Analysis of the banking industry in Qatar - Research Paper Example

Section/# Qatar Banking Prospectus The level of competition currently exhibited within the banking industry in Qatar. With regards to the freedom and level of competition that currently exists within the Qatari banking sector, it should be noted that the level of competition and freedom that exists within Qatar far outweighs the same levels of freedom and competition that are exhibited elsewhere throughout the region. This is evidenced by the fact that when the financial crisis struck, rather than taking direct action within the banking markets, the QIA (Qatar Investment Authority – a branch of the government) aimed to work with the banks to seek to provide the needed fluid capital to avert any domestic issues that may serve as spillover effects of the global crisis.

Whereas a litany of other “more free” economic systems took federal action within the financial markets, Qatar sought to engage with the shareholders of the financial institutions indirectly rather than by taking direct action into the markets. 2. The laws and regulation set by government to reduce or increase competition in this industry. One of the ways that the government has actually served to decrease the level of competition that is currently exhibited within the industry is the way that it has chosen to cooperate fully with only handful of Qatar’s 18 currently operation banks.

Although this tacit approval mechanism is a means by which one, or a small group of banks can be raised over the others, it also serves to provide knowledgeable shareholders with which the government is comfortable with cooperating on some of the larger pipeline and oil/gas extraction fiduciary projects. 3. The financial crisis ant its affect on the industry. Although briefly mentioned earlier in this analysis, the main way that the Qatari government sought to avert the affects of the financial crisis of 2007/2008 was to involve itself directly with the banks to ensure that liquidity remained high enough to avert any of the negative externalities that were being witnessed elsewhere throughout the world at that time with regards to a general lack of liquidity.

As a means of doing this, the government of Qatar announced that they would be willing to take a 10-20% stake by means of capital injection into the banking sector. As it was noted that the economic issues associated with the global financial crisis would not intimately affect the banking system of Qatar to the degree that it was originally projected, the government reduced the level of proposed capital injection to around 5 percent over a period of several years. In this way, the observer can be aware of the fact that although the government of Qatar was willing and able to rapidly intervene in the financial affairs of its largest banks, it did so in a model that was in keeping with a well developed economic system with an advanced governmental structure interested in the preservation of its most important financial institutions.