Progress Towards a Single Financial Regulator in Qatar

Posted on June 11th, 2013

Since the establishment of Qatar Financial Centre (QFC) in 2005, the financial services sector in Qatar has been subject to the supervision and regulation of two separate and distinct jurisdictions comprising the laws of the State of Qatar and the regulations and rules of the Qatar Financial Centre. The idea of having a comprehensive, integrated and effective regulatory framework became therefore primordial.

The plan for a unified market watchdog in Qatar is not new. It was first announced in 2007. The idea was to combine the Qatar Financial Central Regulatory Authority (QFCRA), the Qatar Financial Market Authority (QFMA) and the Qatar Central Bank (QCB) into one entity for the purpose of attracting more international financial services companies.

Although little progress has been observed in this aspect since, mainly because of the global economic crisis, the government of Qatar remained committed to the objective of establishing a single unified regulator that is of high importance and necessity.

“The benefits of a single integrated regulator are considerable and include ensuring consistent high standards across all markets and increased growth opportunities for financial services in Qatar”, said the QFCRA in its annual report in 2011. “In time, such an initiative will also aid the diversification of Qatar’s economy, reduce uncertainties and administrative costs for financial market participants and deliver effective regulation and enforcement of the financial services perimeter by ensuring that all financial services conducted in Qatar are properly licensed and subject to real supervision”, the report added.

However, the creation of such an entity will have to overcome some unique challenges, experts say. For example, each jurisdiction implement different rules for financial institutions, a problem would rise if they take different approaches toward regulation in some cases. Another interesting issue is the different languages that each jurisdiction uses. While the official language in the state is Arabic and its laws are published in Arabic, the rules and regulations of the QFC are in English and submissions to the QFC authorities are required to be in English or translated into English if originally in another language. Experts see that in the event the authorities determine that for the sake of continuity one language should take precedent over another, the relevant rules and regulations will have to be translated into the alternative language. Experts also insist that although it appears that each member of the regulatory body (QCB, QFRA and QFMA) will be ultimately reporting to the QCB, the question of the way the regulatory body will be interacting with one another remains unsolved.

Despite these obstacles, Qatar does not seem to have given up on its goal announced back in 2007.

On March 12, 2012, the QFCRA announced the composition of its new Board of Directors following their appointment by the Council of Ministers. QCB’s governor HE Sheikh Abdulla Bin Saud al-Thani has become the chairman of the QFCRA.

This step that has been described as the first practical step towards establishing a single regulator in the Gulf Arab state was followed by an even more significant step towards the same objective.

On December 12, 2012, QCB, QFCRA and QFMA have welcomed the enactment of the Law of the QCB and the Regulation of Financial Institutions (Law No. 13 of 2012). This new Law mandates the QCB to act as “the competent supreme authority in framing the policies for the regulation and supervision of all financial services and markets in the State”. QCB shall execute this role through a Financial Stability and Risk Committee, established by the new Law.

The governor of QCB will head the committee and the panel would have members from the QFMA and the QFCRA along with experts and officials from QCB itself, from different banks and financial services entities and from insurance companies as well.

Although this does not mean that a single rulebook for QFCRA, QFMA and QCB has been reached in the State of Qatar, but as HE Sheikh Abdulla Bin Saud al-Thani said: “it is definitely an important step in building a resilient financial sector, which operates to the highest international standards of regulation and supervision and best practices”.

“Importantly, the new Law formalizes, through the Financial Stability and Risk Committee, the excellent level of coordination and collaboration that exists between the Central Bank, the QFCRA and the QFMA”, HE Sheikh Abdulla Bin Saud al-Thani added.

By Aline El Sayed - Senior Associate - Al Misnad Law - In Association with the Law Offices of Khalifa Al Misnad