In its contribution towards a healthy economy, the Qatar Central Bank has two core purposes:
1. Monetary Stability
Monetary stability means stable prices and confidence in the currency, which the QCB seeks to meet through using the monetary policy tools.
2. Financial Stability
Financial stability engages with detection and reduction of threats to the financial system. QCB monitoring system detects these threats, which may be reduced by improving the infrastructure and conducting financial and other operations comprise, for instance and in exceptional cases, acting as lender of last resort.
Objectives
- Stability of the QR exchange rate and its free convertibility to other currencies.
- Stability of domestic price levels.
- Financial stability.
- Other macroeconomic objectives without interfering with the above objectives.
Functions
- Manage and conduct operations related to exchange rate policy.
- Conduct and implement monetary policy and evaluate its conduct.
- Exercise the privilege of the issuance, and circulation of domestic currency, and adopt and take necessary security measures to prevent counterfeiting.
- Supervise and control the activities of financial institutions, i.e., banks, exchange houses, investment companies, financial companies, and representative offices.
- Conduct domestic public debt operations.
- Contribute to policies of financial stability.
- Act as a bank for all banks operating in the state of Qatar under the umbrella of QFC.
- Manage QCB’s reserves in foreign assets.
- Organize and manage bank clearing operations and payments system.
- Conduct studies and researches related to domestic and world economic developments.
- Extend advices and consultations to the Government related to financial and economic issues.
- Promote the banking sector in Qatar.
- Promote efficiency and development of the financial markets.
- Any other function that falls within its jurisdiction.
Financial Stability is a theme that has assumed great significance worldwide since the eighties on account of numerous financial crises that mostly affected the emerging market economies (EMEs) and occasionally, the developed countries. The increasing integration of financial markets across the world and the relative ease with which capital moves across countries has, in a way, increased the sensitivity of financial systems to macroeconomic shocks and contagion.
Financial system stability implies the absence of financial crises, or minimizing their emergence and mitigating their effects when they arise. Maintaining confidence in the viability and operational efficiency of the financial system is an essential element of financial stability. To achieve this, there are three important elements (Bank of England, 2004):
- Transparency: Transparency acts as an effective tool to discipline policy makers and market participants. For the former, discipline is derived from their desire to maintain and enhance reputation. For the latter transparency ensures discipline by eliminating distortions in prices.
- Credibility: It is important to maintain the credibility of the system as a whole. Agents must rest assured that the authorities would do everything to keep crisis at bay and act effectively in the event of a crisis.
- Surveillance: Surveillance is of crucial importance in augmenting the ability of authorities to avert a crisis. Monitoring the activities of financial institutions and major participants on a regular basis, enables authorities to identify problems in individual entities that are symptomatic of systemic difficulties.