Qatar capable of supporting banks amid boycott

[DUBAI] Qatar, the gas-rich nation boycotted by three of its Gulf neighbours since June, is capable of supporting its banks with assets in the emirate's vast sovereign wealth fund and foreign currency reserves, the central bank governor said.

Stress tests routinely conducted by the central bank show the strength and efficiency of Qatari banks in the face of the "arbitrary measures" imposed by boycotting countries, Governor Abdullah bin Saoud Al Thani said in statement on the regulator's website on Wednesday.

Qatar is being forced to spend heavily to support its banks and defend the currency's peg to the US dollar after Saudi Arabia, the United Arab Emirates, Bahrain and Egypt severed diplomatic and transport links on June 5, accusing Qatar of supporting Sunni Islamists and Iranian-backed militants. Qatar has repeatedly denied the charges.

Qatar pumped almost US$40 billion into the economy and financial system in the first two months of the standoff, Moody's Investors Service said on Sept 13. The Qatar Investment Authority, which in the past spent billions on assets around the world, is also becoming a seller.

Adequate capital, the availability of liquidity and high profitability enjoyed by Qatari banks mean the lenders aren't at "high risk", the central bank said in the statement. Broader money supply grew more than 8.3 per cent in July, while the monetary base grew 1.7 per cent, further signs of strength, it said.

Qatar's central bank has been telling lenders to tap international investors to raise financing, instead of mainly relying on the government, people familiar with the matter told Bloomberg in August.

Qatari lenders have also been asked to keep track of foreign partners that have maintained business with them, as well as those that have scaled back lending during the boycott.

The economy is likely to grow this year at the slowest pace since 1995, according to economists surveyed by Bloomberg in August. Gross domestic product expanded 0.6 per cent in the second quarter ended June 30 from a year earlier, compared with 2.5 per cent in the January-to-March period, according to official data.

BLOOMBERG