Bankers in the UAE say that Qatar’s ban on Islamic banking is a bad move.
The Qatar decision that bans Islamic banking in conventional bank institutions is sending waves of shock throughout the UAE banking sector.
Despite the fact that a similar move is not expected to happen in the UAE, the professionals there say Qatar’s move sets a bad precedent and creates uncertainty within the regional industry.
Commercial banks in Qatar have been ordered by the central bank to cease Islamic banking services by the close of this year.
A circular issued by Qatar’s central bank earlier this month stated that the decision to cease Islamic financing services operating within conventional banks went into immediate effect. The lenders were given a grace period that stretches to December 31, 2011, at which point the Islamic banking activities will need to shut down.
Leading institutions that are affected by the issuance are HSBC, Al Ahli Commercial Bank, Qatar National Bank, Doha Bank, International Bank of Qatar and the Commercial Bank of Qatar.
HSBC issued a statement saying that they are in the midst of communications with the central bank to get more clarification on the scope of the issue.
Bankers across the region are intrigued and somewhat baffled by the decision, considering the fact that only seven short months ago the governor of Qatar’s central bank, Shaikh Abdullah Bin Saud Al Thani, was involved in the inauguration of the Islamic banking branch of HSBC in Doha.
Conventional banking establishments like Mashreq and Standard Chartered have Islamic divisions in the UAE and were not issuing comments on the Qatar decision. Bankers region-wide note that this type of decision has a wide reach and effects will be seen around the region, especially on the Islamic banking participation of overseas businesses. One senior banker stated that the Qatar directive will adversely affect the confidence levels throughout the banking sector and will likely stifle growth in both assets and innovations.
Based on this decision, any conventional banking firm operating in Qatar will need to wind down and eliminate Islamic-based assets from the balance sheets before the end of this coming December. There has been no clarification as to whether those banks will be compensated for any losses that occur due to this decision.
Banking analysts note that this directive has major implications for those banking firms involved, as both physical infrastructures and staffing that have been built up over the previous years will be unnecessary by this time next year.
There are sixteen commercial banking branches offering Islamic banking services in Qatar currently.Paul Holdsworth, Staff Writer, Gulf Jobs Market News