- Islamic windows assets (% of total banking assets): QR54.7 billion (9.6%)
- Islamic bank assets (% of the total banking assets): QR119.3 billion (21.0%)
- Largest Islamic window (all other windows):Qatar National Bank, QR30.2 billion (QR24.5 billion)
- Largest Islamic bank (all other Islamic banks): Qatar Islamic Bank, QR51.8 billion (QR67.5 billion)
[QR3.64 = $1]
The Islamic banking system in Qatar is relatively large, with more than 30% of total assets, higher than the roughly 21% of total assets in Malaysia, which has been viewed as having expanded the Islamic banking system. Also, compared to markets like the UAE that are viewed as being "over-banked", the Qatari Islamic banking system is quite concentrated, especially the Islamic windows. The Islamic banking market is relatively more competitive, though the market is dominated by 3 banks: QIB, Masraf al-Rayan and Qatar International Islamic Bank.
The decision by the QCB to end Islamic windows for conventional banks (and also, it sounds like, prohibit them from investing in sukuk) was initially expected to boost Islamic banks at the expense of conventional banks, something which has not yet happened, according to the IMF. IT would seem natural that Islamic banks would benefit from an inflow of assets, though only one conventional bank (the International Bank of Qatar) has sold off its conventional portfolio. The remainder have held their assets and liabilities and allowed each to shrink through natural attrition.
This was probably not what the QCB intended, but they also did not provide much incentive for the Islamic windows to transition away from the conventional banks. The process of segregating the Islamic and conventional assets could have been accomplished differently (and better, in my opinion) had they allowed conventional banks to spin the Islamic windows off as independent subsidiaries that would be required to apply for a separate Islamic banking license. They would remain wholly-owned by the conventional banks, but have their capital, management, board oversight and assets segregated from the conventional side (which I thought was the intent).
It would also facilitate the maximization of value for the conventional banks in exchange for losing a significant part of their business. Instead of selling a portfolio in run-off, they would be selling operational subsidiaries, for which they could demand a premium to what actually happened. While I understand some of the reasons for the move by the QCB, the way it was accomplished (and the suddenness of the decision) seems like a poorly thought out move to bolster Islamic banks. The questions the IMF raises (how to address a mismatch between assets and liabilities as Islamic windows are wound down, managing the transition to an Islamic banking oligopoly, etc).
There are a few more points from the report that interest me that I may hit on in my newsletter (pushed back to today by the long weekend). Sign up on the