency was also warded off through the announcement of our firm commitment to the peg. Legal investigations were also initiated against banks involved in speculative attacks. With the return of confidence, the stock market, which declined in the immediate aftermath of the blockade, has also fully recovered.
The recent upgrades and affirmations of international ratings agencies confirm Qatar's prudent management of its assets. To what policy move do you attribute this stability?
The government and QCB took a series of quick and proactive measures to tide over the aftereffects of the blockade, such that it had no lasting impact, and the economy rebalanced quickly in 2H2017. The government also took various measures to improve the investment environment, encourage local manufacturing industries, initiate self-sufficiency in diary and farm products, expand into new air and sea routes, offer visa-free entry, and enact fiscal reforms through expenditure rationalization, among others. These initiatives revived the economy and ensured more private-sector participation in the overall development of the economy. Indeed, QCB's active liquidity management has brought liquidity in the banking system back to complete normalcy, making the sector sound and profitable. Renewed international investor confidence also reinforced the stability of financial markets. QCB also proactively utilized communication channels to establish stability in the price of Qatari riyal within a short span of time. Thus, it is not one policy measure, but a combination of policies by the authorities that helped the economy prudently manage its assets.
QCB has been recently working on a platform to support fintech. What is fintech's potential impact on the Qatari banking system, and how does QCB plan to regulate it?
Fintech activities have grown exponentially in the global financial sector arena in recent years, and QCB is actively working on developing strategies to adapt to this changing horizon. Fintech can bring positive change to the sector, but also additional risks. It helps financial sector stakeholders streamline their processes to achieve more efficiency and faster delivery, in addition to facilitating communication with their customers to better understand their needs and enhance their access to financial services. Fintech is also known to increase the contribution of the financial sector to GDP, diversify the economy, and create new market dynamics, which is why we are formulating an approach to fintech that takes lessons from other major global initiatives.