GCC Regulators Give Thrust on Risk Governance to Promote Financial Stability

Risk Governance

GCC Regulators Give Thrust on Risk Governance to Promote Financial Stability

The 7th GCC regulatory summit is hosted by Thomson Reuters and held on 25th and 26th February 2013 at St. Regis Hotel, Doha, Qatar. Dr. R.Seetharaman, the Group Chief Executive Officer of Doha Bank Group participated in the panel discussion “Corporate Governance in the GCC”on 25th February 2013. He spoke on “Are GCC regulators doing enough to supervise and enforce governance rules?”

Risk Governance

Speaking in the panel Dr. R. Seetharaman gave insights on the Global regulatory framework. He said “The light touched regulation failed to spot the risk which could have caused the crisis. Regulation should remain flexible to keep up with innovation in financial markets. Central banks should strengthen their frameworks for systemic liquidity provision. The Dodd–Frank Wall Street Reform and Consumer Protection Act in US implemented the regulatory reforms in response to the crisis. The SEC proposes tougher disclosure rules for Hedge fund and private equity firms Strengthening the oversight and regulation of shadow banking, building resilient financial institutions and ending “too big to fail are some the areas which are currently focused as part of Global regulatory reforms.”

Dr. R. Seetharaman highlighted the current trends in corporate governance followed by GCC regulators. He said “Qatar Central Bank (QCB) has provided corporate governance guidelines for banks and financial institutions. Recently Qatar Financial Centre( QFC) has released new rules relating to governance and risk management by requiring the governing body of a QFC authorised firm to approve and establish a formal governance framework, risk management and internal controls framework and remuneration policy. Saudi Monetary Agency (SAMA) has also provided principles of corporate governance. A recent move by Saudi Arabia on planning to open market for foreign investment will result in companies definitely trying to improve corporate governance practices. Oman banking regulations covers the duties, acts of directors, officers and employees of the bank. Corporate Governance benefits the GCC capital markets. Corporate governance will increase institutional participation and would bring a long-term perspective to the market and would also encourage the production of more high quality research. It will also support development of Bond market in the region.”

Dr. R. Seetharaman highlighted the measures brought by GCC regulators after the crisis to improve risk governance in the GCC. He said” QCB proactively assessed the various exposures like securities and real estate markets of all the Qatari banks under different stress scenarios. Qatari banks had to create a risk reserve to cover contingencies on loans and advances. In 2011 Qatar announced stricter regulations on personal loans capping margin and tenure and restrictions on transfer of loans. Again in 2011 Qatar brought regulations on credit card such as limits on withdrawals and maximum interest. QCB also brought credit bureau in 2011 and regulations on investments. In 2011 the UAE Central bank issued new guidelines on retail loans and fees and capped personal loans. Restrictions came on the repayment tenor on personal loans. The UAE central bank also prescribed maximum fees for banking transactions.”

Dr. R. Seetharaman highlighted the areas where Basel 3 focuses in relation to Governance and the measures to strengthen liquidity by GCC regulators. He said “The Basel Committee has given focus on Governance areas such as Board practices, senior management, Risk management and controls, compensation, complex or opaque corporate structure and disclosure and transparency. The UAE Central Bank has come up with regulation to improve liquidity risk management and governance framework. Some of the areas which are covered in this regulation include Board of Directors responsibility on liquidity risk management, senior management role in liquidity strategy, process for monitoring and controlling liquidity risks, forward looking funding strategies, periodic stress tests, formal contingency funding plan and transfer pricing frameworks.”

In his closing remarks Dr. R. Seetharaman said “In recent years GCC regulators have given thrust on risk governance to promote financial stability”