The evolution of Qatar banking sector: A short history
March 20 2016 12:14 AM
the evolution
The evolution of Qatar banking sector: A short history By Dr Abdulaziz A al-Ghorairi

LOCAL

To understand Qatar’s banking sector and the role it plays in the wider economy today, a useful exercise is to look the sector’s history and how it developed over time.
The evolution of the banking system in Qatar is quite different from that of many other countries.
The need for banking first rose from the exploration and export of oil in 1949 and was serviced, until Qatar’s independence by a mixture of foreign and Arab banks.
Until 1954, the Eastern Bank (now Standard Chartered Bank) was the only bank operating in Qatar. With a need to have more banks, the British Bank of the Middle East (acquired by HSBC), the Othman Bank, (formerly Grindlays Bank, acquired by Standard Chartered), and the Arab Bank began operations in Qatar in the 1950s, following by the Lebanese Bank, (now Al-Mashrek Bank) in 1960.
These banks served a fast-expanding economy with particular focus on servicing government needs and the oil sector.
With the entire economy almost wholly-dependent on foreign banking institutions, during the mid-1960s the government encouraged the creation of a number of domestic banks to strengthen the nation’s economic assets.
The first locally-owned bank was the National Bank of Qatar (QNB) set up in 1965 and since its inception, QNB has taken the place originally occupied by Eastern Bank as principal banker to the government.
Following the post-1973 oil price hike, the government granted permission to create new banks on a periodic basis, with Commercial Bank beginning operations in 1975. Since then, the number of banks in the country has grown substantially, and today a total of 18 banks licensed by the Qatar Central Bank make the Qatari banking sector one of the most competitive sectors in the region.
At present, there are three types of banks operating in Qatar: commercial banks (national and foreign) being the most dominant, Islamic banks and specialised banks (Qatar Development Bank). The evolution of Qatar’s banking system from the 1950s until today reflects the changes in the economy. Early on, Qatar lacked the means and the infrastructure for an indigenous banking sector to emerge, but with increased government wealth and increased awareness of the importance of creating an integrated national economy, the dynamics of the banking industry has shifted in favour of domestic banks with an ever-increasing role in the economy.
The past few years have been marked not only by an expansion in the size of the banking sector, but also its activities, level of services and an increased involvement of the government through the Qatar Central Bank in the regulation, direction and control of the sector in order to make it more efficient and competitive.

Dr Abdulaziz A al-Ghorairi is senior
vice-president, chief economist & head of asset management at Commercial Bank.



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