From quiet beginnings as one of the world’s smallest states, Qatar has emerged as a regional player as a result of shrewd investment in natural gas and sound economic management. Although oil and gas revenues still account for about 60% of GDP, the non-oil sector grew by 10.8% last year, and the financial sector is performing particularly strongly.
According to the Qatar Central Bank, local commercial banks’ total assets at the end of 2004 stood at QR92 billion (more than $26 billion). By March 2005 they had risen to just over QR103 billion. The country, however, has just 750,000 residents – of whom only 25% are citizens. GDP per capita earnings stood at $36,476 in 2004, and Qatar has a strong concentration of high-net-worth individuals.
Fourteen banks service this small but rich market – seven local and seven foreign. The clear leader is Qatar National Bank (QNB), with about 50% of total banking system assets. Established in 1964 as the country’s first Qatari-owned commercial bank, it is today half state-owned and half privately owned. Next in line is Commercialbank, which was created in 1975 as Qatar’s first wholly privately owned commercial bank. Also operating are Doha Bank, Qatar Islamic Bank and Qatar International Islamic Bank.
The sector also includes two local banks in which foreign institutions have recently bought strategic stakes. In August 2004, Bahrain’s Al-Ahli United Bank acquired a 40% stake through a private placement in Al-Ahli Bank. That same month National Bank of Kuwait bought a 20% stake in Grindlays Qatar Bank, which has now been renamed International Bank of Qatar. According to CK Krishnan, executive manager of wholesale banking at Doha Bank, the entry into the market of NBK and Al-Ahli means that “competition among local banks is going to heat up”.
Foreign banks active in Qatar include HSBC, Standard Chartered, BNP Paribas, United Bank, Arab Bank, Bank Saderat Iran and Mashreqbank. Of these, HSBC and Standard Chartered are considered the most active. HSBC, as well as having been involved “in practically every oil and gas project financing, in a lead arranger position, in the past five years”, offers the local market the full spectrum of banking services, says Kapil Chadda, the bank’s local director of investment banking.
HSBC has recently become the first to set up a local investment banking presence, and is active in international debt capital markets, equities business, advisory services, and global markets business. “We’re trying to address the flow of money in Qatar, and facilitate that flow into projects and initiatives, then help manage the flow of funds out of Qatar,” says Chadda.
All banks, financial institutions and exchange houses in the country are regulated by the central bank, which does not operate independently of the government. It requires all banks to meet the Bank for International Settlements’ standards, although most maintain a capital adequacy ratio above the 8% requirement.
Although some local bankers suggest that the regulator’s position on Basle II is unclear, Hamad Almannai, an adviser in the central bank governor’s office, says that banks will indeed be expected to meet Basle II standards. In fact, one local banker says that the central bank is set to enforce the regulations as of the beginning of 2006, a year ahead of the BIS’s schedule. However, he argues that the central bank is unduly fixated on the reporting of capital adequacy (with Gulf Cooperation Council member state banks already being overcapitalized), and fails to understand the full scale of the changes required by Basle II.
