Qatar Central Bank Role - Case Study Example

QATAR CENTRAL BANK ROLES IN SUPERVISING AND MONITORING THE FINANCIAL INSTITUTIONS IN QATAR Name of Student Institution affiliation QATAR CENTRAL BANK ROLES IN SUPERVISING AND MONITORING THE FINANCIAL INSTITUTIONS IN QATAR The Central Bank is an institution that is predominantly responsible for the currency issuance and printing, control of the currency through limiting the money supply in a particular country. On te another hand, it does this by setting the standards for interest rates of in these financial institutions. Qatar's Central Banks is given the supervisory and regulative mandate of other financial institutions in Qatar. The paper below reviews the fundamental role of Qatar's Central Banks in its supervising and monitoring roles of the other financial institution in Qatar. Qatar’s Central Bank is mandated with the r monitoring, and supervision responsibility of the other financial institution within the country in order to maintain a safe and stable financial institution in the country's financial sector.This ensures that trust between the public and the wider financial markets in the country. Qatar’s Central Bank provides a comprehensive overview of the country's banking and financial sector in general with the goals of supervising and controlling their financial policies. Qatar’s Central Bank boasts of vast knowledge and exposure in the country's banking and financial services industry (Singh, n.d.). Though the Qatar’s Central Bank awareness of the financial and banking operations, systems, products, and services enable it to come up with effective monitor and supervising policies to help it in its responsibilities in the country's financial markets. In this case, Qatar’s Central Bank assess and supervises financial institutions and banks’ ensuring that they adhere to the set articulated control and supervision policies and regulations. Off-site supervision Qatar’s Central Bank role in supervision and controlling of the financial institution includes off-site supervision. Its Off-site Supervision Department is tasked with monitoring of banks and other financial institution in the country in order to ensure the financial soundness of these institutions. This department under Qatar’s Central Bank ensures effectiveness in the enforced supervision and regulation policies. In the course of this task, this department carries out monitoring activities on the risk profiles, financial performance evaluation, and preparation of off-site risk reports, follow-ups the institution compliance (Neuenkirch, 2012). It also takes effective measures on the financial institutions that are found not to abide by these set policies and lastly recommend enforcement action to these financial institutions. This department has taken up various quantitative tools which help it do discharge these functions effectively. Some of the significant tools used by the Off-site Supervision Department under Qatar’s Central Bank are the CAMELS-BCOM rating system, profitability, large financial exposures, asset quality, liquidity, risk concentration, market risks, related party transactions and interest rates (Ehrmann, Eijffinger, & Fratzscher, 2012). On the other hand, this department uses the qualitative information in its monitoring and supervisory responsibility these includes; corporate governance, risk management from the on-site inspection reports, internal controls, reports of subsidiaries and supervisors operating abroad, external audit reports. On the other hand, it uses the Memorandum of Understanding, frequent dialogue and meetings with senior management from these institutions. On-site supervision The other role of Qatar’s Central Bank in monitoring and supervising financial institutions is carrying out on-site supervision. Through the On-Site Supervision Department, Qatar’s Central Bank assumes the monitory responsibility on the financial institutions and banks reviewing their financial activities. In this case, the On-Site Supervision Department ensures that these banks and financial institution have are abiding by the set laws, policies and regulations (Khiaonarong, n.d.). This department is also tasked with overseeing the combat of terror financing activities and money-laundering. It also issues regulatory instructions to these financial institutions and banks and also proposes penalties to the entities which have violated the set laws and regulations. The On-Site Supervision Department also conducts comprehensive inspections verifying the remedial measures being taken up by these financial institutions and banks in efforts to abide by the set policies and regulation. The On-site Supervision Department also relates to the Off-site Supervision Department in studies preparation reviewing policies and regulations set by Qatar’s Central Bank in ensuring a sound environment in the country’s financial department and markets. On the other hand, On-Site Supervision Department also offers recommendations to the Qatar’s Central Bank on remedies to curb financial problems in the country’s financial market and sector (Koulischer, n.d.). Through the On-Site Supervision Department, Qatar’s Central Bank also develops inspection methods for the banks and financial institutions, how to combat money-laundering and terror financing activities within the country’s financial department and markets. Licensing and registration The other role Qatar’s Central Bank under it supervisory and monitoring responsibility is through licensing and registration. Qatar’s Central Bank has licensed and regulated the financial institutions and banks in Qatar in order to ensure soundness in the country’s financial sector and markets. Article 40 of the Central Bank of Qatar and the 2006 Financial Institutions Law prescribes that no entity is allowed to take up any regulated services in Qatar unless licensed by Qatar Central Bank. The licensing process in this case ensures that all this parties are informed of any policies and regulation set a there they have agreed to abide by them (Mohit, 2013). The registration and licensing function of Qatar’s Central Bank is carried out by the Bank Supervision Department. The licensing and registration of financial institutions and banks is dependent on the internationally accepted standards for financial institutions and bank registration and licensing.Qatar Central Bank licenses all the financial institutions in Qatar through the help of supervision and surveillance process. In this case, Qatar Central Bank reviews the financial conditions of the financial institutions the commercial banks and financial institutions (Neuenkirch, 2012). Through the use of periodic information, it also monitors their financial operations reviewing whether they are abiding by the set standards and policies. This periodic information includes; interest rates of deposits and advances recorded on the weeky basis, assets returns and liabilities recorded on a monthly basis, expenditure and income and provisioning for doubtful and bad debts. Through licensing and registration the Qatar Central Bank ensures that it safeguards the prudent and sound management of payment institutions in Qatar. In this case, Qatar Central Bank will ensure that it only grant an authorisation to a potential financial institution provided that it is satisfied with the ability of these payment institutions ensuring that it will maintain the required organizational framework for these financial institutions. These organisations frameworks include; organisational structure which are transparent, are consistently responsible, well-defined and have effective procedures in place to identify, observe, manage, and report the risks to which it is exposed to. On the other hand, the organization framework also entails proper internal risk control mechanism which entails proper administration and procedures in accounting (Neuenkirch, 2012). Licensing and registration of the financial institutions by Qatar Central Bank, therefore, ensures that the applying financial institutions have met the set procedures, arrangements, and mechanisms and also ensuring that its business plan is comprehensive. Qatar Central Bank is also responsible for the compliance and supervision of the payment of the financial institutions when applying for registration. Oon the other hand, this responsibility to supervise these financial institution ensures that Qatar Central Bank is able to ensure that these financial institutions comply with the set licensing act through payment of grants to the Qatar Central Bank. Through licensing and registration of the financial institutions in Qatar, the Qatar Central Bank ensures that the financial institution being set up in the county are legit through reviewing the financial institutions sources of finance, financial projections and has the ability to be interest rate sensitive (Singh, n.d.). On the other hand though licensing of these banks and financial institutions the Qatar Central Bank is able to conduct internal supervision on these banks and financial institutions. This enables Qatar Central Bank to review their capital adequacy, earnings, management and Liquidity and Asset Quality. This helps in ensuring that these financial institutions and banks comply with the statutory requirements in Qatar's financial sector (Ehrmann, Eijffinger, & Fratzscher, 2012). Financial regulation The other role of Qatar Central Bank in supervising and monitoring the financial institutions is financial regulation. Qatar Central Bank is responsible for the regulating the finances of all financial institutions and banks in Qatar. The Qatar Central Bank, in this case, is responsible for both financial regulation and financial banking. Qatar Central Bank is therefore mandated with regulating the activities of investment intermediaries, stockbrokers, credit institutions, investment schemes, investor’s compensation and general funds. In the insurance industry, Qatar Central Bank is mandated with the responsibility to regulate the general insurance and life insurances (Khiaonarong, n.d.). On the other hand, it is also mandated with regulating the finance lending industry by regulating the finances of mortgages, Mooney lenders and credit intermediaries. Through financial regulation, Qatar Central Bank fosters fair and safe financial services to the Qatar’s public. On the other hand, it also fosters solvency of financial institutions in Qatar giving the customers confidence in these financial institutions by promoting their legitimacy. Through financial regulation, Qatar Central Bank also ensures consumer protection by making sure that the financial institutions and banks prudential requirements are met. On the other hand, it also ensures that the set competency requirements by these financial institutions and banks are met (Ehrmann, Eijffinger, & Fratzscher, 2012). Through enforcing the financial regulation on these banks and financial institutions, the Qatar Central Bank has come up with statutory codes of conduct which are set for the financial institutions to affects the financial regulation policies. These statutory codes of conduct ensure that the financial institutions and banks in Qatar act in a transparent and fair manner. Which is the best interest of the Qatar’s pubic. These statutory codes of conduct are enforced by on-site inspections and the Qatar Central Bank enforcement powers (Neuenkirch, 2012). Coordination of the country’s financial system The other role of Qatar Central Bank concerning supervising and monitoring financial institutions is coordination of the country’s financial system supervision and supervision unit. In this case, Qatar Central Bank carries out inspections on the countries financial institutions and banking information systems through its regular supervision. Through this activity, Qatar Central Bank reviews the technology used in the provision of financial and banking services by the banks and financial institutions. This is in an effort to ensure the soundness of financial transactions in Qatar. Qatar Central Bank also is involved in the execution of the country’s financial institutions and banks approved information systems programs (Mohit, 2013). On the other hand, Qatar Central Bank also provides remedies for all problems arising concerning the financial institutions and banks service provision technology. In this case, the Qatar Central Bank coordinates with Information Technology Strategic Planners who advise it in uses of financial service provision technological services that are best for the public. Qatar Central Bank in this case also determines the preparation and requirements of the financial institutions and banking computer hardware, systems and programs to be used. This ensures that the technological method used in the financial service provision is easy and efficient for the public (Koulischer, n.d.). Enforcement of the anti-money laundering (AML) law The other role of Qatar Central Banking supervising and monitoring the financial institutes in Qatar is through enforcement of the anti-money laundering (AML) law and countering the financing of terrorism (CFT). Qatar government through the 2010 Money Laundering and Terrorist Financing Act which was later amended in the year 2013 through the Criminal Justice Act gives Qatar Central Bank mandate to enforce the anti-money laundering law and Terrorist Financing Act. Qatar Central Bank, in this case, recommends the action to be taken by the Financial Action Task Force (“FATF”) in countering these issues (Ehrmann, Eijffinger, & Fratzscher, 2012). Financial Action Task Force (“FATF”) is a specialized international organization; this task focuses on Qatar’s fight against terrorist financing and money laundering. Qatar Central Bank is the competent authority in Qatar that monitors and supervises the compliance of the financial and credit institutions’ under this Act. Qatar Central Bank is therefore given the mandate to take up measures ensuring that these financial and credit institutions in Qatar comply with the provisions of the Act (Khiaonarong, n.d.). Qatar Central Bank is also mandated with ensuring that all banks and financial institution located in Qatar have installed proper monitoring systems as required ensuring that the finances of these institutions and banks are tracked. On the other hand in the enforcement of this Act, Qatar Central Bank also ensures that the noted suspicious transactions in these financial institutions and banks are reported and investigated conclusively (Neuenkirch, 2012). Evidently the role of Qatar Central Bank is quite fundamental in Qatar’s economy and financial sector. The roles of Qatar Central Bank can be claimed to cut across the country’s financial sector and economy. From the fiscal and monetary policy to the supply and demand chain within the country the role of Qatar Central Bank has proven to be fundamental in creating a conducive financial environment in Qatar. References Ehrmann, M., Eijffinger, S., & Fratzscher, M. (2012). The Role of Central Bank Transparency for Guiding Private Sector Forecasts*. The Scandinavian Journal Of Economics, no-no. http://dx.doi.org/10.1111/j.1467-9442.2012.01706.x Khiaonarong, T. Payment Systems Efficiency, Policy Approaches, and the Role of the Central Bank. SSRN Electronic Journal. http://dx.doi.org/10.2139/ssrn.444480 Khiaonarong, T. Payment Systems Efficiency, Policy Approaches, and the Role of the Central Bank. SSRN Electronic Journal. http://dx.doi.org/10.2139/ssrn.444480 Mohit, B. (2013). QALB: Qatar Arabic language bank. Qatar Foundation Annual Research Forum Proceedings, (2013), ICTP 032. http://dx.doi.org/10.5339/qfarf.2013.ictp-032 Neuenkirch, M. (2012). Managing financial market expectations: The role of central bank transparency and central bank communication. European Journal Of Political Economy, 28(1), 1-13. http://dx.doi.org/10.1016/j.ejpoleco.2011.07.003 Singh, R. The Role of Central Bank in Crisis Management. SSRN Electronic Journal. http://dx.doi.org/10.2139/ssrn.156761 Read More