Interview: Sheikh Abdulla bin Saoud Al Thani

What kind of changes will new financial technology (fintech) bring to the sector?

SHEIKH ABDULLA BIN SAOUD AL THANI: The government is actively promoting Qatar as a regional centre for fintech as new, cost-effective technologies are becoming increasingly prominent worldwide. Under the country’s Second Strategic Plan for Financial Sector Regulation 2017-22, fintech has been recognised as a primary tool for achieving long-term development goals for the financial sector. This will require the right regulatory environment, competitive operating costs, government support, funding and a robust financial services sector. There is strong momentum and new opportunities in Qatar to implement fintech such as digital payments, money management, lending, remittances and investments.

Alongside benefits, these innovations will also create new regulatory and operational challenges. Regulatory obstacles will need to be addressed through creating cross-border synergies in areas like knowledge sharing, investments and remittances. To ensure the safety and security of the domestic banking system, the QCB prohibited trading in bitcoin in February 2018.

How is the QCB looking to maintain a stable and robust financial environment?

SHEIKH ABDULLA: We have adopted a proactive approach to address local and regional economic challenges. Our objective as a central bank is to focus on exchange rates, prices and financial stability. Therefore, we formulate our policies based on evolving circumstances, implement various prudential requirements and focus on improving communication channels.

Additionally, we are continuing our efforts to strengthen the regulation and supervision of the sector in order to mitigate systemic risks. The QCB implemented International Financial Reporting Standard 9, with effect from January 1, 2018, after studying its impact on the capital ratios of local banks. Domestic economic conditions improved significantly towards the end of 2017; the current account recorded positive growth, while trade surplus grew by 44.8% during 2017.

Meanwhile, the global economy continues to improve and oil prices are recovering, which will result in a healthy fiscal balance. Given these favourable macroeconomic conditions, liquidity and funding structures in the sector have strengthened significantly and banks continue to report stable profitability. In 2017 capital adequacy ratios stood at around 16.8%, while non-performing loans were at 1.6%. Higher capital adequacy levels and quality of assets indicate that the local banking sector is able to withstand severe stress scenarios. Banks were advised to develop contingency plans to meet emerging challenges and stress conditions in consultation with the QCB. Higher growth in domestic deposits and a surplus in primary liquidity reflects a return to normality for the banking sector, which is now well equipped to support the private sector – especially small and medium-sized enterprises – and drive the economy towards self-sufficiency.

What points should be considered regarding the creation of a centralised sharia committee?

SHEIKH ABDULLA: The planned launch of a centralised sharia committee forms part of the broader, global approach to developing the Islamic financial services industry. In establishing such a framework, some key objectives will need to be considered. The committee should unify general sharia rules for each Islamic financial product to facilitate legal and regulatory supervision according to their legal structure and risk profile. This would help enhance the confidence and stability of the market, as well as improve transparency, integrity and market compatibility among Islamic banks.

Additionally, the committee should implement general principles to regulate and control board activities and auditing functions at sharia-compliant banks. It should also facilitate arbitration and dispute settlements between Islamic banks and other stakeholders.