Qatar’s central bank has tightened its rules on how much banks can invest in stocks and bonds, according to a report by Reuters.
Reportedly, banks’ total investment in equities and debt instruments must be limited to 25% of their capital and reserves, though debt instruments issued by the government and national banks are exempt from the limits.
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According to bank instructions issued in November 2011, the limits were 30% each for equities and debt instruments.
The central bank has set new limits for investment in individual companies and unlisted securities, and introduced a 15% ceiling for total securities investment outside Qatar.
Real estate investment by Islamic banks will be limited to 10% of capital and reserves which was 30% previously.
The circular did not say over what time frame the new rules would be implemented, and central bank officials could not be contacted to elaborate.
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By GlobalDataThese rules allow banks to lend more money on infrastructure project or invest in government debt.
Regional head of financial research at Arqaam Capital, Jaap Meijer expected that Qatar Islamic Bank (QIB) would be most affected by the new rules, since it currently had 32% of its capital in equity and debt securities, 7% points above the ceiling, while 19 % of its capital was in unlisted securities which were 9% above the limit.
Meijer said that Qatar National Bank, Commercial Bank of Qatar, Al Khalij Commercial Bank and QIB exceed the limits for international investments.
"Among Islamic banks, only Qatar International Islamic Bank will be affected by the new curb on property investment, because it has a ratio of 29%," Meijer added.
According to the report, "The new regulations may push banks to transfer their excess liquidity out of the public capital markets into additional positions with the government and the other exempt entities, adding to their already sizeable positions."
