Stress tests carried out routinely by Qatar Central Bank have proved the strength and efficiency of the Qatari banking system, HE the QCB Governor Sheikh Abdullah bin Saoud al-Thani has said.
In an exclusive interview with Qatar News Agency (QNA) Sheikh Abdullah noted that banks would be minimally affected by the strictest of controls and so banks do not face substantial risk threatening its ability to continue. That is due to their capital adequacy and the low level of debt delinquency. Banks are also highly solvent and profitable, His Excellency added.
He stressed that there was no liquidity crunch in the Qatari banking sector.
On Moody’s decision to lower the credit rating of Qatari banks, Sheikh Abdullah said that the “current abnormal geopolitical risks” were a big factor in the agency's decision. QCB believes the agency will amend that change in the very near future.
He expressed QCB's belief that local banks were “capable of facing the abnormal conditions” resulting from the siege enforced on the country. This belief stems from the faith the central bank has in international standards and the benefit of applying them, especially the ones related to capital adequacy and liquidity. Despite that, the central bank still took precautionary measures in the face of the negative impact of the oppressive siege.
One of those measures, the Governor said, was holding routine meetings with CEOs of banks operating in the country. Another measure was regulating daily the liquidity levels and cash transfers in the sector.
A third measure was carrying out stress tests for the worst case scenarios. There is also a detailed monitoring of the movement of deposits and foreign exchange dealings. Emergency plans were placed to face any potential risk.
Sheikh Abdullah noted that the international reserves of Qatar Central Bank were in line with international standards.
He described foreign currency reserve levels for local banks as excellent and added that it covers the market's needs. He noted that despite the fact that those reserves were 240% of the monetary base, they only represented 10% of the State of Qatar's reserves.
On the Qatari riyal's peg to the dollar and maintaining capital inflows to the state, Sheikh Abdullah said that the foreign reserves available to banks in general and to the central bank in particular were the guarantee to maintaining the peg. The surpluses in the current account, balance of payment, and the capital account support the reserves.
He noted that the Qatar Central Bank is working on achieving financial stability in the country through many mechanisms. Those include issuing regulatory instructions to the banking and financial sector in Qatar, in order to increase confidence in the sector and its capability of dealing with potential risks.
The QCB also issued instructions on how banks can evaluate their capital adequacy internally. There were also instructions on how to evaluate the need to add to reserve that is supportive in cyclical fluctuations.
The central bank is also using its policy tools to periodically evaluate banking and financial institutions. Those also provide data to Qatar Central Bank, which the latter revise through foreign auditors as part of the end of year audit, Sheikh Abdullah said.
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