State of Qatar: Introduction to Key Indicators and Regulatory System

1. State of Qatar: Introduction to Key Indicators and Regulatory System Dr. Ali Al Amari Sr. Director Supervision, Authorization &AML IFN Asia Forum: Kuala Lumpur, October 2011

2. Major Points Key Indicators Regulatory System In the State of Qatar. Introduction • QFCRA,QCB,QFMA and MBT QFCRA Objectives • QFCRA Law, Structure, Regulations, Rules and Licensing • Major Development & Collaboration Regional Development Regulatory Challenges Conclusion

3. STATE of QATATR “Occupying the small Qatar Peninsula on the northeasterly coast of the much larger Arabian peninsula. Its sole land border is with Saudi Arabia to the south, with the rest of its territory surrounded by the Arabian Gulf. A strait of the Arabian Gulf separates Qatar from the nearby island state of Bahrain”. KSA

4. State of Qatar: Key Indicators Sources: World Economic Forum, the Global Competitiveness Report 2011–2012 S&P report September, 2010 International Financial Centers Overall Ranking, the Banker, October, 2011

5. Regulatory System In the State of Qatar QFCRA Qatar Central Bank QFMA MBT Banks Banks Islamic/ Conventional Stocks Market and Listed Firms Commercial Registration Asset Management Financial & Investment Firms Financial / Non-financial Insurance Firms. Insurance A Proposal to unify these under one single regulator is under discussion! Exchange Houses Non-Financial Firms Payment& Clearance System and Monetary Policy

6. Introduction to Regulatory System in the State of Qatar • The Qatar Central Bank (QCB), the Qatar Financial Markets Authority (QFMA), the QFC Regulatory Authority (QFCRA) and the Ministry of Business and Trade (MBT) are the four main regulatory authorities entrusted with the responsibility of regulating and supervising the monetary, banking and financial system in Qatar. • The Qatar Financial Centre (QFC) – was established by the government of Qatar in 2005 to attract international financial services and multinational corporations to grow and develop the market for financial services in the region. • The QFC Regulatory Authority (QFCRA) is the independent regulatory body of QFC. It has been established to regulate firms that conduct financial services in or from the QFC. It regulates banking, insurance, Assets Management as well as non-financial firms in the AML aspects.

7. Financial Indicators for all Banks under QCB including Islamic Banks Source. Qatar Central Bank report 2009. and monthly balance sheet,2010 *3 Islamic banks and 6 Islamic windows of commercial banks. Total deposits equalled QR 247 billion. A recent QCB Circular to band conventional banks from providing Islamic finance, will be advantage for Islamic banks. • Total Assets for all Banks as of December 2010 QR. 420 billion • Total Capital for all Banks as of December 2010 QR. 416 billion

8. Distribution of Credit Facilities In Millions of QR Sources: QCB Monthly Monetary Bulletin-AUG 2011

9. Qatar Financial Centre Regulatory Authority Objectives • World class regulatory framework that allows authorised firms to conduct a wide range of activities related to collective investment schemes • High quality regulation to international standards, aligned with other global financial centers, recognized by internationally active firms and international regulators • Legislative framework designed to support effective and efficient conduct of business. Laws based on modern, widely used common-law based precedents • Develop the QFC as an asset management hub. • QFC Companies Registration Office (CRO) which processes, for collective investment scheme purposes, applications to incorporate Limited Liability Companies (LLCs) and Limited Partnerships (LPs) within the QFC.

10. Qatar Financial Centre Regulatory Authority • Established by QFC Law No. 7 of 2005 as the independent regulatory body of the Qatar Financial Centre (“QFC”) • Reports directly to the Council of Ministers • Regulates firms that conduct financial services in or from the QFC • The Board of Directors is comprised of senior international regulators with significant regulatory experience in the US, UK, France and Hong Kong • The regulatory regime is principles-based and in line with international best practice • Amendments to the QFC Financial Services Regulations require approval of the Council of Ministers • The Board of Directors of the Regulatory Authority approves all rule changes made by the Regulatory Authority • All changes and amendments are submitted for public consultation before implementation

11. QFC Law • QFC Law establishes: • - QFC Authority; • - QFC Regulatory Authority; • - QFC Regulatory Tribunal; • - QFC Civil & Commercial Court; and • - QFC Company Registration Office. • Identifies permitted activities which may be conducted in or from the QFC • Empowers the Minister of Finance to enact Regulations (some with the consent of the Council of Ministers) • Preempts civil law in its application to the QFC to the extent that it may conflict with QFC Regulations 11

12. Qatar Financial Centre Council of Ministers QFC Civil and Commercial Court – Appellate Division The Board: Chairman and CEO Non-Executive Members The Board: Chairman Delegated Member Non-Executive Members The Executive Team The Executive Team (Operated by the QFCRA)

13. Regulated and Non-Regulated Activities Regulated* Non-Regulated • Financial and banking business • Insurance and reinsurance • Money market, stock exchange & commodity market business • Insurance and stock broking • Money and asset management business • Islamic banking and finance business • Funds administration • Pensions business • Credit companies • Corporate finance • Financial advice and advisory work • Custodian services • Company headquarters and treasury operations • Provision of professional services including audit, accounting, tax consulting and legal services • Company formation and administration services • Ship broking and agency work • Provision of classification and grading services * For any regulated financial services business to be conducted in or from the QFC, it must be licensed by the QFC Authority, authorised by the QFCRA, and incorporated/registered by the QFC Companies Registration Office. 13

14. QFC Licensing & Authorisation Process Application, licensing & authorisation

15. Authorised Firms • Since 2005, 125 institutions have been licensed in the QFC • 72 of these firms were authorised to conduct regulated activities under authorisations granted by the Regulatory Authority; 53 firms conduct non-regulated activities • The QFC has attracted some of the most prominent firms in their respective sectors: • Global: Citibank , Deutsche, Barclays, Morgan Stanley, Nomura, Goldman Sachs, Bank of Tokyo Mitsubishi, AXA, AIG, State Street, ICICI Bank, SBI,Credit Agricole, Royal Bank of Scotland, ABN Amro and Sumitomo • Regional: Qinvest, QNB Capital LLC, BLOM Bank, Samba, Qatar First Investment Bank, Al Rayan Investment Bank

16. Qatar Financial Centre Regulatory Authority No. of authorised firms Category 1 = Deposit Taking Category 2 = Dealing in Investments (Principal) Category 3= Dealing in Investments (Agent) Category 4 = Arranging & Advising Category 5 = Full Islamic Financial Institution 16

17. Authorisations • Total QFC firms at 28th November 2010 • 72 authorised firms providing regulated services (including 10 direct insurers and 9 brokers) • 53 licensed firms providing non-regulated services 17

18. Regulatory Collaboration • The QFCRA has signed Memorandums of Understanding with leading regulatory bodies to enhance its supervision of QFC authorised firms, including among others: • Monetary Authority of Singapore • China Banking Regulatory Commission • Office of the Comptroller of the Currency (USA) • Commission Bancaire of France • BaFin (Germany) • Malaysia Central Bank (Bank Negara) • Bahrain Monetary Agency • Dubai Financial Services Authority • Reserve Bank of India • Central Bank of Ireland • Banking Regulation and Supervisory Agency of Turkey • Financial Services Agency of Japan. • The Memorandums of Understanding allow for exchanges of information and collaboration • QFCRA is also active in its support of strategic regulatory priorities for Qatar, for example partnering with the Financial Information Unit, the Qatar Central Bank, and the Qatar Financial Markets Authority on critical anti-money laundering initiatives 18

19. Major Development 2011/2010 • Anti Money Laundering & TF • According to the Law 4 of 2010 on Anti-Money Laundering and Combating Financing of Terrorism ( National Law applied by all regulatory bodies in the country), The Regulatory Authority has issued new rules on Combating Financial Crime Anti Money Laundering & TF. • The Regulatory Authority has successfully partnered with the Financial Information Unit, Qatar Central Bank, and Qatar Financial Markets Authority. The 3 regulatory bodies now have AML Rules that are broadly the same and consistent. • The Regulatory Authority also collaborated with the Ministry of Business and Trade on carrying out AML on site reviews of insurance companies and drafted the DNFBP Rules. • Qatar has successfully been removed from the FATF public statement on jurisdictions with strategic deficiencies in AML, as a result of this collaboration. • Asset management • Consultation Papers on changes to the QFC’s Asset Management regime were published in March and August 2010, and the Rules will be implemented on 1 January 2011. • Insurance, captives and re-insurance • A Consultation Paper on the development of a Captive Insurance regime in the QFC was published in June 2010. The final Rules will be implemented in 2011. In August 2010, the first captive insurance manager, Kane LLC, was authorised. • Training and Competency • The Regulatory Authority launched a ‘Training and Competence’ module to provide firms with a greater understanding of the regulatory regime in the QFC and developments in international regulation

20. Regional Development • The GCC countries have shown a great deal in developing and enhancing the business and economic environment to have market and economic stability and sustainable growth. Regulatory reform was evident since the year 2000 and maybe earlier. • Sound and effective corporate governance are an absolute necessity for healthy business environment . • Corporate Governance reform and enhancing supervisory approach , Basel requirements and risk management have started to gain positive result. Guidelines and Corporate Governance Codes have been issued by most of the GCC countries. • The Qatar Central Bank issued CG Guidelines on March 2008. • The Qatar Financial Market Authority (QFMA) issued CG Code on January, 2009. • Bahrain issued in 2006 amended in 2010. • Kingdom of Saudi Arabia CMA issued in 2006 amended in 2010. • QFCRA will issue a Guide for Corporate Governance very soon.

21. Regulatory Challenges. • Large and complex Islamic financial models require supervisors to understand the structure of Islamic organization and its financial activities and financial structure. • Islamic financial innovations are much faster than supervisory understanding. So, understanding risk management framework and inherited risk in Islamic products is crucial. • Islamic institutions are operating under different legal and regulatory environment so any lack of cooperation between regulators will have negative impact in disclosure, transparency and regulatory arbitrage. • Comply with international standards: • Risk Management, liquidity Risk, Shariaa Compliance. • Legal, Regulation and Fatwa harmonization. • Credit Risk, operational risk and market risk. • Basel II,III requirements • Solvency II and other insurance standards (Takaful challenges). • The financial crisis that the world witnessed during the past few years revealed weaknesses in legal environment and the regulatory system

22. Standards and Regulations • Rapid growth and expansion required a proper legal environment and sound regulatory system. • Legal and regulatory initiatives started in the 90s as a reaction to the fast expansion of Islamic institutions. • Malaysia and the GCC countries have shown a great deal in developing and enhancing the regulatory system. • Internationally, IFSB ,AAOFI and IIFM have become good references in providing standards and guidelines for the regulatory sector. • Most of the Central Banks around the world have set regulatory forms and guidance to regulate Islamic institutions.

23. IFI-Regulatory & Priorities Challenges Source: DaudVicary Abdullah, CIFP, Global Islamic Finance Leader, Deloitte , SECOND ISLAMIC FINANCIAL STABILITY FORUM Jeddah, Kingdom of Saudi Arabia - 14 December 2010

24. Conclusion • Islamic finance and Islamic institutions have been increased and expanded around the world. • Variety of Islamic products have been introduced into the market. • Islamic institutions are operating in different countries under different laws and regulations. • Islamic finance is a commercial model intending to gain profits according to Shariaa. • Islamic finance should be considered as investment and business opportunity for Muslims and non-Muslims. • Regulators, supervisors, international regulatory bodies and business leaders are required to have strong cooperation in providing roles and guidelines that should help in understanding Islamic finance and Islamic products. Enhancing transparency and home – host information sharing and minimizing regulatory arbitrage. • Working towards acceptable Islamic financial standards that will lead to harmonize Islamic regulatory system ,Sharia Fatwa and Islamic products.

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