Micro-prudential regulation focuses on the stability of individual components of the financial system and the ability of each individual institution to respond to unexpected risks. The aim will be to provide more effective regulation that includes strengthening the risk-based supervisory framework for banking, insurance and capital markets. Regulations will be aligned with international standards. The global financial crisis underscored the risk of focusing too heavily on regulation, at the expense of supervision. Supervision will need to be more demanding, risk-based and also aligned with international best practice.

Banking
A risk-based approach to supervision involves linking the level of oversight of a bank to its risks. Risk assessments will be conducted on a regular basis and will follow a systematic approach. In order to strengthen financial sector regulation and supervision, the regulatory framework for banks will be aligned with the Basel Core Principles, Basel III standards and international financial reporting standards (IFRS).

Building an effective framework for assessing and regulating systemically important domestic banks is also of prime importance. Moreover, the scope of oversight and regulation will take account of shadow banking entities that can pose inherent risks to the financial system.

Lastly, risk-based supervision will be further strengthened by the design of risk scores to characterise the risk profile of banks for effective monitoring. Accordingly, supervisory action will be linked to these scores for the mitigation of such risks.

Insurance
The regulation of the State insurance sector in the next few years will be influenced by two developments. Firstly, the responsibility for insurance regulation (given to the QCB under the new QCB Law) will require the implementation of new regulations and a new supervisory framework. This work will also involve the development of a new department in the QCB to supervise insurers and insurance service providers.

Secondly, the regulatory framework for insurance in Qatar will be aligned with the recently revised IAIS Insurance Core Principles. The revised principles give increased emphasis to governance, prudential standards and group supervision. The QFCRA remains responsible for the licensing and supervision of insurance firms operating in and from the QFC. The QCB and the QFCRA will coordinate closely to ensure that there is consistency between their respective regimes, in line with international best practice.

Capital markets
Modern economies are highly dependent on capital being allocated efficiently. In turn, regulations governing financial markets should be framed in a way that provides transparency to participants, reliability of financial information and efficient design and delivery of services. In recent years, there has been a renewed focus on developing a risk-based approach to the regulation and supervision of markets.

The QFMA will take steps to identify the risks of non-compliance, to refocus rules toward dealing with the threats to the stability and fairness of markets and to adopt a holistic approach towards market regulation. More generally, the QFMA will ensure that its regulations support the development of deep and liquid markets for equities, debt and related financial instruments.