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Tue 6 Oct 2009 08:00 AM

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Qatar set to buy further 5% of banks' capital

Banking sources welcome move announced by finance minister in TV interview.

Banking sources in Qatar have welcomed plans by the government to buy another five percent of local banks' capital in December under a 2008 plan to deal with the impact of the global financial crisis.

"We bought five percent last year and God willing we will buy another five percent ... in December," Finance Minister Youssef Kamal told Doha-based Al Jazeera television on Monday.

Last October, the country's sovereign wealth fund, the Qatar Investment Authority, said it would buy 10 percent to 20 percent of listed banks' capital to boost confidence.

In March, Qatar said it bought $1.79 billion worth of listed banks' investment portfolios.

The move has been praised by bankers, according to a report in The Peninsula on Tuesday, after a year to forget in which some banks are likely to witness negative growth by year-end compared to 2008.

“The banks here are not desperate. They actually don’t need capital to survive. They can manage. But if the economy is going to grow next year, which surely will, there could be problems due to capital squeeze,” a banking industry source told the paper.

“In the worst case scenario, we are assuming no less than 20 percent banking asset growth next year. This will actually be 20 percent reinstatement considering the reversals of 2009,” the source added.

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