Islamic finance windows to cease operations by the 1st February 2013 (By IFN)

Islamic finance windows to cease operations by the 1st February 2013

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QATAR: The rules prohibiting operations of Islamic windows by conventional banks in Qatar will take effect on the 1st February 2013, according to an announcement by the Qatar Financial Center Regulatory Authority (QFCRA). The change, which has been imminent since the end of 2011, is not expected to have a glaring impact on the Qatari banking sector as conventional banks have had ample time to adjust to the new changes. Since the announcement, the Qatari banking sector has also seen a flourishing of new Islamic banks looking to capitalize on the separate rules and regulations. The amendments, dubbed the Islamic Finance Amendments Rules 2012, will see the closing of all Islamic window operations by conventional firms with the exception of Takaful which is conducted under the Insurance Business Rules 2006. Analysts at Beltone Financial also said: “The impact of this rule change will be minimal given the low level of activity conducted through Islamic windows.” The new laws include prohibitions on Islamic financial institutions from conducting other forms of financial businesses, and state: “An Islamic financial institution must not hold itself out as conducting financial business other than Islamic financial business; and must not carry on any regulated activity otherwise than in accordance with Shariah.” A recent report by Fitch Ratings also noted that the Qatari banking space will see increased competition between Islamic and conventional lenders with the implementation of the new laws. It added: “Asset quality (of Qatari banks) should continue to improve, with government spending flowing freely, mainly into the real estate and construction sectors. Asset quality ratios are perhaps flattered by rapid loan while interest rate caps will also make retail lending less attractive to the banks. As loans loss coverage is very high and NPLs (Non Performing Loans) have probably peaked, pressures on earnings from impairment charges are likely to be low.”