What were the highlights of Qatar's financial system last year? How has the pandemic affected stability and what measures have you taken to counter its impact?
The banking sector, with a high level of capital and a low delinquency rate remains safe, sound, and solid. The proactive regulatory and supervisory approach of QCB ensures smooth sailing of the financial sector during the challenging periods. Enhanced macroprudential regulation and introduction of IFRS9 standards, necessitated banks to increase the holding of high quality liquid assets and provisioning for non-performing loans. Moreover, the banking sector has improved its funded liquidity by lengthening the maturity structure and expanding the geographical diversity of its external sources of funding. To mitigate the impact of the COVID19 pandemic, the government had implemented a stimulus package of over 11% of GDP. Within this framework, market liquidity is ensured through QAR50 billion zero REPO facility. New credit facilities through a national guarantee scheme and deferring the repayment of loan installments assisted the affected business units to mitigate the business losses due to restrictions imposed to contain the spread of COVID19 to a greater extent. Digital financing and other financial innovations are other focus areas for the banking sector during this period. Social distancing measures, shifting customer preferences and continuously changing the technological environment provided necessary momentum to these activities. QCB on its part is in the process of providing an enabling regulatory infrastructure, which defines the environment under which the financial sector should operate, while ensuring protection of customers. Needless to say, to enhance digital financial transactions and to support the social distancing measures, QCB has launched the Qatar Mobile Payment System during the year, which provides a new and safe method for fast electronic payment.
What key policies and circumstances will determine the evolution of credit flow in Qatar in the next few years?
Qatar was quick to respond to the blockade and the economy sailed through the challenging macroeconomic environment successfully. The financial sector returned to normalcy after an initial period of capital outflows. Qatar pursued various reform measures to meet the needs of international investors. The major thrust of the measures has been to strengthen and increase the space for the private sector, create an environment conducive for attracting foreign investment, and ensure the development of a knowledge-based economy by leveraging technology. A new Strategic Plan for Financial Sector Regulation was published in 2018, in close coordination among the three domestic regulators. The strategy provided a roadmap to guide the financial sector in its future endeavor towards building a sound and resilient financial sector.
What would a consolidation wave mean for Qatar banking sector's profitability and efficiency, and how will this process develop in the next few years?
The merger of two banks in 2019 originated from the individual banks, where the banks came with the consolidation proposal and QCB provided the necessary approval after conducting legal and financial due diligence. The feasibility study conducted showed the merger would be beneficial with lower cost and higher efficiency. The latest result published by the merged banks indicated the same whereas the merged entity reported increase in profits for the half year ended 2020. The possibility of further consolidation of banks depends solely on the individual banks business strategy. It is not desirable for the central bank to stifle the creativity and drive for efficiency of the banking sector.