1. Financial Sector Assessment Program (FSAP)  

To further enhance financial stability and soundness of the banking and financial sector, Qatar has joined the IMF/World Bank’s Financial Stability Assessment Program (FSAP).  The FSAP was initiated in May 1999 by joint efforts of the IMF and the World Bank.  Today, it is widely recognized by the international community as an important instrument for diagnosis of potential vulnerabilities in the financial sectors of member countries of the IMF and the World Bank.  The program involves experts from a range of national and international agencies working together to analyze the strengths and vulnerabilities of a country’s financial system; to assess how key risks emerging from the financial sector are managed; to ascertain sector’s developmental and technical assistance requirements and to prioritize policy responses.  FSAP goes a long way in improving a participating country's surveillance systems and also enhances its capacity to absorb macroeconomic shocks.

Benefits of FSAP Participation  

FSAP offers numerous benefits to participating countries, which may be summarized as follows:

1. Provides member countries with comprehensive and system wide approach to analyzing financial sector issues.

2. Offers fresh perspective provided by independent review by objective outsiders.

3. FSAP participation improves financial surveillance, which in turn gets reflected in greater data availability, better assessments of financial system strengths and fragility, and sounder analysis of potential impact of financial crises on macroeconomic conditions.

4. Provides an opportunity for self-assessment, discuss supervisory and regulatory practices with experts from other countries and to compare practices.

5. Identify vulnerabilities, prioritize reforms, and focus attention domestically on the need for reforms.

FSAP Schedule for Qatar  

The first FSAP Mission is now scheduled to visit Qatar in January 2007.

2. Basel Committee on Banking Supervision (BCBS)

The BCBS is one of the key international groupings for banking supervisors.  Its main objective is to formulate broad supervisory standards and guidelines, and recommend standards of best practice in the expectation that individual authorities will take steps to implement them through detailed arrangements—statutory or otherwise—which are best suited to their own national systems.

Much of the committee’s work has been associated with formulating capital adequacy framework for banks.  In 1988, it introduced a capital measurement system commonly referred to as the Basel Capital Accord.  The system advocated the implementation of a credit risk measurement framework with a minimum capital standard of 8% by the end of 1992.  The 1988 Accord was replaced by a New Capital Adequacy Framework in June 1999 which consisted of three pillars namely;

(1)   Pillar 1: Minimum Capital Requirements.

(2)   Pillar 2:  Supervisory Review Process.

(3)   Pillar 3:  Market Discipline.

The 1999 Accord underwent further revision after extensive consultations and interactions with banks and industry groups, resulting in a revised international capital framework in June 2004.  This is also known as Basel II.  The revised framework is designed to establish minimum levels of capital for internationally active banks.  It advocates more risk sensitive capital requirements and has proposed a detailed set of minimum requirements that assign a risk weight to each category of bank asset; thereby ensuring the integrity of internal risk assessments.

The Basel Committee also endeavors to promote adoption of sound supervisory practices worldwide.  Thus, it has developed a “Core Principles of Effective Banking Supervision.”  These principles relate to preconditions for banking supervision; quality of information required from regulated entities; licensing of banks; types of formal powers required by supervisors; and mechanisms needed to deal with cross-border banking issues. 

QCB’s Approach to Basel II 

QCB is committed to implementing Basel II on all banks operating in Qatar by January 2006.  QCB’s progress in complying with the standards prescribed by Basel II may be summarized in the following table.

Implementing Basel II:  QCB’s Approach

(See attached table)