Posted on October 10, 2014
Authorities are mulling ways to insure bank deposits against risks of loss and provide protection to other investors, said The Peninsula.
The idea is to boost the confidence of bank customers and the banking industry and promote investments in other avenues. An extensive, joint study continues at the behest of the major regulatory bodies concerned with banking and financial services, securities and insurance businesses. They include the apex regulator, Qatar Central Bank (QCB), Qatar Financial Markets Authority (QFMA) and Qatar Financial Centre Regulatory Authority (QFCRA).
Al Sharq reported yesterday that the study aims to create an environment of protection and confidence for banking and financial services sector customers and investors. The proposed protection system is to be part of a new strategic plan for Qatar's fast-evolving banking and financial services sector and the capital markets. Such systems in major countries around the world are being studied and proposals discussed with local banks and other agencies concerned.
Under new rules being framed, banks would be asked to treat customer details highly confidential, Al Sharq quoted banking industry sources as saying. The study is expected to be approved sometime next year and the protection mechanism may be put in force after completing legal and other formalities. There is also a possibility that an environment may be created whereby ombudsmen could be appointed to look into investor complaints, including those by bank depositors.
It is not known if the protection system would provide guarantees by way of insurance for a minimum level of bank deposit or entire deposits. Many countries provide guarantees against loss of minimum deposit amounts. Contacted by this daily, a senior banker said he didn't think protection for deposits was needed since banks were highly liquid. "Liquidity has never been an issue with banks in Qatar. In fact, the country has high surpluses," said the banker on grounds of anonymity.
But top economist and investment analyst, Abdullah Al Khater, welcomed the proposal although it was 'belated'. "A protection system would provide the much-needed confidence to depositors and investors as well as service providers," he said. According to Al Khater, Qatar should have implemented the insurance system for bank deposits after the global financial crisis triggered by some Western banks raised its head in 2008. The US, European Union member-states and several other countries, including India, have such systems in place. They also have insurance ombudsmen and other statutory bodies that look into stock investor complaints.
Al Khater said once a protective mechanism is in place, investors would be fearless and panic withdrawals from banks in situations of emergencies would not take place. The flow of investments into various avenues in Qatar will also increase, he hinted.