Qatar, blockaded by three of its Gulf neighbours since June, is capable of supporting its banks with assets in the country’s vast sovereign wealth fund and foreign currency reserves, the central bank governor said. Stress tests routinely conducted by the central bank show the strength and efficiency of Qatari banks in the face of the “arbitrary measures” imposed by the siege countries, Qatar Central Bank Governor HE Sheikh Abdullah bin Saoud al-Thani said on Wednesday.
Qatar is spending heavily to support its banks and defend the currency’s peg to the US dollar. “The government and the central bank are able to support banks with the holdings of the large sovereign wealth fund and the large state reserves,” Lusail news service quoted Sheikh Abdullah as saying. The central bank posted excerpts from the report on its website.
Sheikh Abdullah said banks should only consider the government and the central bank supplies of funds as the last resort, implying that they must first seek other sources of financing.
“The bank will not intervene in the management of the private liquidity of banks as long as they obey prudential requirements,” Lusail quoted him as saying. Sheikh Abdullah said that domestic liquidity was up 8.3% at the end of July while the monetary base had grown 1.7%. The Qatar Investment Authority, the sovereign wealth fund, pumped almost $40bn of the $340bn it controls into the economy and financial system in the first two months of the siege, Moody’s Investors Service said on September 13. Most analysts believe the QIA can easily continue defending the banks and replenish the central bank’s reserves.
Adequate capital, availability of liquidity and high profitability enjoyed by Qatari banks mean the lenders aren’t at “high risk,” the central bank said in the statement. Broader money supply grew more than 8.3% in July, while the monetary base grew 1.7%, further signs of strength, it said. The QCB has been telling lenders to tap international investors to raise financing, instead of mainly relying on the government, people familiar with the matter told Bloomberg in August. Qatari lenders have also been asked to keep track of foreign partners that have maintained business with them, as well as those that have scaled back lending during the boycott.