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UPDATE 1-INTERVIEW-Qatar sees no worrying rise in concentration of bank lending

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* QCB puts limits on banks' exposure to individuals, sectors

* IMF says deposits and credit highly concentrated in Qatar

* QCB governor says deposits stable

(Adds quotes on lending ratios, background)

DUBAI, May 8 (Reuters) - Lending by Qatari banks has not become significantly more concentrated among borrowers, and the Gulf state is taking steps to ensure financial firms are not over-exposed to a small number of customers, the head of its central bank told Reuters.

Sheikh Abdullah bin Saud al-Thani also said deposits at Qatari banks were stable.

His remarks come after the International Monetary Fund (IMF) warned in February that both credit and deposits were highly concentrated in Qatar, and that the authorities should carefully monitor vulnerabilities in the banking system.

"No significant increase (in credit concentration) is observed by the QCB (Qatar Central Bank) during the recent period," Sheikh Abdullah said in a written answer to questions.

"The bank funding side has been stable for the past several years and the banking sector has never experienced any withdrawal pressure," he added, referring to deposits.

Qatar, the world's biggest exporter of liquefied natural gas, spent roughly 6.5 percent of gross domestic product on capital injections and other measures to maintain stability in its banking sector following the 2008 global credit crunch.

Regulators across the world are looking at ways to make banks stronger to prevent any similar crisis in future.

Qatar's central bank, which pegs its riyal currency to the U.S. dollar, rarely comments on policy and regulatory issues.

Bank lending is expected to take off in the coming years, with the Qatari government and firms planning to spend some $210 billion on new transport links and residential areas before hosting the 2022 World Cup soccer tournament.

Sheikh Abdullah said the QCB had put limits on the amount of lending banks could make to individual customers and sectors.

"The total investments and credit to a single customer for a borrower group is capped at 25 percent of the total capital and reserves of the bank," he said.

Credit concentration was measured and monitored using a ratio of large exposures to the total Tier 1 capital of a bank, he added.

Deposits of Qatari banks grew 18.3 percent on average to a record 581 billion riyals ($159.6 billion) in the first three months of 2014, outpacing the expansion in total credit, which increased 15.2 percent to 548 billion riyals.

RATIO SWITCH

When Qatar's massive infrastructure projects pick up, domestic lenders may become more reliant on foreign funding again, the IMF said in February.

A drying up of external liquidity could adversely impact the Qatari banking system, although its capital and liquidity buffers were high, it added.

The cash-rich OPEC member currently measures banks' health using a credit ratio - set at a maximum of 90 percent - that is less strict than the widely used benchmark loan-to-deposit ratio.

However, the QCB discussed with the IMF a proposal of the Gulf Cooperation Council Harmonization Committee to switch to a loan-to-deposit measure, Sheikh Abdullah said.

"They had proposed a ratio of 100 percent initially, which was reduced to 90 percent on the recommendations of some of the GCC central banks," he said.

By switching to the loan-to-deposit system from the credit ratio, whose denominator includes more items than just deposits, the QCB would lead banks to be more focused on growing their customer deposit base or reducing the amount they lend.

"As far as the QCB is concerned, it evaluates the credit portfolio of banks with respect to the nature, type of lending, concentration risks, etc. on an on-going basis. Any early warning signals are studied and discussed with banks," Sheikh Abdullah said.

($1 = 3.6410 Qatar Riyals)

(Editing by Mark Potter and Mark Trevelyan)