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RBI CHIEF | Page 4 EMISSIONS ISSUE | Page 11 Aft er Rajan, VW ready with who? India $10bn plan; to search on devise fi x later Monday, June 20, 2016 Ramadan 15, 1437 AH EGYPT’S EXPENSIVE GRAIN: Page 3 World’s biggest GULF TIMES wheat buyer seen sowing confusion, BUSINESS reaping higher costs Gradual increase in QCB overnight QCB may postpone 100% deposit rate is ‘assumed’: MDPS loan-deposit compliance By Pratap John Chief Business Reporter Given the expected rate hikes by the Federal Reserve in the near term and the nature of the monetary policy under the Qatar Central Bank’s deadline amid liquidity (QCB) commitment to the exchange rate peg, a gradual increase in the QCB overnight deposit rate is assumed, the Ministry of Development Planning and Statistics (MDPS) has said. As Qatar’s currency is pegged to the US dollar, it has appreciated in both nominal and real effective terms since the middle of 2014, reducing imported shortfall issues: MDPS inflationary pressures, MDPS has said in its latest Qatar Economic Outlook (QEO) 2016-18. By Santhosh V Perumal The report said the nominal effective exchange rate Business Reporter (NEER) captures movements in bilateral exchange rates, weighted by respective volumes of trade flows. The NEER provides an accurate measure of iquidity issues may force the Qa- how the Qatari riyal is valued against the currencies tar Central Bank (QCB) to postpone of its major trading partners. The real effective Lthe deadline for compliance to 100% exchange rate (REER) adjusts for differential inflation loan-to-deposit ratio by one year to the end among its counterparts. of 2018, according to the Ministry of Devel- Qatar’s import bill declined in 2015 in part because opment Planning and Statistics (MDPS). the cost of goods and services diminished, MDPS “The deadline for compliance may be said. But the 12.7% REER appreciation from postponed until end-2018, given liquidity January 2014 to December 2015 has cut into the issues faced by Qatar’s banks, MDPS said in competitiveness of Qatari exporters with the Qatar Economic Outlook 2016-18. country’s primary trading partners, QEO said. The QCB had announced in early 2014 According to MDPS, the QEO’s forecasts are that local lenders should adhere to a new derived from an internally consistent numerical loan-to-deposit requirement of 100% by Liquidity issues may force the QCB to postpone the deadline for compliance to 100% loan-to-deposit ratio by one year to the end of 2018, representation of Qatar’s economy, based on the end of 2017. according to the Ministry of Development Planning and Statistics. PICTURE: Nasar TK standard economic accounting and consistency Highlighting that currently the deposit checks. The framework is based on a flow-of-funds side of the ratio includes only customer demand from the real estate and public sec- six GCC (Gulf Cooperation Council) bank- trols to bring them closer in line with the US model of the economy in which all sources of funds deposits and not long-term wholesale tors, MDPS said. ing markets, the ministry observed. Federal Reserve’s current rate: the deposit from the various sectors equal their total uses of funds, which have recently been the pri- “This shortfall in domestic financing Finding that in tandem the cost of fund- rate (0.75%), the loan rate (4.5%) and the funds. mary source of funding, MDPS said banks has taken the net foreign liability position ing has increased, MDPS said the Qatar repo rate (4.5%). The framework has been calibrated and updated are still in negotiation with the regulators of Qatar’s banking system to QR121.7bn as Interbank Off ered Rate (QIBOR) – a daily Additionally, the QCB could continue with known outcomes for 2015 and data revisions for to amend the loan-to-deposit formula to of March 2016, or 10.7% of the system’s reference point for banks borrowing unse- suspending Treasury bond issuances and 2012, 2013 and 2014. include long-term wholesale funds in the asset base, up from 4% a year earlier,” it cured funds from other fi nancial institu- reinstate the suspension of treasury bills. All GDP data forecasts are made on the basis of denominator. said. tions – has risen sharply over the past year. (After a four-month pause starting in early 2013 prices, following the current practice of the Lower oil and gas revenues have caused Tightening liquidity and fi scal concerns The overnight QIBOR increased by two- December 2015, QR1.5bn worth treasury Statistical Directorate of MDPS. public sector deposits in the domestic have pushed interbank rates and credit de- fi fth y-o-y as of May 11, when the three- bills – traditionally issued on a monthly ba- The main forecast assumptions are based on the banking system to shrink, tightening li- fault swaps upwards, it said, adding with month QIBOR climbed by a third. sis – was issued on April 5, 2016.) best assessment of the future made by MDPS and quidity and driving banks to raise funds strong demand for credit from the private Qatari banks’ eff orts to raise funds abroad Moreover, the QCB could also adopt un- draw on expert opinion as published in a wide range abroad, it said. and public sectors, banks have sought to have in part been due to falling public sector conventional measures akin to those used by of sources. Resident deposits – commercial banks’ furnish loans to clients amid slowing de- deposits, but also to meet Basel III require- central banks elsewhere, including the di- “Those on Qatar’s interest rates are based on the single largest domestic liability and fund- posit growth, helping to maintain the rise in ments, MDPS said. rect purchase of commercial bonds and the declared policy of the Qatar Central Bank (QCB) and ing source – dropped 2% year-on-year (y- the loan-to-deposit ratio. Stressing that the QCB has a range of acceptance of commercial bank liabilities expert opinion about the future trajectory of US o-y) in March 2016, when total domestic In April 2016, the ratio for domestic tools to tackle these issues, the ministry as collateral for QCB extraordinary loans or dollar interest rates,” QEO said. credit expanded by 13.9% y-o-y, driven by banks stood at 130%, the highest among the said it could reduce the three rates it con- equity injections in individual banks. NBAD, FGB in talks to form top Mideast bank State-controlled banks confirm they’re studying a combination; Bank stocks add $4bn in a each bank has formed working day aft er merger talks group of senior managers for deal Plans to create one of the Middle East’s largest lenders by assets spurred Bloomberg more than $4bn of gains in Abu Dhabi Dubai/London banking stocks in one day, Bloomberg reported. National Bank of Abu Dhabi and First ational Bank of Abu Dhabi and Gulf Bank led the surge yesterday after First Gulf Bank said they’re the lenders said in a joint statement Nin talks to merge in a deal that they’ve formed working groups to would create the largest lender by as- explore a potential merger. Financial sets in the Middle East. institutions including Abu Dhabi Com- A group of senior executives from mercial Bank and Union National Bank each of the banks is reviewing the com- joined the rally amid speculation the mercial, structural and legal aspects of move may be the start of a new phase a potential transaction, according to a of consolidation in the UAE’s banking fi ling to the Abu Dhabi stock exchange industry. yesterday. Bloomberg News was fi rst to Abu Dhabi-listed banks added 15.96bn report the two lenders were consider- dirhams ($4.35bn) to their market ing a merger on June 16. value, according to Bloomberg calcula- A deal would create a lender with as- tions. NBAD, as the bank is known, led sets of about $170bn and mark the fi rst the way with a 15% surge – the most major banking merger in the UAE since allowed in a single day – increasing its A merger deal of National Bank of Abu Dhabi and First Gulf Bank would create a lender with assets of about $170bn and mark the fi rst major National Bank of Dubai and Emirates market value by 6.25bn dirhams. FGB banking merger in the UAE since National Bank of Dubai and Emirates Bank International combined in 2007 to create Emirates NBD Bank International combined in 2007 rose 11%, boosting its worth by 6.08bn to create Emirates NBD. The country’s dirhams. NBAD is the UAE’s second-biggest build investment banking businesses of syndicated loans in the six-nation velopment is the biggest shareholder fragmented banking industry is ready bank by assets, while FGB is fourth- to compete with bigger foreign rivals. Gulf Cooperation Council last year, in FGB with a 7% stake. The bank’s for consolidation and a deal could ranked. A combination would help them “We assume the merger is motivated while FGB ranked seventh, according market value is about $14.4bn, accord- prompt further transactions among will help them to lend to larger entities overtake Emirates NBD as the country’s by the complementary balance sheets to data compiled by Bloomberg. NBAD ing to data compiled by Bloomberg. lenders, according to investment bank and take up a greater share of the syn- largest lender and represent nearly a and the scope for economies of scale in was also the second-largest arranger The news is “a surprise consider- EFG-Hermes Holding.

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