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Qatar to prop up its banking system

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Points of Essence:

  • Qatari Government is on the offensive to boost a stalling financial system in the country to avert impact from the global financial crisis. The investment fund bail-out from 7 local banks has been in the pipe line to spur liquidity in the banking system and ensure solvency of the lender institutions. The International Herald Tribune has the report.

DUBAI: Qatari shares soared Monday after the government said it would buy investment funds from banks to help shield the financial system from the global credit crisis.

“Such procedures reflect the due concern of the government in the banking sector,” the government said.

Prime Minister Hamad bin Jasim bin Jaber of Qatar announced Monday that the government would buy investment funds owned by seven local banks to protect lenders after the benchmark stock index dropped 31 percent this year, ranking it among the world’s 10 worst performers with Iceland, Ukraine and Romania.

Qatar, the world’s biggest producer of liquefied natural gas, had $58 billion in sovereign wealth funds at the end of last year.

“This move will create additional buying power and improve liquidity in the banking system,” said Chamel Fahmy, senior regional sales trader at Beltone Securities Brokerage in Dubai.

Qatar’s move to support its banks follows a string of measures by other Gulf Arab governments to address the financial crisis and support banks, including rate cuts, deposit guarantees and emergency financing. It also comes after Moody’s, the ratings agency, recently gave a negative outlook for the Qatari banking sector, primarily due to the global economic slowdown expected to follow the financial crisis.

The government will buy the investment funds based on a price set after trading on Feb. 28, the statement said. The banks involved are Qatar National Bank, Doha Bank QSC, Commercial Bank of Qatar, Qatar Islamic Bank, Qatar International Islamic Bank, Al-Ahli Bank and Al-Khaliji.

The main trading index in Doha advanced 8.9 percent, the steepest climb since Oct. 14, to 4,783.38.

Qatar National, Qatar Islamic and Qatar Commercial banks all rose 10 percent, which is the limit.

“This is great news for the markets,” said Haissam Arab, chief executive of Gulfmena Alternative Investments, a regional specialist hedge fund company.

“By taking away the investment portfolios of the banks, the banks do not have to provision for any losses and can take it away from their books,” he said. “It boosts their solvency and supports them.”

Source: http://www.iht.com

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Written by Suapi Shaffaii

March 10, 2009 at 12:47 pm

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