By Andy Sambidge
Central bank governor says Qatar banks have fared better than most amid slowdown.
The level of non-performing loans in Qatar's banking sector is low and banks remain profitable, central bank governor Sheikh Abdullah Bin Saud Al Thani has said.
Sheikh Abdullah said the performance of Qatar's banks compared favourably with that of many financial institutions currently operating on the international stage.
"Banks are well-capitalised and remain profitable, with low non-performing loan ratios," he said. "This needs to be considered in the context of the global crisis at a time when banks in many developed countries are struggling to remain profitable."
His comments follow a report by Standard & Poor's which said Gulf Arab banks may see further increases in non-performing loans.
Banks across the Gulf region have suffered after the multi- billion dollar debt restructuring of two Saudi family holding companies, Ahmad Hamad Algosaibi & Brothers Co. and Saad Group, it said.
Sheikh Abdullah said he believed the decision to offer support to the sector on a piecemeal basis as the crisis unfolded was instrumental in cushioning Qatar's banks from the worst of the fall-out.
"The equity injections of October 2008 were made at a time when international financial markets were turbulent, while in March and June last year, further measures were introduced aimed at improving the banks' liquidity profile to enable them to continue lending," he said.
"While each action targeted a specific item on the asset side of the banks' balance sheets, the primary aim was to reinvigorate financial intermediation and maintain financial soundness."
Sheikh Abdullah's comments came in an interview with Oxford Business Group (OBG), the global publishing, research and consultancy firm.
He acknowledged that the need to support Qatar's banks in managing risks had become heightened in the wake of the economic crisis.
"Liquidity risk, which was not viewed as particularly significant until recently, is now at the forefront due to recent events. But any type of risk is capable of inflicting significant damage on banks' balance sheets," he added.