The implementation of Basel III Pillar I capital requirements started in January 2014 among all banks in Qatar. PICTURE: Nasar TK

By Pratap John
Chief Business Reporter

Qatar is expected to implement next year “countercyclical buffers” with a view to maintaining the health of the country’s banks.
According to the Qatar Central Bank, the “modalities for maintenance of countercyclical buffers are being worked out and is expected to be implemented in 2016.”
Apart from significant macroeconomic developments, the performance and health of banks in Qatar were also impacted by major regulatory developments during 2014, the QCB said in its latest Financial Stability Review (FSR).
“Qatar has been in the forefront in implementation of international standards and regulation on the banking sector,” the QCB said.
The implementation of Basel III Pillar I capital requirements started in January 2014 among all banks in Qatar.
The banks were asked to comply with Basel III capital requirements like minimum capital ratios for common equity tier 1 capital, tier 1 capital and total capital ratio.
Furthermore, the banks have also been asked to maintain capital conservation buffer. The modalities for maintenance of countercyclical buffers are being worked out and are expected to be implemented in 2016.
Domestic systemically important banks (DSIBs) have also been instructed to maintain additional capital buffers in a phased manner from 2016. In July 2014, the QCB issued guidelines on the framework for DSIBs which deal with identification, calibration and treatment of DSIBs in Qatar.
The identification of banks as DSIBs is done on the basis of their size, domestic interconnectedness, complexity and substitutability. Six banks have been notified as DSIBs.
Capital requirements as per Pillar 2 are to be undertaken by banks under Internal Capital Adequacy Assessment Process (ICAAP) and reported annually to the QCB for review.
QCB said it is in the process of formalising the parameters and minimum requirements for the ICAAP process.
Supplementing the capital requirements, liquidity coverage ratio (LCR) requirements have been imposed on banks to take care of short-term liquidity. The minimum LCR required has been set at 60% starting from 2014 and will be increased by 10% every year to reach 100% in 2018, QCB said.
Banks are required to report LCR both on solo and consolidated basis. They are also notified to submit LCR in currencies which are significant for banks.
In addition, banks are required to maintain Net Stable Funding Ratio (NSFR) at a minimum of 70% starting from 2015 and increased by 10% every year to reach 100% by 2018.
Implementation of ‘Leverage Ratio’ started with effect from September 2014 as per the finalised Basel Committee on Banking Supervision (BCBS) document issued in January 2014 to test a Tier 1 leverage ratio of 3%. Financial penalties will be imposed on violation of the ratios.