QATAR: New limits for banks’ securities investment

Qatar’s central bank has tightened its curbs on how much banks can invest in stocks and bonds, according to a circular released by the central bank and seen by Reuters.

Banks’ total investment in equities and debt instruments must be limited to 25% of their capital and reserves, though debt instruments issued by the government and national banks are exempt from the limits.

Previously, under instructions to banks issued in November 2011, the limits were 30% each for equities and debt instruments.

Among other restrictions, the central bank set new limits for investment in individual companies and unlisted securities, and introduced a 15% ceiling for total securities investment outside Qatar.

Real estate investment by Islamic banks will be limited to 10% of capital and reserves; previously, the limit was 30%.

The central bank did not give the reasons for its new rules, but Qatar is gearing up to spend tens of billions of dollars on major infrastructure projects, and it is seeking to develop its government debt market partly to help finance this.

The circular did not say over what time frame the new rules would be implemented, and central bank officials could not be contacted to elaborate.

The rules may push banks to free up more money to lend to infrastructure projects or invest in government debt, but may not have much immediate effect in forcing them to sell securities because not all banks have reached the limits.

A report by Jaap Meijer, regional head of financial research at Arqaam Capital, estimated Qatar Islamic Bank (QIB) would be most affected by the new rules, since it currently had 32% of its capital in equity and debt securities, 7 percentage points above the ceiling, while 19% of its capital was in unlisted securities, 9 points above the limit.

Qatar National Bank, Commercial Bank of Qatar , Al Khalij Commercial Bank and QIB exceed the limits for international investments, he said.

Among Islamic banks, only Qatar International Islamic Bank will be affected by the new curb on property investment, because it has a ratio of 29%, he added.

“The new regulations may push banks to transfer their excess liquidity out of the public capital markets into additional positions with the government and the other exempt entities, adding to their already sizeable positions,” the report said.

Obama aide defends surveillance

President Barack Obama does not believe the recently disclosed top-secret National Security Agency surveillance of phone records and Internet data has violated Americans’ privacy rights, his chief of staff said yesterday.

Denis McDonough, appearing on CBS’s Face the Nation programme, also said he did not know the whereabouts of Edward Snowden, the former NSA contractor who said he was the source of reports in Britain’s Guardian newspaper and The Washington Post about the agency’s monitoring of phone and Internet data at big companies such as Verizon Communications, Google and Facebook.

The administration has said the top-secret collection of massive amounts of “metadata” from phone calls – raw information that does not identify individual telephone subscribers, was legal and authorised by Congress in the interests of thwarting militant attacks. While he defended the surveillance, McDonough said “the existence of these programmes obviously have unnerved many people.”

Reported by: Caye Global News, Gulf Times

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