DOHA, Oct 11 (Reuters) - Qatar's regulator has proposed extending its ban on onshore banks operating Islamic windows to include financial institutions in the Qatar Financial Centre (QFC), according to a consultation paper released this week.
Such windows allow conventional banks to offer Islamic financial services, provided that clients' money is segregated from the rest of the bank.
Last year the central bank banned Islamic windows in the onshore banking system, requiring conventional banks to close or divest their sharia-compliant businesses. Its motive was apparently to ensure a level playing field for Islamic banks.
Extending the ban would ensure that conventional banks could not take advantage of the QFC to skirt the ban. "The Regulatory Authority's proposal would create a consistent approach to Islamic windows within the State," the regulator said in the consultation paper, which is open to responses from the public until Nov. 12.
"Adopting this policy will align Qatar with international standing-setting bodies whose aims are typically focused on reducing regulatory arbitrage."
Islamic windows present disadvantages because of difficulties in properly supervising risks and the complexity of financial reporting, the statement added. But it said the amount of business conducted through Islamic windows in the QFC was already limited.
"The amount is very small. It's never been something that the QFC has gone out of its way to attract. This appears to be more of an attempt to achieve coherence across the financial sector in Qatar, rather than something that is business-driven," said a Doha-based analyst, declining to be named.
The proposed ban would also extend to insurance companies, although there are currently no conventional insurers operating an Islamic window in Qatar.
(Reporting by Bernardo Vizcaino and Regan Doherty; Editing by Andrew Torchia)
Keywords: ISLAMIC FINANCE/QATAR