Authority proposes to block Islamic finance windows operating in QFC (By IFN)

Thursday 11^th October 2012

QATAR: The Qatar Financial Center (QFC) Regulatory Authority has released a consultation paper seeking feedback on its proposal to prohibit Islamic finance activities carried out through windows in the QFC. The plan follows the Qatar Central Bank’s ban on Islamic banking operations by conventional banks implemented last year. “The regulatory authority is proposing to make changes to its rules to remove the ability for authorized firms to commingle both conventional and Islamic regulated activities that it directly conducts under Shariah. These changes would require firms to operate as either a conventional finance or Islamic finance firm,” it said in a statement. The proposal also extends to Takaful and other Islamic finance business windows in the QFC, although there are currently no such activities undertaken in the center. Its consultation paper noted that Islamic finance has continued to expand in Qatar, the GCC and globally over the last few years. “However, there has been continuing debate around the regulatory framework for Islamic financial institutions and its relationship to the regulatory framework for conventional financial institutions, particularly with regard to allowing conventional financial institutions to operate Islamic branches and Islamic windows,” it added. The authority also disclosed that it recently reviewed its approach to the regulation of Islamic windows, focusing on the regulatory approach to Islamic windows internationally and the existing levels of Islamic window businesses in the QFC. While noting that there are advantages and disadvantages to the window model, it ultimately found that there are “significant challenges” in regulating and supervising banks which carry out conventional and Islamic banking; current limited business conducted through Islamic windows in the QFC and opportunities for regulatory arbitrage in allowing Islamic windows to continue in the QFC while they are not allowed elsewhere in Qatar. The authority’s proposals are open for public consult until the 12th November 2012.