Dec. 15 (Bloomberg) -- Qatari commercial banks will be required to transfer accounts from their Islamic divisions into a portfolio to be held by the central bank until they mature, under a rule separating the two kinds of finance.
“These will be carried in a portfolio, outside the activity of their business,” Central Bank Governor Sheikh Abdullah bin Saud Al Thani said in a telephone interview today. “We are not in the business of mixing the Islamic with the non-Islamic by the end of the year.”
The central bank sent a circular to commercial lenders in February ordering them to stop taking new Islamic deposits immediately and shut Islamic branches by year-end on concern they may be using funds from the conventional bank for Islamic loans. Banks have the option to transfer Sharia-compliant accounts to an Islamic bank, Sheikh Abdullah said in an interview with the Qatar News Agency on Dec. 11.
Doha Bank QSC, Qatar’s fifth largest lender by market value, will sell its Islamic arm and will have two months to complete the transaction, Sheikh Abdullah said. The bank will submit a report by Dec. 20 on how disposal of the division will take place, he said. “They are going to sell.”
Sale of Islamic assets “is not certain,” Doha Bank Chief Executive Officer Raghavan Seetharaman said in a telephone interview today. “Nothing is concluded. We have options open. If there is a good price, why not?”
The bank will comply with the order by converting its Islamic branches to conventional branches, Seetharaman said today. Sale of the Islamic division won’t happen before the end of the year, he said yesterday.
Islamic banks in Qatar, which include Qatar Islamic Bank SAQ, Masraf Al Rayan, Qatar International Islamic Bank and Barwa Bank, have faced competition in recent years from Sharia-compliant arms of non-Islamic lenders. Masraf Al Rayan shares have jumped 42 percent this year, while Qatar’s benchmark QE Index added less than 1 percent.
International Bank of Qatar, a private lender, is the only commercial lender so far to announce the sale of an Islamic arm. It agreed in August to sell its Al Yusr Islamic banking operation to Barwa.
Qatar National Bank SAQ, the country’s largest lender, said in October it will keep its Islamic accounts until they mature. HSBC Holdings Plc will close its Islamic banking unit HSBC Amanah in Qatar by the end of the year, Steve Bottomley, head of strategy and planning for the Middle East and North Africa, said in May.
To contact the reporter on this story: Robert Tuttle in Doha at email@example.com.
To contact the editor responsible for this story: Stephen Voss at firstname.lastname@example.org.