IBQ FINANCE LIMITED
(incorporated as an exempted company with limited liability in the Cayman Islands)
U.S.$2,000,000,000
Euro Medium Term Note Programme
unconditionally and irrevocably guaranteed by
INTERNATIONAL BANK OF QATAR (Q.S.C.)
(a Qatari shareholding company incorporated with registration number 22788 under the Commercial
Companies Law No. (11) of 2015)
Under this U.S.$2,000,000,000 Euro Medium Term Note Programme (the ‘‘Programme’’), IBQ Finance Limited (the ‘‘Issuer’’) may from time to
time issue notes (the ‘‘Notes’’) denominated in any currency agreed between the Issuer, the Guarantor and the relevant Dealer(s) (as defined
below). The payments of all amounts due in respect of the Notes will be unconditionally and irrevocably guaranteed by International Bank of
Qatar (Q.S.C.) (the ‘‘Bank’’ or the ‘‘Guarantor’’) on an unsubordinated basis.
Notes may be issued in bearer or registered form (respectively ‘‘Bearer Notes’’ and ‘‘Registered Notes’’). The maximum aggregate nominal amount
of all Notes from time to time outstanding and guaranteed under the Programme will not exceed U.S.$2,000,000,000 (or its equivalent in other
currencies calculated as described in the Dealer Agreement (defined herein), subject to any increase as described in the Dealer Agreement).
Notes may be issued on a continuing basis to one or more of the Dealers specified under ‘‘Overview’’ and any additional Dealer(s) appointed
under the Programme from time to time by the Issuer and the Guarantor (each a ‘‘Dealer’’ and together, the ‘‘Dealers’’), which appointment may
be for a specific issue or on an ongoing basis. References in this base prospectus (‘‘Base Prospectus’’) to the ‘‘relevant Dealer(s)’’ shall, in the case
of an issue of Notes being (or intended to be) subscribed for by more than one Dealer, be to all Dealers who have agreed to subscribe for such
Notes.
An investment in Notes issued under the Programme involves certain risks. For a discussion of the principal risk factors that may affect the
abilities of the Issuer and the Guarantor to fulfil their respective obligations under the Notes see ‘‘Risk Factors’’ below.
This Base Prospectus has been approved by the Central Bank of Ireland, as competent authority under the Prospectus Directive (as defined
below). The Central Bank of Ireland only approves this Base Prospectus as meeting the requirements imposed under Irish and European Union
law pursuant to the Prospectus Directive. Application has been made to the Irish Stock Exchange plc (the ‘‘Irish Stock Exchange’’) for Notes
issued under the Programme during the period of 12 months from the date of this Base Prospectus to be admitted to the official list (the
‘‘Official List’’) and to trading on its regulated market (the ‘‘Main Securities Market’’). Such approval relates only to the Notes which are to be
admitted to trading on a regulated market for the purposes of Directive 2004/39/EC (‘‘MiFID’’) on markets in financial instruments and/or which
are to be offered to the public in any member state of the European Economic Area (a ‘‘Member State’’).
References in this Base Prospectus to Notes being ‘‘listed’’ (and all related references) shall mean that such Notes have been admitted to trading
on the Main Securities Market and have been admitted to the Official List or have been admitted to trading on such further stock exchanges or
markets as may be specified in the relevant Final Terms (as defined below). The Main Securities Market is a regulated market for the purposes
of MiFID.
Notice of the aggregate nominal amount of Notes, interest (if any) payable in respect of Notes, the issue price of Notes and certain other
information which is applicable to each Tranche (as defined under ‘‘Terms and Conditions of the Notes’’) of Notes will be set out in a final terms
document (the ‘‘Final Terms’’) which will be delivered to the Central Bank of Ireland and, with respect to Notes to be listed on the Irish Stock
Exchange, will be delivered to the Irish Stock Exchange.
The Programme also permits Notes to be issued on the basis that they will not be admitted to listing, trading and/or quotation by any competent
authority, stock exchange and/or quotation system or to be admitted to listing, trading and/or quotation by such other or further competent
authorities, stock exchanges and/or quotation systems as may be agreed with the Issuer and the Guarantor.
The Issuer and the Guarantor may agree with any Dealer that Notes may be issued in a form or with terms and conditions not contemplated by
the Terms and Conditions of the Notes herein, in which event a supplemental Base Prospectus, if appropriate, will be made available which will
describe the effect of the agreement reached in relation to such Notes.
Neither the Notes nor the Guarantee of the Notes (as defined under ‘‘Terms and Conditions of the Notes’’) have been, or will be, registered under
the United States Securities Act of 1933, as amended (the ‘‘Securities Act’’) or with any securities regulatory authority of any state or other
jurisdiction of the United States and the Notes may not be offered, sold or delivered, directly or indirectly, in or into the United States or to, or
for the account or benefit of, U.S. persons (as defined in Regulation S under the Securities Act (‘‘Regulation S’’)) except pursuant to an
exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in accordance with any applicable state
securities laws. Accordingly, the Notes may be offered or sold solely to persons who are not U.S. persons outside the United States in reliance
on Regulation S. Each purchaser of Notes is hereby notified that the offer and sale of Notes to it is being made in reliance on the exemption
from the registration requirements of the Securities Act provided by Regulation S.
The Guarantor has been assigned a long term rating of A+ with stable outlook and a short term rating of F1 from Fitch Ratings Ltd (‘‘Fitch’’);
and a long term rating of A2 with stable outlook and a short term rating of P-1 by Moody’s Investors Service, Inc. (‘‘Moody’s’’). The
Programme has been assigned senior unsecured ratings of A+ long-term and F1 short-term by Fitch, and A2 long term and P-1 short term by
Moody’s Investors Service Cyprus Limited ‘‘Moody’s Cyprus’’. Notes issued under the Programme may be rated or unrated. Where a Series (as
defined under ‘‘Terms and Conditions of the Notes’’) of Notes is rated, such rating, and the credit rating agency issuing such rating, will be
disclosed in the Final Terms and will not necessarily be the same as the rating assigned to the Programme by the relevant credit rating agency.
The State of Qatar has been assigned credit ratings of AA and Aa2, each with stable outlook, by Fitch and Moody’s Investors Service Singapore
Pte. Ltd. (‘‘Moody’s Singapore’’). Moody’s Singapore is not established in the European Union and has not applied for registration under the
CRA Regulation (as defined below). The rating has been endorsed by Moody’s Investors Service Ltd registered under the CRA Regulation. Each
of Fitch, Moody’s and Moody’s Cyprus is established in the European Union and is registered under the Regulation (EC) No. 1060/2009, as
amended (the ‘‘CRA Regulation’’). A rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or
withdrawal at any time by the assigning rating agency.
Arranger
Citigroup
Citigroup
Dealers
QNB Capital LLC
The date of this Base Prospectus is 9 November 2015
Standard Chartered Bank
IMPORTANT NOTICES
This Base Prospectus comprises a base prospectus for the purposes of Article 5.4 of the Prospectus
Directive. When used in this Base Prospectus, ‘‘Prospectus Directive’’ means Directive 2003/71/EC (as
amended including by Directive 2010/73/EU) and including any relevant implementing measure in a
relevant Member State. This Base Prospectus also comprises a base prospectus for the purpose of
giving information with regard to the Issuer and the Guarantor and the Notes which, according to
the particular nature of the Issuer, the Guarantor and the Notes, is necessary to enable investors to
make an informed assessment of the assets and liabilities, financial position, profit and losses and
prospects of the Issuer and the Guarantor.
Each of the Issuer and the Guarantor, accepts responsibility for the information contained in this
Base Prospectus and the Final Terms for each Tranche of Notes issued under the Programme and
declares that, having taken all reasonable care to ensure that such is the case, the information
contained in this Base Prospectus is, to the best of its knowledge, in accordance with the facts and
contains no omission likely to affect its import.
Certain information under the headings ‘‘Risk Factors’’, ‘‘Financial Review’’, ‘‘Overview of Qatar’’ and
‘‘Banking Industry and Regulation in Qatar’’ has been extracted from information provided by: (i) the
Qatar Central Bank (the ‘‘QCB’’) and the Organization of Petroleum Exporting Countries (‘‘OPEC’’),
in the case of ‘‘Risk Factors’’; (ii) the International Monetary Fund (the ‘‘IMF’’), in the case of
‘‘Financial Review’’; (iii) the QCB, the Ministry of Development Planning and Statistics, the Ministry
of Finance, the IMF, BP’s ‘‘Statistical Review of World Energy’’ and the U.S. Energy Information
Administration, in the case of ‘‘Overview of Qatar’’; and (iv) the IMF and the QCB, in the case of
‘‘Banking Industry and Regulation in Qatar’’, and, in each case, the relevant source of such
information is specified where it appears under those headings. Each of the Issuer and the Guarantor
confirms that such information has been accurately reproduced and that, so far as it is aware, and is
able to ascertain from information published by the relevant sources referred to, no facts have been
omitted which would render the reproduced information inaccurate or misleading.
Each Tranche (as defined herein) of Notes will be issued on the terms and conditions set out herein
under ‘‘Terms and Conditions of the Notes’’ (the ‘‘Conditions’’) as completed by the Final Terms. This
Base Prospectus must be read and construed together with any amendments or supplements hereto
and with any information incorporated by reference herein and, in relation to any Tranche of Notes,
must be read and construed together with the relevant Final Terms.
Subject as provided in the relevant Final Terms, the only persons authorised to use this Base
Prospectus in connection with an offer of Notes are the persons named in the relevant Final Terms
as the relevant Dealer or the Managers, as the case may be.
The Issuer and the Guarantor have confirmed to the Dealers named under ‘‘Subscription and Sale’’
below that this Base Prospectus contains all information which is (in the context of the Programme,
the issue, offering and sale of the Notes and the Guarantee of the Notes) material; that such
information is true and accurate in all material respects and is not misleading in any material respect;
that any opinions, predictions or intentions expressed herein are honestly held or made and are not
misleading in any material respect; that this Base Prospectus does not omit to state any material fact
necessary to make such information, opinions, predictions or intentions (in the context of the
Programme, the issue, offering and sale of the Notes and the Guarantee of the Notes) not misleading
in any material respect; and that all proper enquiries have been made to verify the foregoing.
No person has been authorised to give any information or to make any representation not contained
in or not consistent with this Base Prospectus or any other document entered into in relation to the
Programme or the Notes or any information supplied by the Issuer or the Guarantor or such other
information as is in the public domain and, if given or made, such information or representation
should not be relied upon as having been authorised by the Issuer, the Guarantor or any Dealer or
any other person.
Neither the Dealers nor any of their respective affiliates have authorised the whole or any part of this
Base Prospectus or independently verified the information contained herein and none of them makes
any representation or warranty or accepts any responsibility as to the accuracy or completeness of the
information contained in this Base Prospectus. Neither the delivery of this Base Prospectus or any
Final Terms nor the offering, sale or delivery of any Note shall, in any circumstances, create any
implication that the information contained in this Base Prospectus is true subsequent to the date
hereof or the date upon which this Base Prospectus has been most recently amended or supplemented
2
or that there has been no adverse change, or any event reasonably likely to involve any adverse
change, in the prospects or financial or trading position of the Issuer or the Guarantor since the date
thereof or, if later, the date upon which this Base Prospectus has been most recently amended or
supplemented or that any other information supplied in connection with the Programme is correct at
any time subsequent to the date on which it is supplied or, if different, the date indicated in the
document containing the same. The Dealers expressly do not undertake to review the financial
condition or affairs of the Issuer or the Guarantor at any point, including during the life of the
Programme, or to advise any investor in the Notes of any information coming to their attention.
The distribution of this Base Prospectus and any Final Terms and the offering, sale and delivery of
the Notes in certain jurisdictions may be restricted by law. Persons into whose possession this Base
Prospectus or any Final Terms comes are required by the Issuer, the Guarantor and the Dealers to
inform themselves about and to observe any such restrictions. For a description of certain restrictions
on offers, sales and deliveries of Notes and on the distribution of this Base Prospectus or any Final
Terms and other offering material relating to the Notes, see ‘‘Subscription and Sale’’. In particular,
Notes have not been and will not be registered under the United States Securities Act of 1933 (as
amended) (the ‘‘Securities Act’’) and Bearer Notes are subject to U.S. tax law requirements. Subject
to certain exceptions, Notes may not be offered, sold or, in the case of Bearer Notes, delivered,
directly or indirectly, in or into the United States or to U.S. persons.
Neither this Base Prospectus nor any Final Terms or any other information supplied in connection
with the Programme or any Notes is: (i) intended to provide the basis of any credit or other
evaluation; or (ii) should be considered as a recommendation by the Issuer, the Guarantor or the
Dealers that any recipient of this Base Prospectus or any Final Terms should subscribe for or
purchase any Notes. Each recipient of this Base Prospectus or any Final Terms and each investor
contemplating purchasing any Notes should make its own independent investigation and appraisal of
the condition (financial or otherwise), affairs and creditworthiness of the Issuer and the Guarantor.
Neither this Base Prospectus nor any other information supplied in connection with the Programme
or the issue of any Notes constitutes an offer or invitation by or on behalf of the Issuer, the
Guarantor or any of the Dealers to any person to subscribe for or to purchase any Notes.
Suitability of Investments
The Notes of any Series may not be a suitable investment for all investors. Each potential investor in
Notes must determine the suitability of that investment in light of its own circumstances. In
particular, each potential investor may wish to consider, either on its own or with the help of its
financial and other professional advisors, whether it:
(a)
has sufficient knowledge and experience to make a meaningful evaluation of the relevant Notes,
the merits and risks of investing in the relevant Notes and the information contained in this
Base Prospectus or any applicable supplement hereto;
(b)
has access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its
particular financial situation, an investment in the relevant Notes and the impact the relevant
Notes will have on its overall investment portfolio;
(c)
has sufficient financial resources and liquidity to bear all of the risks of an investment in the
relevant Notes, including where the currency of payment is different from the potential
investor’s home currency;
(d)
understands thoroughly the terms of the relevant Notes and be familiar with the behaviour of
any relevant indices and financial markets; and
(e)
is able to evaluate (either alone or with the help of a financial adviser) possible scenarios for
economic, interest rate and other factors that may affect its investment and its ability to bear
the applicable risks.
Some Notes are complex financial instruments. Sophisticated institutional investors generally do not
purchase complex financial instruments as stand-alone investments. They purchase complex financial
instruments as a way to reduce risk or enhance yield with an understood, measured, appropriate
addition of risk to their overall portfolios. A potential investor should not invest in Notes which are
complex financial instruments unless it has the expertise (either alone or with the help of a financial
adviser) to evaluate how the Notes will perform under changing conditions, the resulting effects on
the value of the Notes and the impact this investment will have on the potential investor’s overall
investment portfolio.
3
Legal investment considerations may restrict the ability of certain investors to make investments in
Notes. The investment activities of certain investors are subject to legal investment laws and
regulations, or review or regulation by certain authorities. Each potential investor should consult its
legal advisers to determine whether and to what extent: (i) Notes are legal investments for it; (ii)
Notes can be used as collateral for various types of borrowing; and (iii) other restrictions apply to its
purchase or pledge of any Notes by the investor. Financial institutions should consult their legal
advisers or the appropriate regulators to determine the appropriate treatment of Notes under any
applicable risk-based capital or similar rules and regulations.
No comment is made or advice given by the Issuer, the Guarantor or the Dealers in respect of
taxation matters relating to any Notes or the legality of the purchase of Notes by an investor under
any applicable laws.
EACH PROSPECTIVE INVESTOR IS ADVISED TO CONSULT ITS OWN TAX ADVISER,
LEGAL ADVISER AND BUSINESS ADVISER AS TO TAX, LEGAL, BUSINESS AND
RELATED MATTERS CONCERNING THE PURCHASE OF ANY NOTES.
This Base Prospectus does not constitute an offer to sell or the solicitation of an offer to buy any
Notes in any jurisdiction to any person to whom it is unlawful to make the offer or solicitation in
such jurisdiction. The distribution of this Base Prospectus and the offer or sale of Notes may be
restricted by law in certain jurisdictions. None of the Issuer, the Guarantor or the Dealers represents
that this Base Prospectus may be lawfully distributed, or that any Notes may be lawfully offered, in
compliance with any applicable registration or other requirements in any such jurisdiction, or
pursuant to an exemption available thereunder, or assumes any responsibility for facilitating any such
distribution or offering. In particular, no action has been taken by the Issuer, the Guarantor or the
Dealers which is intended to permit a public offering of any Notes or distribution of this Base
Prospectus in any jurisdiction where action for that purpose is required. Accordingly, no Notes may
be offered or sold, directly or indirectly, and neither this Base Prospectus nor any advertisement or
other offering material may be distributed or published in any jurisdiction, except under circumstances
that will result in compliance with any applicable laws and regulations. Persons into whose possession
this Base Prospectus or any Notes may come must inform themselves about, and observe, any such
restrictions on the distribution of this Base Prospectus and the offering and sale of the Notes. In
particular, there are restrictions on the distribution of this Base Prospectus and the offer or sale of
Notes in the United States, the European Economic Area, the United Kingdom, the Cayman Islands,
Japan, the United Arab Emirates (excluding the Dubai International Financial Centre), the Dubai
International Financial Centre, the Kingdom of Saudi Arabia, the Kingdom of Bahrain and the State
of Qatar (‘‘Qatar’’) (including the Qatar Financial Centre) (see ‘‘Subscription and Sale’’).
This Base Prospectus has been prepared on the basis that would permit an offer of Notes with a
denomination of less than A100,000 (or its equivalent in any other currency) only in circumstances
where there is an exemption from the obligation under the Prospectus Directive to publish a
prospectus. As a result, any offer of Notes in any Member State of the European Economic Area
which has implemented the Prospectus Directive (each, a ‘‘Relevant Member State’’) must be made
pursuant to an exemption under the Prospectus Directive, as implemented in that Relevant Member
State, from the requirement to publish a prospectus for offers of Notes. Accordingly any person
making or intending to make an offer of Notes in that Relevant Member State may only do so in
circumstances in which no obligation arises for the Issuer, the Guarantor or any Dealer to publish a
prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to
Article 16 of the Prospectus Directive, in each case, in relation to such offer. None of the Issuer, the
Guarantor or any Dealer have authorised, nor do they authorise, the making of any offer of Notes in
circumstances in which an obligation arises for the Issuer, the Guarantor or any Dealer to publish or
supplement a prospectus for such offer.
None of the Issuer, the Guarantor or the Dealers makes any representation to any investor in the
Notes regarding the legality of its investment under any applicable laws. Any investor in the Notes
should be able to bear the economic risk of an investment in the Notes for an indefinite period of
time.
4
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
HISTORICAL FINANCIAL STATEMENTS
This Base Prospectus contains:
*
the Bank’s unaudited reviewed condensed interim financial statements as at and for the six
month period ended 30 June 2015 including comparative information as at and for the six
months ended 30 June 2014 (the ‘‘Interim Financial Statements’’);
*
the Bank’s audited financial statements as at and for the year ended 31 December 2014 (the
‘‘2014 Financial Statements’’); and
*
the Bank’s audited financial statements as at and for the year ended 31 December 2013 (the
‘‘2013 Financial Statements’’ and, together with the 2014 Financial Statements, the ‘‘Annual
Financial Statements’’).
The Annual Financial Statements were prepared in accordance with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board (the ‘‘IASB’’) and
applicable QCB regulations. The Interim Financial Statements were prepared in accordance with
International Accounting Standard No. 34, ‘‘Interim Financial Reporting’’ and applicable QCB
regulations.
The Bank’s financial year ends on 31 December and references in this Base Prospectus to ‘‘2012’’,
‘‘2013’’ and ‘‘2014’’ are to the 12 month period ending on 31 December in each such year.
AUDITORS AND UNAUDITED INFORMATION
The Annual Financial Statements have been audited by KPMG (the ‘‘Auditors’’), in accordance with
International Standards on Auditing, who have issued unqualified reports on the Annual Financial
Statements . The Interim Financial Statements have been reviewed by the Auditors in accordance
with International Standard on Review Engagements 2410, who have issued an unqualified review
report on the Interim Financial Statements.
All information in this Base Prospectus as at, or for the six month periods ended, 30 June 2015 and
30 June 2014 is unaudited. In addition, certain other financial information in this Base Prospectus is
also unaudited financial information and has been extracted from the Bank’s management information
systems.
CERTAIN NON-IFRS FINANCIAL INFORMATION
This Base Prospectus includes certain financial information which has not been prepared in
accordance with IFRS. None of this financial information was subject to any audit or review by
independent auditors.
Capital and other ratios
This Base Prospectus includes references to capital and other ratios, including the Bank’s common
equity tier 1 capital adequacy ratio. its total tier 1 capital adequacy ratio, its total capital adequacy
ratio, its cost/income ratio, its net interest margin and spreads and its liquidity ratio. Although these
ratios are not IFRS measures, the Bank believes that they are important to understanding its capital
position and other aspects of its business, particularly in light of regulatory requirements to maintain
capital and liquidity ratios above prescribed minimum levels. The Bank’s interpretation of any future
planned ratios and the basis of its calculation of these ratios may be different from those of other
financial institutions.
PRESENTATION OF OTHER INFORMATION
Currencies
In this Base Prospectus, unless otherwise specified or the context otherwise requires, references to:
*
‘‘QAR’’ and ‘‘Qatari riyals’’ are to the lawful currency for the time being of Qatar;
*
‘‘U.S.$’’ and ‘‘U.S. dollars’’ are to the lawful currency for the time being of the United States of
America; and
*
‘‘E’’ and ‘‘euro’’ are to the currency introduced at the start of the third stage of European
economic and monetary union pursuant to the Treaty on the Functioning of the European
Union, as amended.
5
Unless otherwise indicated, the financial information contained in this Base Prospectus has been
expressed in Qatari riyals. The Bank’s functional currency is the Qatari riyal and the Bank prepares
its financial statements in Qatari riyal.
The Qatari riyal currently is, and since the mid-1980s has been, pegged to the U.S. dollar at a fixed
exchange rate of QAR 3.64 per U.S.$1.00. Certain figures and percentages included in this Base
Prospectus have been subject to rounding adjustments. Accordingly, figures shown in the same
category presented in different tables may vary slightly and figures shown as totals in certain tables
may not be an arithmetic aggregation of the figures which precede them.
THIRD PARTY AND MARKET SHARE DATA
This Base Prospectus contains information regarding the Bank’s business and the industry in which it
operates and competes, which the Bank has obtained from third party sources. The Bank and other
institutions operating in the financial services industry make available a wide range of financial and
operational information to regulatory and market bodies, including the QCB and the Ministry of
Development Planning and Statistics of Qatar. These bodies use certain of the data supplied to
publish statistics, including those included in monthly monetary bulletins and bank monthly
statements. However, no assurance can be made that the information reported to these bodies by
different market participants is, in all cases, directly comparable. Where third party information has
been used in this Base Prospectus, the source of such information has been identified.
In some cases, independently determined industry data is not available. In these cases, any Bank
market share data included in this Base Prospectus is referred to as having been estimated. All such
estimates have been made by the Bank using its own information and other market information
which is publicly available. The Bank believes that these estimates of market share are helpful as they
give prospective investors a better understanding of the industry in which it operates as well as its
position within that industry. Although all such estimations have been made in good faith based on
the information available and the Bank’s knowledge of the market within which it operates, the Bank
cannot guarantee that a third party expert using different methods would reach the same conclusions.
Statistical information relating to Qatar included in this Base Prospectus has been derived from
official public sources, including the Ministry of Development Planning and Statistics of Qatar, the
QCB, the IMF, the U.S. Energy Information Administration and the Qatar Financial Centre (the
‘‘QFC’’), as well as the BP Statistical Review of World Energy June 2015 and Moody’s. All such
statistical information may differ from that stated in other sources for a variety of reasons, including
the use of different definitions and cut-off times. This data may subsequently be revised as new data
becomes available and any such revised data will not be circulated by the Bank to investors who have
purchased any Notes.
Where information has not been independently sourced, it is the Bank’s own information.
NO INCORPORATION OF WEBSITE INFORMATION
The Bank’s website is www.ibq.com.qa. The information on this website or any other website
mentioned in this Base Prospectus or any website directly or indirectly linked to these websites has
not been verified and is not incorporated by reference into this Base Prospectus, and investors should
not rely on it.
DEFINITIONS
References in this Base Prospectus to:
*
‘‘billion’’ are to a thousand million
*
‘‘Government’’ are to the Government of Qatar; and
*
‘‘Qatar’’ are to the State of Qatar.
ROUNDING
Certain data in this Base Prospectus has been rounded to the nearest million Qatari riyals (or as
otherwise stated), with QAR 500,000 (or its equivalent) being rounded up. As a result of such
rounding, the totals of data presented in tables in this Base Prospectus may vary slightly from the
arithmetic totals of such data. Where the number ‘‘0’’ appears in a table, it means that the relevant
number has been rounded to zero. Where the symbol ‘‘-’’ appears, it means that there is no number
for the particular item.
6
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Some statements in this Base Prospectus may be deemed to be ‘‘forward-looking statements’’.
Forward-looking statements include statements concerning the Guarantor’s plans, objectives, goals,
strategies and future operations and performance and the assumptions underlying these forwardlooking statements. When used in this Base Prospectus, the words ‘‘anticipates’’, ‘‘estimates’’,
‘‘expects’’, ‘‘believes’’, ‘‘intends’’, ‘‘plans’’, ‘‘aims’’, ‘‘seeks’’, ‘‘may’’, ‘‘will’’, ‘‘should’’ and any similar
expressions generally identify forward-looking statements. These forward-looking statements are
contained in the sections entitled ‘‘Risk Factors’’, ‘‘Description of the Issuer’’ and ‘‘Description of the
Bank’’ and other sections of this Base Prospectus. The Guarantor has based these forward-looking
statements on the current view of its management with respect to future events and financial
performance. Although the Guarantor believes that the expectations, estimates and projections
reflected in its forward-looking statements are reasonable, if one or more of the risks or uncertainties
materialise, including those identified below or which the Guarantor has otherwise identified in this
Base Prospectus, or if any of the Guarantor’s underlying assumptions prove to be incomplete or
inaccurate, the Guarantor’s actual results of operation may vary from those expected, estimated or
predicted. Investors are therefore strongly advised to read the sections ‘‘Risk Factors’’, ‘‘Description of
the Guarantor’’, ‘‘Overview of Qatar’’ and ‘‘Banking Industry and Regulation in Qatar’’, which include
a more detailed description of the factors that might have an impact on the Guarantor’s business
development and on the industry sector in which the Guarantor operates.
The risks and uncertainties referred to above include:
*
macro-economic and financial market conditions (and changes thereof) and, in particular, the
global financial crisis;
*
credit risks, including the impact of a higher level of credit defaults arising from adverse
economic conditions, the impact of provisions and impairments and concentration of the
Guarantor’s portfolio of financing and investing assets;
*
the effects of, and changes in laws, regulations or governmental policy affecting the Guarantor’s
business activities;
*
removal or adjustment of the peg between the U.S. dollar and the Qatari riyal;
*
liquidity risks, including the inability of the Guarantor to meet its contractual and contingent
cash flow obligations or the inability to fund its operations; and
*
changes in interest rates and other market conditions.
Additional factors that could cause actual results, performance or achievements to differ materially
include, but are not limited to, those discussed under ‘‘Risk Factors’’.
These forward-looking statements speak only as at the date of this Base Prospectus. Without
prejudice to any requirements under applicable laws, the Issuer and the Guarantor expressly disclaim
any obligation or undertaking to disseminate after the date of this Base Prospectus any updates or
revisions to any forward-looking statements contained herein to reflect any change in expectations
thereof or any change in events, conditions or circumstances on which any forward-looking statement
is based.
CAYMAN ISLANDS NOTICE
No invitation whether directly or indirectly may be made to any member of the public of the
Cayman Islands to subscribe for any Notes issued under the Programme and this Base Prospectus
shall not be construed as an invitation to any member of the public of the Cayman Islands to
subscribe for any Notes issued under the Programme.
NOTICE TO KINGDOM OF SAUDI ARABIA RESIDENTS
This Base Prospectus may not be distributed in the Kingdom of Saudi Arabia except to such persons
as are permitted under the Offers of Securities Regulations issued by the Capital Market Authority of
the Kingdom of Saudi Arabia (the ‘‘Capital Market Authority’’). The Capital Market Authority does
not make any representations as to the accuracy or completeness of this Base Prospectus, and
expressly disclaims any liability whatsoever for any loss arising from, or incurred in reliance upon,
any part of this Base Prospectus. Prospective purchasers of Notes issued under the Programme should
conduct their own due diligence on the accuracy of the information relating to the Notes. If a
prospective purchaser does not understand the contents of this Base Prospectus he or she should
consult an authorised financial adviser.
7
NOTICE TO BAHRAIN RESIDENTS
In relation to investors in the Kingdom of Bahrain, Notes issued in connection with this Base
Prospectus and related offering documents may only be offered in registered form to existing account
holders and accredited investors as defined by the Central Bank of Bahrain (‘‘CBB’’) in the Kingdom
of Bahrain where such investors make a minimum investment of at least U.S.$100,000 or the
equivalent amount in any other currency or such other amount as the CBB may determine.
This Base Prospectus does not constitute an offer of securities in the Kingdom of Bahrain in terms of
Article (81) of the Central Bank and Financial Institutions Law 2006 (decree Law No. 64 of 2006).
The offering documents have not been and will not be registered as a prospectus with the CBB.
Accordingly, no securities may be offered, sold or made the subject of an invitation for subscription
or purchase nor will this Base Prospectus or any other related document or material be used in
connection with any offer, sale or invitation to subscribe or purchase securities, whether directly or
indirectly, to persons in the Kingdom of Bahrain, other than to accredited investors for an offer
outside the Kingdom of Bahrain.
The CBB has not reviewed, approved or registered this Base Prospectus or related offering documents
and it has not in any way considered the merits of the Notes to be offered for investment, whether in
or outside the Kingdom of Bahrain. Therefore, the CBB assumes no responsibility for the accuracy
and completeness of the statements and information contained in this Base Prospectus and expressly
disclaims any liability whatsoever for any loss howsoever arising from reliance upon the whole or any
part of the content of this Base Prospectus. No offer of Notes will be made to the public in the
Kingdom of Bahrain and this Base Prospectus must be read by the addressee only and must not be
issued, passed to, or made available to the public generally.
NOTICE TO QATARI RESIDENTS
This Base Prospectus does not and is not intended to constitute an offer, sale or delivery of bonds,
notes or other debt financing instruments under the laws of Qatar and the rules and regulations
applicable in the Qatar Financial Centre and has not been and will not be reviewed or approved by
or registered with the Qatar Financial Markets Authority, the Qatar Financial Centre Regulatory
Authority, the Qatar Stock Exchange or the Qatar Central Bank in accordance with their regulations
or any other regulations in Qatar and the Qatar Financial Centre. The Notes are not and will not be
traded on the Qatar Stock Exchange.
STABILISATION
In connection with the issue of any Tranche of Notes, the Dealer or Dealers (if any) named as the
Stabilising Manager(s) (or person(s) acting on behalf of any Stabilising Manager(s)) in the applicable
Final Terms may over allot Notes or effect transactions with a view to supporting the market price of
the Notes at a level higher than that which might otherwise prevail. However, there is no assurance that
the Stabilising Manager(s) (or persons acting on behalf of a Stabilising Manager) will undertake
stabilisation action. Any stabilisation action may begin on or after the date on which adequate public
disclosure of the terms of the offer of the relevant Tranche of Notes is made and, if begun, may be
ended at any time, but it must end no later than the earlier of 30 days after the issue date of the
relevant Tranche of Notes and 60 days after the date of the allotment of the relevant Tranche of Notes.
Any stabilisation action or over-allotment must be conducted by the relevant Stabilising Manager(s) (or
person(s) acting on behalf of any Stabilising Manager(s)) in accordance with all applicable laws and
rules.
8
TABLE OF CONTENTS
PAGES
RISK FACTORS .........................................................................................................................
10
OVERVIEW.................................................................................................................................
27
FORMS OF THE NOTES ..........................................................................................................
32
TERMS AND CONDITIONS OF THE NOTES ......................................................................
37
USE OF PROCEEDS..................................................................................................................
61
FORM OF FINAL TERMS .......................................................................................................
62
SUMMARY OF PROVISIONS RELATING TO THE NOTES WHILE IN GLOBAL
FORM..........................................................................................................................................
68
DESCRIPTION OF THE ISSUER ............................................................................................
70
SELECTED FINANCIAL INFORMATION ............................................................................
72
FINANCIAL REVIEW...............................................................................................................
76
DESCRIPTION OF THE BANK...............................................................................................
93
RISK MANAGEMENT..............................................................................................................
103
MANAGEMENT AND EMPLOYEES .....................................................................................
114
OVERVIEW OF QATAR ...........................................................................................................
120
BANKING INDUSTRY AND REGULATION IN QATAR ..................................................
126
TAXATION.................................................................................................................................
135
SUBSCRIPTION AND SALE ....................................................................................................
139
GENERAL INFORMATION ....................................................................................................
143
FINANCIAL INFORMATION .................................................................................................
F-1
9
RISK FACTORS
Any investment in Notes issued under the Programme is subject to a number of risks and uncertainties.
Before making any investment decision, prospective investors should consider carefully the risks and
uncertainties associated with an investment in any Notes, the Guarantor’s business and the countries and
markets in which it operates, together with all of the other information that is included in this Base
Prospectus. Prospective investors should also consult their own financial and legal advisers about risks
associated with an investment in the Notes and the suitability of investing in the Notes in light of their
particular circumstances, without relying on the Issuer or the Guarantor. Prospective investors are
advised to make, and will be deemed by the Issuer and the Guarantor to have made, their own
investigations in relation to such factors before making any investment decision. Should one or more of
the following events or circumstances occur at the same time or separately, the Issuer and/or the
Guarantor’s business, results of operations, financial condition and/or prospects could be materially
adversely affected which, in turn, could adversely affect the Issuer’s and the Guarantor’s ability to make
payments under the Notes. If that were to happen, the trading price of the Notes could decline and an
investor might lose part or all of its investment.
Each of the Issuer and the Guarantor believes that the factors described below represent the principal
risks inherent in investing in the Notes, but the inability of the Issuer or the Guarantor to pay interest,
principal or other amounts on or in respect of the Notes may occur for other reasons which may not be
considered significant risks by the Issuer and the Guarantor based on information currently available to
them or which they may not currently be able to anticipate. As a result, the following is unlikely to be
an exhaustive list or explanation of all risks which investors may face when making an investment in the
Notes and should be used as guidance only. Additional risks and uncertainties relating to the Guarantor
that are not currently known to the Issuer and the Guarantor, or that either currently deems immaterial,
may individually or cumulatively also have a material adverse effect on the business, prospects, results of
operations and/or financial position of the Guarantor and, if any such risk should occur, the price of the
Notes may decline and investors could lose all or part of their investment. Investors should consider
carefully whether an investment in the Notes is suitable for them in light of the information in this Base
Prospectus and their personal circumstances.
The order in which the risks are presented below does not necessarily reflect the likelihood of their
occurrence or the magnitude of their potential impact on the Issuer or the Guarantor.
Words and expressions defined in the ‘‘Terms and Conditions of the Notes’’ below or elsewhere in this
Base Prospectus have the same meanings in this section.
Risks relating to the Issuer
The Issuer will depend on receipt of payments from the Guarantor to make payments to holders of the Notes
The Issuer is a newly formed entity incorporated in the Cayman Islands on 1 October 2015 and has
no operating history. The Issuer’s principal purpose is to provide funding, through the international
capital markets, to the Guarantor. All proceeds from the issue of Notes under the Programme will be
lent by the Issuer to the Guarantor. Payments of principal and interest under any such loan by the
Guarantor to the Issuer will fund the Issuer’s payment obligations under the Notes.
As the Issuer does not have any other business operations, the Issuer’s ability to fulfil its obligations
under the Notes is entirely dependent on the Guarantor’s performance under each such loan.
Accordingly, the Issuer is subject to all the risks to which the Guarantor is subject, to the extent that
such risks could limit the Guarantor’s ability to satisfy in full and on a timely basis its obligations
under the Guarantee. See ‘‘Risk Factors—Risks relating to the Guarantor’’ for a further description of
certain of these risks.
Risks relating to the Bank
The Bank’s business is and will continue to be affected by global and regional financial markets and economic
conditions and any deterioration in economic conditions in Qatar and, to a lesser extent, the other GCC
countries could materially adversely impact the Bank
There has been significant volatility and disruption in global capital and credit markets since the
onset of the global financial crisis in late 2007. As a result, there has been, at times, a material
reduction in the availability of financing, both for financial institutions and their customers,
compelling many financial institutions to rely on central banks and governments to provide liquidity
and, in some cases, additional capital. Governments around the world, including in Qatar and some
of the other countries in the MENA region, have taken actions intended to stabilise financial markets
10
and prevent the failure of financial institutions. See: ‘‘Banking Industry and Regulation in Qatar’’.
Despite such measures, international capital and credit markets have continued to experience
volatility.
The Bank’s business and results of operations have been adversely affected by these conditions. For
example, volatility in asset prices that has resulted from the continuing financial crisis has created a
less favourable environment for certain of the Bank’s businesses.
If certain historic levels of market disruption and volatility recur, the Bank may experience reductions
in business activity, increased funding costs and funding pressures, decreased asset values, credit losses
and impairment charges, and lower profitability and cash flows. The Bank’s business and financial
performance may also be adversely affected by future recovery rates on assets, particularly as the
historical assumptions underlying asset recovery rates may prove to be inaccurate as a result of the
prolonged market volatility and disruption since 2007.
Almost all of the Bank’s credit exposures are focused on Qatar. Qatar’s economy is dependent on oil
and gas and related industries, as well as the prices and production quantities of these commodities.
Oil and gas prices have, however, been volatile in recent years, which has impacted economic growth
in Qatar and many other Gulf Cooperation Council (‘‘GCC’’) countries. Any deterioration in
economic conditions in Qatar, whether or not due to deterioration in the oil and gas industries, could
materially adversely affect many of the Bank’s borrowers and contractual counterparties which, in
turn, is likely to adversely affect the Bank’s business, financial condition, results of operations and
prospects. See ‘‘—The Bank’s loan portfolios, debt investment securities and deposit base are
concentrated in Qatar’’ below.
The Bank is exposed to credit risk and has a significant customer concentration of credit risk
Risks arising from adverse changes in the credit quality and recoverability of loans, securities and
amounts due from counterparties are inherent in a wide range of the Bank’s businesses, principally in
its lending and investment activities. In particular, the Bank is exposed to the risk that borrowers
may not repay their loans according to their contractual terms and that the collateral securing the
payment of these loans may be insufficient. The Bank continuously reviews and analyses its loan
portfolio and credit risks, and the Bank’s provision for losses on loans is based on, among other
things, its analysis of current and historical delinquency rates and loan management and the valuation
of the underlying assets, as well as numerous other management assumptions. However, these internal
analyses and assumptions may give rise to inaccurate predictions of credit performance, particularly in
a volatile economic climate.
Credit losses could also arise from a deterioration in the credit quality of specific borrowers, issuers
and other counterparties of the Bank, or from a general deterioration in local or global economic
conditions, or from systemic risks within financial systems, any or all of which could affect the
recoverability and value of the Bank’s assets and require an increase in the Bank’s provisions for the
impairment of loans, securities and other credit exposures.
The Bank’s credit risk is increased by concentrations of risk. The Bank has significant customer risk
concentrations. For example, the Bank’s top 20 customer loan exposures as at 30 June 2015
amounted to 59.0 per cent. of its total customer loan portfolio, down from 64.6 per cent. at
31 December 2014 and the Bank’s top 10 customer loan exposures as at 30 June 2015 amounted to
40.1 per cent. of its total customer loan portfolio, down from 47.2 per cent. at 31 December 2014. In
addition, the Bank has a significant geographic risk concentration. See ‘‘—The Bank’s loan portfolios,
debt investment securities and deposit base are concentrated in Qatar’’ below.
Any failure by the Bank to maintain the quality of its assets through effective risk management
policies could lead to higher loan loss provisioning and result in higher levels of defaults and writeoffs.
The Bank’s loan portfolios, investment securities and deposit base are concentrated in Qatar
The Bank’s investment securities and loan portfolios are concentrated, geographically, in Qatar. The
Bank’s loan portfolios and investment securities portfolio together constituted 77.3 per cent. of its
total assets at 30 June 2015. In terms of the Bank’s net credit exposure (which includes its exposure
to banks and under derivative financial contracts but excludes its liability under contingent
commitments), 93.2 per cent. of this exposure was to counterparties located in Qatar at 30 June 2015.
11
The Bank’s customer deposits constituted 70.5 per cent of its total liabilities as at 30 June 2015 and
94.4 per cent. of its customer deposits at 30 June 2015 had been accepted in Qatar. As at 30 June
2015, the Bank’s top 20 customer deposits constituted 59.9 per cent. of its total customer deposits.
As a result, any deterioration in general economic conditions in Qatar or the GCC region generally
or any failure by the Bank to manage effectively its geographic risk concentrations could lead to a
deterioration in the credit quality of counterparties of the Bank as well as an increase in the Bank’s
cost of borrowing funds (to the extent that the deterioration results in deposit withdrawals). See
‘‘—The Bank’s business is and will continue to be affected by global and regional financial markets and
economic conditions and any deterioration in economic conditions in Qatar and, to a lesser extent, the
other GCC countries could materially adversely impact the Bank’’ above.
Qatar’s economy is materially affected by international oil and natural gas prices, which have
fluctuated widely over the past two decades. According to preliminary data in the Qatar Central
Bank’s Quarterly Statistical Bulletin for June 2015, the oil and gas sector contributed 54.4 per cent.
and 50.5 per cent. to Qatar’s total nominal gross domestic product (‘‘GDP’’) for the years ended
31 December 2013 and 31 December 2014, respectively. It also contributed 62.4 per cent. and 56.3 per
cent. to the annual revenues of Qatar in the fiscal years ended 31 March 2013 and 31 March 2014,
respectively.
The OPEC Reference Basket crude oil price averaged U.S.$109 per barrel in 2012 and U.S.$106 per
barrel in 2013. However, since June 2014, when the monthly average OPEC Reference Basket price
per barrel was U.S.$108, crude oil prices have fallen by approximately 58 per cent to a monthly
average price of U.S.$45 in August 2015. According to the IMF, this fall in prices will lead to a
substantial deterioration in Qatar’s fiscal position since the price of liquefied natural gas (‘‘LNG’’)
sold by Qatar is linked to the price of oil and more than 90 per cent. of its budget revenues and
exports are tied to activities of the hydrocarbon sector.
International prices for crude oil have fluctuated substantially as a result of many factors, including
global demand for oil and natural gas, changes in production levels, geopolitical uncertainty
(particularly in the Middle East and North Africa (‘‘MENA’’) region), changes in governmental
regulations, weather, general economic conditions and competition from other energy sources. In
addition, as crude oil prices provide a benchmark for gas and petrochemical feedstock prices, changes
in crude oil prices may also have an impact on gas and petrochemical prices. International prices for
natural gas have also fluctuated significantly in the past depending on global supply and demand and
the availability and price of alternative energy sources.
In the past, Qatar has been able to partially offset lower hydrocarbon prices by increases in
hydrocarbon production, but the future rate of growth in Qatar’s hydrocarbon production is expected
to slow. Most of Qatar’s oilfields are mature and oil production may have peaked in 2011.
Additionally, the reserves at Al Shaheen, one of Qatar’s most productive oil fields, were reduced in
2011 after drilling results led to a reserves reassessment. Qatar is also approaching the end of a 20
year development cycle for LNG projects and LNG production is expected to plateau in the near
future.
With a moratorium on the development of new gas projects in the North Field in place since 2005
(excluding the Barzan gas pipeline project which is targeted for local consumption), and given the
long lead time to develop gas projects, Qatar may not be able to significantly increase gas production
in the near future through new gas projects.
Thus, any material reduction in the prices of natural gas, crude oil and other hydrocarbons may have
a significant adverse impact on the economy of Qatar and may also materially adversely impact
Qatar’s revenues and financial condition. Such effects would be likely to materially adversely affect
the Bank by:
*
reducing the demand from its Qatari customers for financing and by adversely affecting the
quality of its outstanding financing, thus potentially increasing its impairment losses and so
reducing profitability; and/or
*
causing certain large depositors of the Bank to withdraw their deposits (in whole or in part) to
address their own liquidity needs, resulting in the Bank having to source alternative and more
expensive sources of funding. See also ‘‘—The Bank is subject to the risk that liquidity may not
always be readily available or may only be available at significant cost’’ below.
12
In addition, any reduction in Qatar’s revenues would reduce the likelihood and/or extent of
Government financial support being available to Qatari banks, including the Bank, should such
support be needed in the future.
The Bank is exposed to declining property values in Qatar on the collateral supporting residential and
commercial real estate loans
The Bank’s total customer loan portfolio as at 30 June 2015 was QAR 19.1 billion, of which real
estate and commercial mortgages amounted to 31.3 per cent., or QAR 6.0 billion. Although the
property market in Qatar has stabilised after a period of sustained growth, negative economic and
other factors could lead to future contraction in the residential mortgage and commercial lending
market and to decreases in residential and commercial property prices which would adversely affect
the value of the Bank’s collateral and could lead to increased impairment charges which would reduce
the Bank’s profitability. See ‘‘—A recurrence of rising inflation, or continued deflation, may impact the
Bank’s profitability’’ below.
The Bank has significant credit-related contingent liabilities and commitments that may lead to potential losses
The Bank issues irrevocable loan commitments, guarantees and letters of credit, all of which are
accounted for off the Bank’s balance sheet until such time as they are actually funded or cancelled.
Although these commitments are contingent, they nonetheless subject the Bank to both credit and
liquidity risks. Although the Bank anticipates that only a portion of its obligations in respect of these
commitments will be triggered and funds itself accordingly, the Bank may need to make payments in
respect of a greater portion of such commitments than it anticipated, particularly in cases where there
has been a general deterioration in market conditions. This would result in the Bank needing to
obtain additional funding, potentially at relatively short notice, which could have an adverse affect on
its financial condition and results of operations. As at 30 June 2015, the Bank had QAR 5.8 billion
in such contingent liabilities outstanding, equal to 23.4 per cent. of its combined loans and advances
to customers and contingent liabilities.
The Bank could be adversely affected by the weakness or the perceived weakness of other financial institutions
and counterparties, which could result in significant systemic liquidity problems, losses or defaults
Against the backdrop of constraints on liquidity and the high cost of funds in the interbank lending
market, and given the high level of interdependence between financial institutions that became most
evident following the bankruptcy of Lehman Brothers in 2008, the Bank is subject to the risk of
deterioration of the commercial and financial soundness, or perceived soundness, of other financial
institutions. Within the financial services industry, the default of any one institution could lead to
significant losses, and potentially defaults, by other institutions. As was experienced in 2008 and 2009,
concerns about, or a default by, one institution could also lead to significant liquidity problems,
losses or defaults by other institutions, because the commercial and financial soundness of many
financial institutions is closely related as a result of their credit, trading, clearing or other
relationships. Even the perceived lack of creditworthiness of, or questions about, a counterparty may
lead to market-wide liquidity problems and losses or defaults by the Bank or other institutions. This
risk, often referred to as ‘‘systemic risk’’, may also adversely affect other financial intermediaries, such
as clearing agencies, clearing houses, securities firms and exchanges, with whom the Bank interacts on
a daily basis. Systemic risk, should it materialise, could have a material adverse effect on the Bank’s
ability to raise new funding and on its business, financial condition, results of operations and
prospects.
The Bank is subject to the risk that liquidity may not always be readily available or may only be available at
significant cost
Liquidity risk is the risk that the Bank will be unable to meet its obligations, including funding
commitments, as they become due. This risk is inherent in banking operations and can be heightened
by a number of enterprise-specific factors, including over-reliance on a particular source of funding
(including, for example, short-term and overnight funding), changes in credit ratings or market-wide
phenomena such as market dislocation and major disasters. Credit markets worldwide experienced a
severe reduction in liquidity in the final quarter of 2008 and the first half of 2009. Since then, market
conditions have been volatile with financial institutions continuing to experience periods of reduced
liquidity.
The perception of counterparty risk between banks has also increased significantly since the final
quarter of 2008, which has led to reductions in certain traditional sources of liquidity, such as the
13
debt markets, asset sales and redemption of investments. The Bank’s access to these traditional
sources of liquidity may be restricted or available only at a higher cost and there can be no assurance
that the Qatari government will continue to provide the levels of support that it has provided to date,
either to the Qatari banking sector generally or to the Bank in particular.
In addition, uncertainty or volatility in the capital and credit markets may limit the Bank’s ability to
refinance maturing liabilities with long-term funding or increase the cost of such funding. The Bank’s
access to any additional financing it may need will depend on a variety of factors, including market
conditions, the availability of credit generally and to borrowers in the financial services industry
specifically, and the Bank’s financial condition, credit ratings and credit capacity.
The Bank has historically relied on deposits to meet most of its funding needs. The availability of
deposits is subject to fluctuation due to factors outside the Bank’s control, including possible loss of
confidence and competitive pressures, and this could result in a significant outflow of deposits within
a short period of time. As at 30 June 2015, approximately 80.2 per cent. of the Bank’s total deposits
(including amounts due to banks) had remaining maturities of one month or less or was payable on
demand and approximately 99.6 per cent. had remaining maturities of one year or less or was
payable on demand. In addition, the Bank is reliant on certain large deposits from a limited group of
government-related and private sector corporate customers. See ‘‘—The Bank’s loan portfolios, debt
investment securities and deposit base are concentrated in Qatar’’ above.
If a substantial portion of the Bank’s depositors withdraw their demand deposits or do not roll over
their time deposits at maturity, the Bank may need to seek other sources of funding or may have to
sell assets to meet its funding requirements. There can be no assurance that the Bank will be able to
obtain additional funding as and when required or at prices that will not affect the Bank’s ability to
compete effectively and, if the Bank is forced to sell assets to meet its funding requirements, it may
suffer material losses as a result. In extreme cases, if the Bank is unable to refinance or replace such
deposits with alternative sources of funding to meet its liquidity needs, through deposits, the
interbank markets, the international capital markets or through asset sales, this would have a material
adverse effect on the Bank’s business, financial condition, results of operations and prospects and
could, potentially, result in its insolvency.
Market fluctuations and volatility may adversely affect the value of the Bank’s positions in certain securities
and make it more difficult to assess the fair value of certain of its assets
The Bank has significant holdings of available for sale investment securities, principally comprising
Qatar Government fixed income debt securities. As at 30 June 2015, the Bank’s investment securities
portfolio amounted to QAR 2,804 million or 9.9 per cent. of the Bank’s total assets while its fixed
and floating rate debt securities comprised 95.3 per cent. of the portfolio. The Bank earns interest
income on the debt securities comprised in the portfolio. It also realises gains and losses on the sale
of securities and records unrealised gains and losses resulting from the fair valuation of the securities
at each balance sheet date in its statement of comprehensive income. The level of the Bank’s income
from its investment securities depends on numerous factors beyond the Bank’s control, such as overall
market trading activity, interest rate levels, fluctuations in currency exchange rates and general market
volatility.
In addition, the fair value of the Bank’s fixed rate investment securities changes in response to
perceived changes in the credit quality of the issuers of the securities as well as changes in interest
and currency exchange rates. Although interest rates have historically been at low levels for many
years, in an increasing interest rate environment the fair values of the Bank’s fixed rate investment
securities are likely to decline which could expose the Bank to fair valuation losses or losses on the
sale of such securities. Similarly, a decline in the credit quality of any of the issuers of the debt
securities held by the Bank could result in the Bank making impairments or write-offs in respect of
those securities.
Valuations of the Bank’s investment securities in future periods, reflecting then-prevailing market
conditions, may result in significant changes in their fair values and, where these changes are negative,
could adversely affect the Bank’s results of operations. In addition, the value ultimately realised by
the Bank in respect of any investment securities may be materially different from their current or
estimated fair value. Any of these factors could require the Bank to recognise fair valuation losses or
realise impairment charges, which would adversely affect its results of operations.
14
The Bank is subject to extensive regulation and compliance with changes in, or the interpretation and
enforcement of, this regulation may be costly and any failure by the Bank to comply with this regulation may
result in the application of penalties to the Bank
The Bank is subject to a number of prudential and regulatory controls designed to maintain the
safety and soundness of banks, ensure their compliance with economic and other objectives and limit
their exposure to risk. These controls include laws and regulations promulgated by the QCB, the
Qatar Financial Market Authority (the ‘‘QFMA’’) and the Qatar Exchange (the ‘‘QE’’) and these
controls are further described under ‘‘Banking Industry and Regulation in Qatar’’.
In addition, in order to carry out and expand its businesses, it is necessary for the Bank to maintain
or obtain a variety of licences, permits, approvals and consents from various regulatory, legal,
administrative, tax and other governmental authorities and agencies. The processes for obtaining these
licences, permits, approvals and consents are often lengthy, complex, unpredictable and costly. If the
Bank is unable to maintain or obtain the relevant licences, permits, approvals and consents, its ability
to achieve its strategic objectives could be impaired.
The regulations to which the Bank is subject may limit its ability to carry on certain parts of its
business, increase its loan portfolio or raise capital or may impose significant additional costs on the
Bank. For example, in February 2011 conventional banks in Qatar were required by the QCB to
cease carrying on Islamic banking operations by 31 December 2011. In response to this requirement,
the Bank closed its Islamic banking operations. In April 2011, the QCB imposed a cap on the
amount of loans that could be made available to retail customers in Qatar and limited the interest
payable on such loans and on credit cards held by such customers and these restrictions remain in
force.
Changes in applicable regulations may also increase the Bank’s cost of doing business. It is not
always possible for the Bank to anticipate when a new regulation will be introduced by the Qatari
authorities. This creates a risk that the Bank’s profitability may be adversely affected as a result of it
being unable to adequately prepare for regulatory changes introduced by the Qatari authorities. In
addition, increased regulations or changes in laws and regulations and the manner in which they are
interpreted or enforced may have a material adverse effect on the Bank’s business, financial condition,
results of operations or prospects. Furthermore, non-compliance by the Bank with any applicable
regulations could expose the Bank to potential liabilities and fines, which may be significant. In
addition, the Qatari government has enacted legislation to establish a single financial regulator in
Qatar, which will oversee the banking, insurance and securities sectors. Once implemented, this may
change the way that current regulations are implemented or enforced in a manner that may be
adverse to the Bank.
The Bank is also required to comply with applicable know your customer, anti-money laundering and
counter-terrorism financing laws and regulations, including those related to countries subject to
sanctions by the United States Office of Foreign Assets Control (‘‘OFAC’’), similar regulations of the
European Union (the ‘‘EU’’) and other jurisdictions, and applicable anti-corruption laws in the
jurisdictions in which it conducts business. To the extent that the Bank fails or is perceived to fail to
comply with these and other applicable laws and regulations, its reputation could be materially
damaged, with consequent adverse affects on its business, financial condition, results of operations
and prospects.
A negative change in the Bank’s credit ratings could limit its ability to raise funding and may increase its
borrowing costs
The Bank currently has a long-term foreign currency issuer default rating of A2 with stable outlook
from Moody’s and a long-term issuer default rating of A+ with stable outlook from Fitch. These
ratings, which are intended to measure the Bank’s ability to meet its debt obligations as they mature,
are an important factor in determining the Bank’s cost of borrowing funds.
Both rating agencies expressly note that the probability of Government support for the Bank in case
of need is a key factor underpinning the rating. However, although the Government has in the past
supported its domestic banks (for example in the aftermath of the global financial crisis as discussed
under ‘‘Banking industry and regulation in Qatar—Banking system’’), it is important to note that the
Government is under no obligation (contractual or otherwise) to support any Qatari bank (including
the Bank) and there is no certainty that the Government will do so in the future. As a result,
investors should not rely on there being any such future support in making their investment decision.
15
A downgrade of the Bank’s credit rating, or a change in the outlook to negative, may limit its ability
to raise funding and increase its cost of borrowing, which could adversely affect its business, financial
condition, results of operations and prospects. A downgrade of the Bank’s credit rating (or
announcement of a negative ratings outlook) may also limit its ability to raise capital. Moreover,
actual or anticipated changes in the Bank’s credit rating may affect the market value of any Notes
issued under the Programme.
In addition, the credit rating assigned to the Bank may not reflect the potential impact of all risks
related to an investment in the Notes, the market or any additional factors discussed in this
document, and other factors may affect the value of the Notes. A securities rating is not a
recommendation to buy, sell or hold securities. Ratings may be subject to revision or withdrawal at
any time by the assigning rating organisation and each rating should be evaluated independently of
any other rating.
The banking industry is competitive and, in particular, the Bank is exposed to significant competition in Qatar
The Bank faces high levels of competition for all of its products and services. In particular, in Qatar
the Bank competes with other domestic banks and such competition may increase. Most of the
Bank’s competitors have significantly greater resources than the Bank which is, therefore, potentially
exposed to any aggressive competitive positions taken by those other banks. In addition, as an
institution seeking to grow its business, the Bank may need to offer better pricing, products or service
quality than its competitors in order to gain market share and there is no assurance that the Bank
will be able to do this at all or at a cost that does not adversely affect its results of operations.
The relatively small branch network of the Bank may put it at a disadvantage in seeking retail
deposits.
In addition, the Bank believes that the Qatari banking sector faces increased pressure for
consolidation and that one or more of its current competitors in Qatar may consider acquiring or
merging with each other. Any such mergers which do not involve the Bank could result in
competitors that are significantly bigger than the Bank and which have significantly greater resources
with which to compete effectively. In addition to domestic banks, international banks are increasing
their presence in Qatar, either directly or through strategic investments, and these banks compete with
the Bank for wholesale corporate and government business.
As at 31 December 2014, there were a total of 18 banks registered with the QCB in Qatar. In
addition to these banks, more international banks are expected to commence business through the
Qatar Financial Centre (the ‘‘QFC’’), which would allow them to compete for large corporate and
government business. See ‘‘Banking Industry and Regulation in Qatar’’. The competitive nature of the
Qatari banking market and any failure by the Bank to continue to compete successfully in its target
markets in Qatar may adversely affect the Bank’s business, financial condition, results of operations
and prospects.
A recurrence of rising inflation, or deflation, may adversely affect the Bank’s profitability
High inflation could slow the rate of economic growth and consumer spending in Qatar. A
deflationary environment in Qatar could also adversely affect the Bank’s profitability by adversely
affecting property values, which could have an adverse effect on the Bank’s real estate loan portfolio.
High rates of inflation or deflation thus could have a material adverse effect on the Bank’s business.
Although the Government and the QCB have announced their intention to continue to take measures
to ensure that inflation is stabilised, there can be no assurance that the Government and the QCB
will be able to achieve or maintain price stability, in the real estate market or otherwise and thus
control inflation.
The Bank’s financial condition and results of operations could be adversely affected by market risks, including
volatility in interest rates, prices of securities and foreign exchange rates
The Bank’s financial condition and results of operations could be affected by market risks that are
outside its control, including, without limitation, volatility in interest rates, prices of securities and
foreign exchange rates. Fluctuations in interest rates could adversely affect the Bank’s financial
condition and results of operations in a number of different ways. In particular, an increase in
interest rates generally may decrease the value of the Bank’s fixed-rate loans and the debt securities in
its investment securities portfolio and may raise the Bank’s funding costs. As a result, the Bank may
experience a reduction in its net interest income. See note 4(d)(ii) to the 2014 Financial Statements
which illustrates the Bank’s interest rate sensitivity at 31 December 2014 and also ‘‘Risk
16
Management—Market risk—Interest rate risk’’. Interest rates are sensitive to many factors beyond the
Bank’s control, including the policies of central banks, such as the QCB and the U.S. Federal
Reserve, political factors and domestic and international economic conditions.
The Bank’s financial condition and results of operations may also be affected by changes in the
market value of its securities portfolio. See ‘‘—Market fluctuations and volatility may adversely affect
the value of the Bank’s positions in certain securities and make it more difficult to assess the fair value
of certain of its assets’’ above.
Adverse movements in foreign exchange rates may also adversely impact the revenue and financial
condition of the Bank’s depositors and borrowers which, in turn, may impact the Bank’s deposit base
and the quality of its exposures to certain borrowers.
Ultimately, there can be no assurance that the Bank will be able to protect itself from any adverse
effects of a currency revaluation or future volatility in interest rate or currency exchange rates, which
could have a material adverse effect on its business, financial condition, results of operations and
prospects.
The Bank is exposed to a range of operational risks. In particular, any failure of the Bank’s information
technology systems could have a material adverse effect on its business and reputation
Operational risk and losses can result from fraud, errors by employees, failure to document
transactions properly or to obtain proper internal authorisation, failure to comply with regulatory
requirements and conduct of business rules, systems and equipment failures, natural disasters or the
failure of external systems (for example, those of the Bank’s counterparties or vendors). The Bank
has implemented risk controls and loss mitigation strategies, and substantial resources are devoted to
developing efficient procedures and to staff training, but it is not possible to eliminate entirely each of
the potential operational risks the Bank faces. Losses from the failure of the Bank’s system of
internal controls could have a material adverse effect on its business, financial condition, results of
operations and prospects and could materially adversely affect its reputation.
The Bank depends on its information technology systems to process a large number of transactions
on an accurate and timely basis, and to store and process substantially all of the Bank’s business and
operating data. The proper functioning of the Bank’s financial control, risk management, credit
analysis and reporting, accounting, customer service and other information technology systems, as
well as the communication networks between its branches and main data processing centres, are
critical to the Bank’s business and ability to compete effectively. The Bank’s business activities would
be materially disrupted if there is a partial or complete failure of any of these information technology
systems or communications networks. Such failures can be caused by a variety of factors, many of
which are wholly or partially outside the Bank’s control including natural disasters, extended power
outages and computer viruses or other malicious intrusions. The proper functioning of the Bank’s
information technology systems also depends on accurate and reliable data and other system input,
which are subject to human errors. Any failure or delay in recording or processing the Bank’s
transaction data could subject it to claims for losses and regulatory fines and penalties. The Bank has
implemented and tested business continuity plans and processes as well as disaster recovery
procedures, but there can be no assurance that these safeguards will be fully effective and any failure
may have a material adverse effect on the Bank’s business and reputation.
The Bank’s risk management policies and procedures may not be effective in all circumstances and may leave it
exposed to unidentified or unanticipated risks
The Bank’s risk management strategies and internal controls may not be effective in all circumstances
and may leave the Bank exposed to unidentified or unanticipated risks. There can be no assurance
that the Bank’s risk management and internal control policies and procedures will adequately control,
or protect the Bank against, all credit, liquidity, market, operational and other risks. In addition,
certain risks may not be accurately quantified by the Bank’s risk management systems. Some of the
Bank’s methods of managing risk are based upon the use of historical market data which, as
evidenced by events caused by the global financial crisis, may not always accurately predict future risk
exposures, which could be significantly greater than historical measures indicate. In addition, certain
risks could be greater than the Bank’s empirical data would otherwise indicate.
Other risk management methods depend upon evaluation of information regarding the markets in
which the Bank operates, its clients or other matters that are publicly available or information
otherwise accessible to the Bank. This information may not be accurate, complete, up-to-date or
properly evaluated in all cases. Any material deficiency in the Bank’s risk management or other
17
internal control policies or procedures may expose it to significant credit, liquidity, market or
operational risk, which may in turn have a material adverse effect on the Bank’s business, financial
condition, results of operations and prospects.
The Bank’s internal compliance systems might not be fully effective in all circumstances
The Bank’s ability to comply with all applicable regulations is largely dependent on its maintenance
of compliance, audit and reporting systems and procedures, and its ability to attract and retain
personnel qualified to manage and monitor such systems and procedures. Although the Bank is
subject to oversight by regulatory authorities, including regular examination activity, performs regular
internal audits and employs an external auditor to monitor and test its compliance systems, the Bank
cannot be certain that these systems and procedures will be fully effective in all circumstances,
particularly in the case of deliberate employee misconduct or other frauds perpetrated against the
Bank. In the case of actual or alleged non-compliance with applicable regulations, the Bank could be
subject to investigations and judicial or administrative proceedings that may result in substantial
penalties or civil lawsuits for damages. Any of these could have a material adverse effect on the
Bank’s business, financial condition, results of operations and prospects.
The Bank may need to raise further capital in the future for a variety of reasons and such capital may be
difficult to raise when needed
As at 30 June 2015, the Bank’s tier 1 and total capital adequacy ratios (each as determined in
accordance with Basel III requirements as adopted by the QCB) were 17.80 per cent., compared to
the QCB’s requirements of a minimum tier 1 capital adequacy ratio of 10.5 per cent. and a minimum
total capital ratio of 12.5 per cent.
A variety of factors affect the Bank’s capital adequacy levels, including, in particular, changes in its
risk weighted assets and its profitability from period to period. A significant increase in lending in the
future is likely to reduce the Bank’s capital adequacy ratios and any future losses experienced by it
would have a similar effect. In addition, regulatory requirements in relation to the calculation of
capital adequacy and required levels of capital adequacy change from time to time. The Bank may
also need to increase its capital as a result of market perceptions of adequate capitalisation levels and
the perceptions of rating agencies.
As a result, the Bank may need to obtain additional capital in the future. Such capital, whether in
the form of debt financing or additional equity, may not be available on commercially favourable
terms, or at all. Moreover, should the Bank’s capital ratios fall close to regulatory minimum levels or
the Bank’s own internal minimum levels, the Bank may need to adjust its business practices, including
reducing the risk and leverage of certain activities. If the Bank is unable to maintain satisfactory
capital adequacy ratios, its credit ratings may be lowered and its cost of funding may therefore
increase.
The Bank may not be able to recruit and retain qualified and experienced personnel, which could have an
adverse effect on its business and its ability to implement its strategy
The Bank’s success and ability to maintain current business levels and sustain growth will depend, in
part, on its ability to continue to recruit and retain qualified and experienced banking and
management personnel. The market for such personnel in the Middle East is intensely competitive
and the Bank could face challenges in recruiting and retaining such personnel to manage its
businesses.
The Bank depends on the efforts, skill, reputation and experience of its senior management, as well
as synergies among their diverse fields of expertise and knowledge. The loss of key personnel could
delay or prevent the Bank from implementing its strategies. The Bank is also not insured against
losses that may be incurred in the event of the loss of any member of its key personnel.
The Bank’s accounting policies and methods are critical to how it reports its financial condition and results of
operations and require management to make estimates about matters that are uncertain
Accounting policies and methods are fundamental to how the Bank records and reports its financial
condition and results of operations. Management must exercise judgment in selecting and applying
many of these accounting policies and methods so that they comply with IFRS.
Management has identified certain accounting policies in the notes to its financial statements as being
critical because they require management’s judgment to ascertain the valuations of assets, liabilities,
commitments and contingencies. See note 5 to the 2014 Financial Statements. These judgments
18
include, for example, the determination of impairment allowances and fair values of assets and
liabilities.
A variety of factors could affect the ultimate value that is obtained either when earning income,
recognising an expense, recovering an asset or reducing a liability. The Bank has established policies
and control procedures that are intended to ensure that these critical accounting estimates and
judgments are well controlled and applied consistently. In addition, the policies and procedures are
intended to ensure that the process for changing methodologies occurs in an appropriate manner.
Because of the uncertainty surrounding the Bank’s judgments and the estimates pertaining to these
matters, the Bank cannot guarantee that it will not be required to make changes in accounting
estimates or restate prior period financial statements in the future.
The interests of the Bank’s shareholders may, in certain circumstances, conflict with those of Noteholders
Investors should be aware that the interests of the Bank’s shareholders may, in certain circumstances,
be different from those of the Bank’s creditors (including the holders of the Notes) and, in those
circumstances, the holders of the Notes could be disadvantaged.
Risks relating to Qatar
Emerging markets such as Qatar are subject to greater risks than more developed markets, and financial
volatility in emerging markets could negatively impact the Bank’s business
Generally, investment in emerging markets is only suitable for sophisticated investors who fully
appreciate the significance of the risks involved in, and are familiar with, investing in emerging
markets. Investors should also note that emerging markets such as Qatar are subject to rapid change
and that the information set forth in this Base Prospectus may become outdated relatively quickly.
Moreover, financial turmoil in any emerging market country tends to adversely affect confidence in
other emerging market countries and cause investors to move their money to more developed
markets. As has happened in the past, financial problems or an increase in the perceived risks
associated with investing in emerging economies could dampen foreign investment in Qatar and
adversely affect its economy. In addition, during such times, companies that operate in emerging
markets can face liquidity constraints as foreign funding sources are withdrawn and this could also
adversely affect the Bank’s business and result in a decrease in the price of Notes issued under the
Programme.
Specific risks in Qatar that could have a material adverse effect on the Bank’s business, financial
condition, results of operations and prospects include, without limitation, the following:
*
regional political instability, including government or military regime change, riots or other
forms of civil disturbance or violence, including through acts of terrorism;
*
military strikes or the outbreak of war or other hostilities involving nations in the region;
*
a material curtailment of the industrial and economic infrastructure development that is
currently underway across the MENA region;
*
government intervention, including expropriation or nationalisation of assets or increased levels
of protectionism;
*
an increase in inflation and the cost of living;
*
cancellation of contractual rights, expropriation of assets and/or inability to repatriate profits
and/or dividends;
*
increased government regulations, or adverse governmental activities, with respect to price,
import and export controls, the environment, customs and immigration, capital transfers, foreign
exchange and currency controls, labour policies and land and water use and foreign ownership;
*
arbitrary, inconsistent or unlawful government action;
*
changing tax regimes, including the imposition or increase of taxes in tax favourable
jurisdictions such as Qatar;
*
difficulties and delays in obtaining governmental and other approvals for operations or renewing
existing ones;
*
inability to repatriate profits or dividends and restrictions on the right to convert or repatriate
currency or export assets; and
19
*
potential adverse changes in laws and regulatory practices, including legal structures and tax
laws.
There can be no assurance that either the economic performance of, or political stability in, Qatar or
other countries in which the Bank may in the future operate can or will be sustained. Investors
should note that a worsening of current financial market conditions, instability in certain sectors of
the Qatari economy or major political upheaval in Qatar could lead to decreased investor and
consumer confidence, market volatility, economic disruption, and declines in real estate markets and,
as a result, could have an adverse effect on the business, results of operations, financial condition and
prospects of the Bank.
Qatar is located in a region that is subject to ongoing political and security concerns
A number of countries located in the MENA region are either experiencing, or have in the recent
past experienced, political instability, domestic turmoil and violence, and armed conflict. For example,
there has been significant political change in Tunisia and Egypt, armed conflict in Iraq, Libya, Syria
and Yemen, and protests and related activities in a number of other countries in the MENA region.
These recent and ongoing developments, along with terrorist acts, acts of maritime piracy and other
forms of instability in the MENA region, such as tensions between the United States, Israel and Iran,
that may or may not directly involve Qatar, could have an adverse effect on Qatar’s economy and its
ability to engage in international trade which, in turn, could have an adverse effect on the Bank’s
business, financial condition, results of operations and prospects.
The Qatar legal system continues to develop and this may create an uncertain environment for investment and
business activity
Qatar is in the process of developing its legal and regulatory institutions. As a result, procedural
safeguards as well as formal regulations and laws may not be applied consistently. In some
circumstances it may not be possible to obtain the legal remedies provided under Qatari laws and
regulations in a timely manner. As the legal environment remains subject to continuous development,
investors in Qatar may face uncertainty as to the security of their investments. Any unexpected
changes in the legal systems in Qatar may have a material adverse effect on the rights of the holders
of any Notes issued under the Programme or the investments that the Bank has made or may make
in the future, which may in turn have a material adverse effect on the Bank’s business, operating
results, cash flows, prospects and financial condition.
The statistical data contained in this document should be treated with caution by prospective investors
Statistics contained in this document, including in relation to GDP, money supply, inflation and
indebtedness of the Qatari government, have been obtained from, among other sources, the QCB and
the IMF. Such statistics, and the component data on which they are based, may not have been
compiled in the same manner as data provided by other sources and may be different from statistics
published by third parties, reflecting the fact that the underlying assumptions and methodology may
vary from source to source.
There may also be material variances between preliminary, estimated or projected statistics set forth
in this document and actual results, and between statistics set forth in this document and
corresponding data previously published by or on behalf of Qatar. Consequently, the statistical data
contained in this document should be treated with caution by prospective investors.
Qatar has a relatively new insolvency law and there is no certainty as to how Qatari courts will construe or
enforce such law in the event of a bankruptcy affecting the Bank
Qatar has adopted a relatively new bankruptcy and insolvency provision (part of new Commercial
Code No. 27 of 2006) (the ‘‘Bankruptcy Law’’), which came into effect on 13 May 2007. The
Bankruptcy Law provisions are similar to those included in the Egyptian and most other GCC laws
and relate largely to the declaration of bankruptcy, its effects and its administration, and include
conciliation to prevent bankruptcy. However, because the Bankruptcy Law is relatively new and
untested by Qatari courts, there is no certainty as to how Qatari courts would construe or enforce the
Bankruptcy Law in the event of a bankruptcy affecting the Bank. There can also be no assurance
that a Qatari court would compel a bankruptcy administrator to perform any of the Issuer’s or the
Bank’s obligations under the Notes or the Deed of Guarantee, as applicable, during an administration
period. The Bankruptcy Law also enables Qatari courts to defer adjudication of a company’s
bankruptcy if the court decides that it is possible to improve that company’s financial position during
a period (such period to be specified by the court) or if judged to be in the interest of the national
20
economy. Similarly, given the lack of precedent, there is no certainty as to if and how the QCB
might exercise its powers of temporary management and control under the Banking Law (including
putting a financial institution into liquidation) in relation to financial institutions experiencing
financial difficulties.
The future attitude of Qatari courts and the related interpretation or application of Qatari law regarding the
payment of interest cannot be predicted
Although under the laws of Qatar, contractual provisions for the charging and payment of interest
are not prohibited and have been routinely enforced by Qatari courts, a court applying Qatari law
may not enforce such a provision either to pay interest on or, to the extent that, on a given date,
accrued but unpaid interest exceeded outstanding principal, such amounts. Thus the future attitude of
Qatari courts and the related interpretation or application of Qatari law regarding the payment of
interest cannot be predicted.
There is no principle of binding precedent in the Qatari courts
There is no doctrine of binding precedent in the Qatari courts and reports of the decisions of the
Qatari courts are not always published. As a result, any experience with and knowledge of prior
rulings of the Qatari courts may not be a reliable basis on which to predict decisions that Qatari
courts may render in the future. Thus the outcome of any legal dispute remains uncertain.
Risks relating to the Notes
There is no active trading market for the Notes
Notes issued under the Programme will be new securities which may not be widely distributed and
for which there is currently no active trading market (unless in the case of any particular Tranche,
such Tranche is to be consolidated with and form a single series with a Tranche of Notes which is
already issued). There is no assurance that a secondary market for any Notes will develop or, if it
does develop, that it will provide the Noteholders with liquidity of investment or that it will continue
for the life of those Notes. A Noteholder may not be able to find a buyer to buy its Notes readily or
at prices that will enable the Noteholder to realise a desired yield. Additionally, if the Notes are
traded after their initial issuance, they may trade at a discount to their initial offering price,
depending upon prevailing interest rates, the market for similar securities, general economic conditions
and the financial condition of the Issuer and the Guarantor. Accordingly, the purchase of Notes is
suitable only for investors who can bear the risks associated with a lack of liquidity in the relevant
Notes and the financial and other risks associated with an investment in the relevant Notes. An
investor in Notes must be prepared to hold the relevant Notes for an indefinite period of time or
until their maturity. Although application has been made for the listing of certain Notes issued under
the Programme on the Irish Stock Exchange, there is no assurance that such applications will be
accepted, that any particular Tranche of Notes will be so admitted or that an active trading market
will develop. Accordingly, there is no assurance as to the development or liquidity of any trading
market for any particular Tranche of Notes.
The Notes may be redeemed prior to maturity
Unless in the case of any particular Tranche of Notes the relevant Final Terms specifies otherwise, in
the event that the Issuer or the Guarantor would be obliged to increase the amounts payable in
respect of any Notes due to any withholding or deduction for or on account of, any present or future
taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected,
withheld or assessed by or on behalf of the Cayman Islands or Qatar or any political subdivision
thereof or any authority therein or thereof having power to tax, the Issuer may redeem all
outstanding Notes in accordance with the Conditions.
In addition, if in the case of any particular Tranche of Notes the relevant Final Terms specifies that
the Notes are redeemable at the Issuer’s option in certain other circumstances the Issuer may choose
to redeem the Notes at a time when prevailing interest rates may be relatively low. In such
circumstances an investor may not be able to reinvest the redemption proceeds in a comparable
security at an effective interest rate as high as that of the relevant Notes. Potential investors should
consider re-investment risk in light of other investments available at that time.
Fixed/Floating Rate Notes
Fixed/Floating Rate Notes are Notes which may bear interest at a rate that converts from a fixed
rate to a floating rate, or from a floating rate to a fixed rate. Where the Issuer has the right to effect
21
such a conversion, this will affect the secondary market and the market value of the Notes since the
Issuer may be expected to convert the rate when it is likely to produce a lower overall cost of
borrowing. If the Issuer converts from a fixed rate to a floating rate in such circumstances, the spread
on the Fixed/Floating Rate Notes may be less favourable than then prevailing spreads on comparable
Floating Rate Notes tied to the same reference rate. In addition, the new floating rate at any time
may be lower than the rates on other Notes. If the Issuer converts from a floating rate to a fixed rate
in such circumstances, the fixed rate may be lower than then prevailing rates on its Notes.
Notes issued at a substantial discount or premium
The market values of securities issued at a substantial discount (such as Zero Coupon Notes) or
premium from their principal amount tend to fluctuate more in relation to general changes in interest
rates than do prices for more conventional interest-bearing securities. Generally, the longer the
remaining term of such securities, the greater the price volatility as compared to more conventional
interest-bearing securities with comparable maturities.
Modification
The Conditions contain provisions for calling meetings of Noteholders to consider matters affecting
their interests generally. These provisions permit defined majorities to bind all Noteholders including
Noteholders who did not attend and vote at the relevant meeting, Noteholders who do not
participate in any electronic consent sought by the Issuer and Noteholders who voted in a manner
contrary to the majority.
Risks relating to the market generally
Interest rate risks
Investment in Fixed Rate Notes involves the risk that if market interest rates subsequently increase
above the rate paid on the Fixed Rate Notes, this will adversely affect the value of the Fixed Rate
Notes.
Credit ratings may not reflect all risks
One or more independent credit rating agencies may assign credit ratings to the Guarantor, the
Programme or the Notes. The ratings may not reflect the potential impact of all risks related to the
structure, market, additional factors discussed in this Base Prospectus and other factors that may
affect the value of the Notes.
In general, European regulated investors are restricted under the CRA Regulation from using credit
ratings for regulatory purposes, unless such ratings are issued by a credit rating agency established in
the EU and registered under the CRA Regulation (and such registration has not been withdrawn or
suspended). Such general restriction will also apply in the case of credit ratings issued by non-EU
credit rating agencies, unless the relevant credit ratings are endorsed by a EU-registered credit rating
agency or the relevant non-EU rating agency is certified in accordance with the CRA Regulation (and
such endorsement action or certification, as the case may be, has not been withdrawn or suspended).
The list of registered and certified rating agencies published by the European Securities and Markets
Authority (‘‘ESMA’’) on its website in accordance with the CRA Regulation is not conclusive
evidence of the status of the relevant rating agency being included in such list as there may be delays
between certain supervisory measures being taken against a relevant rating agency and publication of
an updated ESMA list. Limited information with respect to the credit rating agencies and ratings will
be disclosed in the relevant Final Terms. Certain information with respect to the credit rating
agencies and ratings is set out on the cover page of this Base Prospectus. A credit rating is not a
recommendation to buy, sell or hold securities and may be revised or withdrawn by its assigning
credit rating agency at any time. Each rating should be evaluated independently of any other rating.
Change of law
The Conditions are based on English law in effect as at the date of this Base Prospectus. No
assurance can be given as to the impact of any possible judicial decision or change to English law or
administrative practice after the date of issuance of the relevant Notes nor whether any such change
could adversely affect the ability of the Issuer or the Guarantor to make payments under the Notes.
Investors in the Notes must rely on Euroclear and Clearstream, Luxembourg procedures
Notes issued under the Programme may be represented by one or more Global Notes. Such Global
Notes will be deposited with a common depositary for Euroclear and Clearstream, Luxembourg.
22
Except in the circumstances described in the relevant Global Note, investors will not be entitled to
receive Notes in definitive form. Euroclear and Clearstream, Luxembourg and their respective direct
and indirect participants will maintain records of the beneficial interests in the Global Notes. While
the Notes are represented by one or more Global Notes, investors will be able to trade their
beneficial interests only through Euroclear and Clearstream, Luxembourg and their respective
participants.
While the Notes are represented by one or more Global Notes the Issuer and the Guarantor will
discharge their payment obligations under the Notes by making payments to the, where applicable,
common depositary for Euroclear and Clearstream, Luxembourg for distribution to their account
holders. A holder of a beneficial interest in a Global Note must rely on the procedures of Euroclear
and Clearstream, Luxembourg and their respective participants to receive payments under the relevant
Notes. The Issuer and the Guarantor have no responsibility or liability for the records relating to, or
payments made in respect of, beneficial interests in the Global Notes.
Holders of beneficial interests in the Global Notes will not have a direct right to vote in respect of
the relevant Notes. Instead, such holders will be permitted to act only to the extent that they are
enabled by Euroclear and Clearstream, Luxembourg to appoint appropriate proxies. Similarly, holders
of beneficial interests in the Global Notes will not have a direct right under the Global Notes to take
enforcement action against the Issuer or the Guarantor in the event of a default under the relevant
Notes but will have to rely upon their rights under the Deed of Covenant.
The Notes may he subject to fluctuations in currency exchange rates
The Issuer will pay principal and interest on the Notes in the relevant Specified Currency. This
presents certain risks relating to currency conversions if an investor’s financial activities are
denominated principally in a currency or currency unit (the ‘‘Investor’s Currency’’) other than the
Specified Currency. These include the risk that exchange rates may significantly change (including
changes due to devaluation of the Specified Currency or revaluation of the Investor’s Currency) and
the risk that government and monetary authorities with jurisdiction over the Investor’s Currency may
impose or modify exchange controls, which could adversely affect an applicable exchange rate. The
Issuer and the Guarantor have no control over the factors that generally affect these risks, such as
economic, financial and political events and the supply and demand for applicable currencies. In
recent years, exchange rates between certain currencies have been highly volatile and volatility
between such currencies or with other currencies may be expected in the future. However, fluctuations
between currencies in the past are not necessarily indicative of fluctuations that may occur in the
future. An appreciation in the value of the Investor’s Currency relative to the Specified Currency
would decrease: (i) the Investor’s Currency-equivalent yield on the Notes; (ii) the Investor’s Currencyequivalent value of the principal payable on the Notes; and (iii) the Investor’s Currency-equivalent
market value of the Notes.
Government and monetary authorities may impose (as some have done in the past) exchange controls
that could adversely affect an applicable exchange rate as well as the availability of a specified foreign
currency at the time of any payment of principal or interest on a Note. As a result, investors may
receive less interest or principal than expected, or no interest or principal. Even if there are no actual
exchange controls, it is possible that the Specified Currency for any particular Note not denominated
in U.S. dollars would not be available at such Note’s maturity.
Notes which have a denomination that is not an integral multiple of the minimum Specified Denomination may
be illiquid and difficult to trade
In relation to any issue of Notes which have a denomination consisting of the minimum Specified
Denomination (as defined in the Conditions) plus a higher integral multiple of another smaller
amount, it is possible that the Notes may be traded in amounts in excess of such minimum Specified
Denomination that are not integral multiples of such minimum Specified Denomination. In such a
case a Noteholder who, as a result of trading such amounts, holds a face amount of less than the
minimum Specified Denomination would need to purchase an additional amount of Notes such that it
holds an amount equal to at least the minimum Specified Denomination to be able to trade such
Notes. Noteholders should be aware that Notes which have a denomination that is not an integral
multiple of the minimum Specified Denomination may be illiquid and difficult to trade.
If a Noteholder holds an amount which is less than the minimum Specified Denomination in his
account with the relevant clearing system at the relevant time such Noteholder may not receive a
definitive Note in respect of such holding (should definitive Notes be printed) and would need to
23
purchase a face amount of Notes such that its holding amounts to at least a Specified Denomination
in order to be eligible to receive a definitive Note.
If such Notes in definitive form are issued, holders should be aware that definitive Notes which have
a denomination that is not an integral multiple of the minimum Specified Denomination may be
illiquid and difficult to trade.
Risks relating to taxation
Payment by the Issuer will be subject to withholding tax in Qatar
The Income Tax Law No.21 of 2009 (the ‘‘Income Tax Law’’) and the Executive Regulations of the
Income Tax Law issued in June 2011 (the ‘‘Executive Regulations’’) provide that any interest
payments made to ‘‘non-residents’’ in respect of activities not connected with a permanent
establishment in Qatar will be subject to withholding tax.
Payments of interest made by the Issuer in respect of the Notes will be subject to taxation. Condition
12 provides that in certain circumstances the Issuer is required to pay such additional amounts as will
result in receipt by the Noteholders after such withholding or deduction of such amounts as would
have been received by them had no such withholding or deduction been required.
EU Savings Directive
Under Council Directive 2003/48/EC on the taxation of savings income in the form of interest
payments (the ‘‘Savings Directive’’), member states of the European Union (‘‘EU Member States’’) are
required to provide to the tax authorities of other EU Member States details of certain payments of
interest or similar income paid or secured by a person established in an EU Member State to or for
the benefit of an individual resident in another EU Member State or certain limited types of entities
established in another EU Member State.
For a transitional period, Austria is required (unless during that period it elects otherwise) to operate
a withholding system in relation to such payments (subject to a procedure whereby, on meeting
certain conditions, the beneficial owner of the interest or other income may request that no tax be
withheld). The end of the transitional period is dependent upon the conclusion of certain other
agreements relating to information exchange with certain other countries. A number of non-EU
countries and territories including Switzerland have adopted similar measures (a withholding system in
the case of Switzerland).
On 24 March 2014, the Council of the European Union adopted a Council Directive (the ‘‘Amending
Directive’’) amending and broadening the scope of the requirements described above. The Amending
Directive requires EU Member States to apply these new requirements from 1 January 2017, and if
they were to take effect the changes would expand the range of payments covered by the Savings
Directive, in particular to include additional types of income payable on securities. They would also
expand the circumstances in which payments must be reported or subject to withholding. This
approach would apply to payments made to, or secured for, persons, entities or legal arrangements
(including trusts) where certain conditions are satisfied, and may in some cases apply where the
person, entity or arrangement is established or effectively managed outside of the European Union.
However, the European Commission has proposed the repeal of the Savings Directive from 1 January
2017 in the case of Austria and from 1 January 2016 in the case of all other EU Member States
(subject to on-going requirements to fulfil administrative obligations such as the reporting and
exchange of information relating to, and accounting for withholding taxes on, payments made before
those dates). This is to prevent overlap between the Savings Directive and a new automatic exchange
of information regime to be implemented under Council Directive 2011/16/EU on Administrative
Cooperation in the field of Taxation (as amended by Council Directive 2014/107/EU). The new
regime under Council Directive 2011/16/EU (as amended) is in accordance with the Global Standard
released by the Organisation for Economic Co-operation and Development in July 2014. Council
Directive 2011/16/EU (as amended) is generally broader in scope than the Savings Directive, although
it does not impose withholding taxes. The proposal also provides that, if it proceeds, EU Member
States will not be required to apply the new requirements of the Amending Directive.
If a payment were to be made or collected through an EU Member State which has opted for a
withholding system and an amount of, or in respect of, tax were to be withheld from that payment,
neither the Issuer nor any Paying Agent (as defined in the Terms and Conditions of the Notes) nor
any other person would be obliged to pay additional amounts with respect to any Note as a result of
24
the imposition of such withholding tax. The Issuer is required to maintain a Paying Agent in an EU
Member State that is not obliged to withhold or deduct tax pursuant to the Savings Directive.
U.S. Foreign Account Tax Compliance Act Withholding
Whilst the Notes are in global form and held within Euroclear or Clearstream, Luxembourg
(together, the ‘‘ICSDs’’), in all but the most remote circumstances, it is not expected that the new
reporting regime and potential withholding tax imposed by sections 1471 through 1474 of the U.S.
Internal Revenue Code of 1986 (‘‘FATCA’’) will affect the amount of any payment received by the
ICSDs (see ‘‘Taxation – U.S. Foreign Account Tax Compliance Act’’). However, FATCA may affect
payments made to custodians or intermediaries in the subsequent payment chain leading to the
ultimate investor if any such custodian or intermediary generally is unable to receive payments free of
FATCA withholding. It also may affect payment to any ultimate investor that is a financial
institution that is not entitled to receive payments free of withholding under FATCA, or an ultimate
investor that fails to provide its broker (or other custodian or intermediary from which it receives
payment) with any information, forms, other documentation or consents that may be necessary for
the payments to be made free of FATCA withholding. Investors should choose the custodians or
intermediaries with care (to ensure each is compliant with FATCA or other laws or agreements
related to FATCA) and provide each custodian or intermediary with any information, forms, other
documentation or consents that may be necessary for such custodian or intermediary to make a
payment free of FATCA withholding. Investors should consult their own tax adviser to obtain a
more detailed explanation of FATCA and how FATCA may affect them. The Issuer’s obligations
under the Notes are discharged once it has made payment to, or to the order of, the common
depositary for the ICSDs (as bearer or registered holder of the Notes) and the Issuer has therefore no
responsibility for any amount thereafter transmitted through the ICSDs and custodians or
intermediaries. Further, foreign financial institutions in a jurisdiction which has entered into an
intergovernmental agreement with the United States (an ‘‘IGA’’) are generally not expected to be
required to withhold under FATCA or an IGA (or any law implementing an IGA) from payments
they make.
Risks relating to enforcement
It may be difficult to enforce arbitration awards and foreign judgments against the Guarantor
Under the Conditions, the parties have agreed that any dispute arising out of or in connection with
the Notes shall be referred to and finally resolved by arbitration in accordance with the Arbitration
Rules of the London Court of International Arbitration (the ‘‘LCIA’’), with a Noteholder having the
right to require that the courts of England have exclusive jurisdiction to settle the dispute. A
unilateral right to litigate, as on the part of a Noteholder has not been specifically raised before the
Qatari courts. Accordingly, it is possible that a Qatari court may not accept that the Noteholder’s
right to litigate is exclusive to such Noteholder and may afford the Guarantor the same right.
In the event that proceedings are brought against the Guarantor in Qatar, the Qatari courts would,
in accordance with their normal practice, enforce the contractual terms of the Notes (including the
contractual choice of a governing law other than Qatari law to govern the Notes, provided that, this
would not apply to any provision of that law which Qatari courts held to be contrary to any
mandatory provision of Qatari law or to public order or morality in Qatar). Qatari courts have
consistently enforced commercial interest obligations computed in accordance with the terms of the
relevant agreement. It is, however, uncertain whether the Qatari courts would enforce the payment of
interest on interest, or the payment of accrued interest which exceeds the amount of the principal
sum.
There is currently no treaty or convention for the reciprocal enforcement of judgments between Qatar
on the one hand and England on the other. A judgment obtained from a court in England will be
enforceable in Qatar subject to the provisions of Articles 379 and 380 of Law No. (13) of 1990 (the
‘‘Civil and Commercial Procedure Law’’), which provides, in the case of Article 379, that judgments
and orders pronounced in a foreign country may be ordered to be executed in Qatar upon the
conditions determined in that country for the execution of Qatari judgments and orders and provides,
in the case of Article 380, that an order for execution of a foreign judgment or order will not be
made unless and until the following have been ascertained, that: (i) the judgment or order was
delivered by a competent court of the foreign jurisdiction in question; (ii) the parties to the action
were properly served with notice of proceedings and properly represented; (iii) the judgment or order
is one that is capable of being executed by the successful party to the proceedings in conformity with
25
the laws of the foreign jurisdiction in question; and (iv) the foreign judgment or order does not
conflict with a previous judgment or order of a competent Qatari court and is not contrary to public
policy or morality in Qatar.
A Qatari court would be entitled to call for textual evidence on the laws of England concerning the
conditions that would be applicable for the execution of the judgment of a Qatari court in England
and the Qatari court would then be entitled to execute the judgment of the English court upon those
conditions. Accordingly, although a judgment obtained from a court in England would be admissible
in evidence in any proceedings brought in Qatar to enforce such judgment it would still be necessary
to initiate proceedings in Qatar.
In accordance with their normal practice, Qatari courts would uphold the choice of arbitration as a
dispute resolution method. However, this would be subject to the same qualifications as are stated
above with regard to choice of law and a Qatari court may not accept that its own jurisdiction had
been excluded by any provision providing that the submission to any particular jurisdiction was
exclusive.
Qatar is a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards
adopted by the United Nations Conference on International Commercial Arbitration on 10 June 1958
(the ‘‘New York Convention’’), with effect from 30 March 2003. The United Kingdom is also a party
to the New York Convention and therefore an arbitration award made in England should be
enforceable in Qatar in accordance with the terms of the New York Convention.
However, enforcement of foreign arbitral awards is underdeveloped in Qatar and largely untested and
therefore there can be no assurance that arbitration in connection with the Notes would protect the
interests of the relevant Noteholders to the same extent as would be expected in certain other
jurisdictions.
26
OVERVIEW
The following is an overview of the principal features of the Programme. This overview must be read as
an introduction to this Base Prospectus and any decision by any investor to invest in any Notes should
be based on a consideration of the Base Prospectus as a whole, including any information incorporated
by reference. This overview does not purport to be complete and is taken from, and is qualified in its
entirety by the remainder of this Base Prospectus and, in relation to the terms and conditions of each
Tranche of Notes, the relevant Final Terms. Each investor should read the entire Base Prospectus and
the relevant Final Terms carefully, especially the risks of investing in Notes issued under the Programme
discussed under ‘‘Risk Factors’’. The Issuer, the Guarantor and any relevant Dealer may agree that
Notes shall be issued in a form other than that contemplated in the Terms and Conditions, in which
event, in the case of listed Notes only and if appropriate, a supplemental Base Prospectus will be
published.
This Overview constitutes a general description of the Programme for the purposes of Article 22.5(3)
of Commission Regulation (EC) No. 809/2004 implementing the Prospective Directive.
Words and expressions defined in the ‘‘Terms and Conditions of the Notes’’ and ‘‘Forms of the Notes’’
below or elsewhere in this Base Prospectus have the same meanings in this Overview.
Issuer:
IBQ Finance Limited, a limited liability exempted company
incorporated in accordance with the laws of, and formed and
registered in, the Cayman Islands with registered number 304473
and its registered office at PO Box 309, Ugland House, Grand
Cayman, KY1-1104, Cayman Islands.
Guarantor:
International Bank of Qatar (Q.S.C.)
Description:
Euro Medium Term Note Programme
Risk Factors:
Investing in Notes issued under the Programme involves certain
risks. There are certain factors that may affect the abilities of the
Issuer and the Guarantor to fulfil their respective obligations under
the Notes issued under the Programme (and, in the case of the
Guarantor only, the Guarantee of the Notes), which are discussed
under ‘‘Risk Factors’’ below. In addition, there are certain factors
which are material for the purpose of assessing the market risks
associated with Notes issued under the Programme. These are set
out under ‘‘Risk Factors’’ and include certain risks relating to the
structure of particular Series of Notes and certain market risks.
Arranger:
Citigroup Global Markets Limited
Dealers:
Citigroup Global Markets Limited
Standard Chartered Bank
QNB Capital LLC
and any other Dealer appointed from time to time by the Issuer and
the Guarantor either generally in respect of the Programme or in
relation to a particular Tranche of Notes.
Certain Restrictions:
Each issue of Notes denominated in a currency in respect of which
particular laws, guidelines, regulations, restrictions or reporting
requirements apply will only be issued in circumstances which
comply with such laws, guidelines, regulations, restrictions or
reporting requirements from time to time (see ‘‘Subscription and
Sale’’) including the following restrictions applicable at the date of
this Base Prospectus
Notes having a maturity of less than one year
Notes having a maturity of less than one year will, if the proceeds of
the issue are accepted in the United Kingdom, constitute deposits
for the purposes of the prohibition on accepting deposits contained
in section 19 of the Financial Services and Markets Act 2000 unless
27
they are issued to a limited class of professional investors and have
a denomination of at least £100,000 or its equivalent, see
‘‘Subscription and Sale’’.
Fiscal Agent and Paying Agent:
Citibank N.A., London Branch
Registrar and Transfer Agent:
Citigroup Global Markets Deutschland AG
Programme Size:
The maximum aggregate nominal amount of Notes outstanding
and guaranteed at any one time under the Programme will not
exceed U.S.$2,000,000,000 (and for this purpose, any Notes
denominated in another currency shall be translated into U.S.
dollars at the date of the agreement to issue such Notes (calculated
in accordance with the provisions of the Dealer Agreement)). The
maximum aggregate nominal amount of Notes which may be
outstanding and guaranteed at any one time under the Programme
may be increased by the Issuer and the Guarantor from time to
time, subject to compliance with the relevant provisions of the
Dealer Agreement.
Listing and Admission to Trading:
Application has been made to the Irish Stock Exchange for Notes
issued under the Programme to be admitted during the period of
twelve months after the date hereof to the Official List and for such
Notes to be admitted to trading on the Main Securities Market.
The Programme also permits Notes to be issued on the basis that
they will not be admitted to listing, trading and/or quotation by any
competent authority, stock exchange and/or quotation system or to
be admitted to listing, trading and/or quotation by such other or
further competent authorities, stock exchanges and/or quotation
systems as may be agreed with the Issuer and the Guarantor.
The relevant Final Terms will state whether or not the relevant
Notes are to be listed and/or admitted to trading and, if so, on
which stock exchange and/or markets.
Distribution:
Notes may be distributed by way of private or public placement
and in each case on a syndicated or non-syndicated basis.
Clearing Systems:
Euroclear Bank S.A./N.V. (‘‘Euroclear’’) and/or Clearstream
Banking, société anonyme (‘‘Clearstream, Luxembourg’’) and/or,
in relation to any Tranche of Notes, any other clearing system as
may be specified in the relevant Final Terms.
Issuance in Series:
Notes will be issued in Series. Each Series may comprise one or
more Tranches issued on different Issue Dates. The Notes of each
Series will have the same terms and conditions which are the same
in all respects, except that the Issue Date and the amount of the first
payment of interest may be different in respect of different
Tranches. The Notes of each Tranche will all be subject to
identical terms in all respects save that a Tranche may comprise
Notes of different denominations.
Fixed Rate Notes:
Fixed interest will be payable on such date or dates as may be
agreed between the Issuer, the Guarantor and the relevant Dealer(s)
and on redemption and will be calculated on the basis of such Day
Count Fraction as may be agreed between the Issuer, the
Guarantor and the relevant Dealer(s).
Floating Rate Notes:
Floating Rate Notes will bear interest at a rate determined:
(a)
on the same basis as the floating rate under a notional interest
rate swap transaction in the relevant Specified Currency
governed by an agreement incorporating the 2006 ISDA
Definitions (as published by the International Swaps and
28
Derivatives Association, Inc., and as amended and updated as
at the Issue Date of the first Tranche of the Notes of the
relevant Series); or
(b)
on the basis of the relevant Reference Rate as adjusted for any
applicable Margin.
The Margin (if any) relating to such floating rate will be agreed
between the Issuer, the Guarantor and the relevant Dealer(s) for
each Series of Floating Rate Notes. Floating Rate Notes may also
have a maximum rate of interest, a minimum rate of interest or
both.
Interest on Floating Rate Notes in respect of each Interest Period,
as agreed prior to issue by the Issuer, the Guarantor and the
relevant Dealer(s), will be payable on such Interest Payment Dates,
and will be calculated on the basis of such Day Count Fraction, as
may be agreed between the Issuer, the Guarantor and the relevant
Dealer(s).
Zero Coupon Notes:
Zero Coupon Notes will be offered and sold at a discount to their
nominal amount and will not bear interest.
Forms of Notes:
Notes may be issued in bearer form or in registered form. See
‘‘Forms of the Notes’’.
Currencies:
Subject to any applicable legal or regulatory restrictions, Notes
may be denominated in any currency agreed between the Issuer, the
Guarantor and relevant Dealer(s).
Status of the Notes:
The Notes will constitute direct, unconditional, unsubordinated
and (subject to the provisions of Condition 5 (Negative Pledge))
unsecured obligations of the Issuer and will rank pari passu among
themselves and (save for certain obligations required to be
preferred by law) equally with all other unsecured obligations
(other than subordinated obligations, if any) of the Issuer from
time to time outstanding.
The Guarantee of the Notes:
The Notes will be unconditionally and irrevocably guaranteed by
the Guarantor. The Guarantee of the Notes constitutes direct,
unconditional, unsubordinated and (subject to the provisions of
Condition 5 (Negative Pledge)) unsecured obligations of the
Guarantor and will rank pari passu and (save for certain
obligations required to be preferred by law) equally with all other
unsecured obligations (other than subordinated obligations, if any)
of the Guarantor from time to time outstanding.
Issue Price:
Notes may be issued at any price on a fully paid basis. The price
and amount of Notes to be issued under the Programme will be
determined by the Issuer, the Guarantor and the relevant Dealer(s)
at the time of issue in accordance with prevailing market
conditions.
Maturities:
The Notes will have such maturities as may be agreed between the
Issuer, the Guarantor and relevant Dealer(s), subject to such
minimum or maximum maturities as may be allowed or required
from time to time by the relevant central bank (or equivalent body)
or any laws or regulations applicable to the Issuer, the Guarantor
or the relevant Specified Currency.
Notes having a maturity of less than one year may be subject to
restrictions on their denomination and distribution, see ‘‘Certain
Restrictions – Notes having a maturity of less than one year’’ above.
Redemption:
Notes may be redeemable at par or at such other Redemption
Amount as may be specified in the relevant Final Terms.
29
Optional Redemption:
Notes may be redeemed before their stated maturity at the option
of the Issuer (either in whole or in part) and/or the Noteholders to
the extent (if at all) specified in the relevant Final Terms.
Tax Redemption:
In addition to ‘‘Optional Redemption’’ above, early redemption will
be permitted for tax reasons as described in Condition 9(b)
(Redemption for tax reasons).
Interest:
Notes may be interest-bearing or non-interest bearing. Interest (if
any) may accrue at a fixed rate or a floating rate. The rate of
interest (if any) and the method of calculating interest may vary
between the Issue Date and the Maturity Date of the relevant
Series.
Denominations of Notes:
The Notes will be issued in such denominations as may be agreed
between the Issuer and the relevant Dealer(s) save that the
minimum denomination of each Note will be such amount as
may be allowed or required from time to time by the relevant
central bank (or equivalent body) or any laws or regulations
applicable to the relevant Specified Currency (see ‘‘Certain
Restrictions – Notes having a maturity of less than one year’’
above), and save that the minimum denomination of each Note will
be A100,000 (or, if the Notes are denominated in a currency other
than euro, the equivalent amount in such currency). If a Global
Note is exchanged for a Definitive Note at the option of the
Noteholders, the Notes shall be tradeable only in principal amounts
of at least A100,000 and integral multiples of A1,000 in excess
thereof up to and including A199,000.
Negative Pledge:
The Notes will have the benefit of a negative pledge as described in
Condition 5 (Negative Pledge).
Cross Default:
The Notes will have the benefit of a cross default as described in
Condition 13 (Events of Default).
Taxation:
All payments in respect of Notes will be made free and clear of
withholding taxes of the Cayman Islands and Qatar, unless the
withholding is required by law. If such withholding is required, the
Issuer or, as the case may be, the Guarantor will (subject as
provided in Condition 12 (Taxation)) pay such additional amounts
as will result in the Noteholders receiving such amounts as they
would have received in respect of such Notes had no such
withholding been required.
Governing Law:
The Dealer Agreement, the Agency Agreement, the Deed of
Covenant, the Guarantee of the Notes (each as defined in ‘‘Terms
and Conditions of the Notes’’) and the Notes and any noncontractual obligations arising out of or in connection therewith
shall be governed by, and shall be construed in accordance with,
English law.
The Registered Office Agreement is governed by the law of the
Cayman Islands.
Enforcement of Notes in Global
Form:
In the case of Global Notes, individual investors’ rights against the
Issuer will be governed by a Deed of Covenant dated 9 November
2015, a copy of which will be available for inspection at the
Specified Office of the Fiscal Agent.
Ratings:
The Programme has been assigned senior unsecured ratings of A+
long-term, with stable outlook, and F1 short-term by Fitch, and F2
long-term, with stable outlook, and P2 short term by Moody’s
Cyprus. The Guarantor has been assigned ratings of A+ by Fitch
and A2 by Moody’s. Fitch, Moody’s and Moody’s Cyprus are
established in the European Union and is registered under the CRA
Regulation.
30
Series of Notes issued under the Programme may be rated or
unrated. Where a Series of Notes is rated, such rating, and the
credit rating agency issuing such rating, will be disclosed in the
relevant Final Terms and will not necessarily be the same as the
ratings assigned to the Programme. A security rating is not a
recommendation to buy, sell or hold securities and may be subject
to suspension, reduction or withdrawal at any time by the assigning
credit rating agency.
Selling Restrictions:
For a description of certain restrictions on offers, sales and
deliveries of Notes and on the distribution of offering material in
the United States of America, the European Economic Area, the
United Kingdom, the Cayman Islands, Qatar (including the Qatar
Financial Centre), Japan, the Kingdom of Saudi Arabia, the United
Arab Emirates (excluding the Dubai International Financial
Centre), the Dubai International Financial Centre and the
Kingdom of Bahrain, and such other restrictions as may be
required in connection with the offering and sale of a particular
Tranche of Notes, see ‘‘Subscription and Sale’’ below.
United States Selling Restrictions
Regulation S, Category 2. TEFRA C or D/TEFRA not applicable,
as specified in the relevant Final Terms.
31
FORMS OF THE NOTES
The Notes of each Series will be in either bearer form, with or without interest coupons attached, or
registered form, without interest coupons attached. Notes will be issued outside the United States in
reliance on Regulation S under the Securities Act.
Bearer Notes
Each Tranche of Notes in bearer form (‘‘Bearer Notes’’) will initially be in the form of either a
temporary global note in bearer form (the ‘‘Temporary Global Note’’), without interest coupons, or a
permanent global note in bearer form (the ‘‘Permanent Global Note’’), without interest coupons, in
each case as specified in the relevant Final Terms. Each Temporary Global Note or, as the case may
be, Permanent Global Note (each a ‘‘Global Note’’) will be deposited on or around the Issue Date of
the relevant Tranche of the Notes with a common depositary for Euroclear and/or Clearstream,
Luxembourg.
In the case of each Tranche of Bearer Notes, the relevant Final Terms will also specify whether
United States Treasury Regulation §1.163-5(c)(2)(i)(C) (or any successor U.S. Treasury Regulation
section including, without limitation, regulations issued in accordance with U.S. Internal Revenue
Service Notice 2012-20 or otherwise in connection with the U.S. Hiring Incentives to Restore
Employment Act of 2010) (the ‘‘TEFRA C Rules’’) or United States Treasury Regulation §1.1635(c)(2)(i)(D) (or any successor U.S. Treasury Regulation section including, without limitation,
regulations issued in accordance with U.S. Internal Revenue Service Notice 2012-20 or otherwise in
connection with the U.S. Hiring Incentives to Restore Employment Act of 2010) (the ‘‘TEFRA D
Rules’’) are applicable in relation to the Notes or that neither the TEFRA C Rules nor the TEFRA
D Rules are applicable.
Temporary Global Note exchangeable for Permanent Global Note
If the relevant Final Terms specifies the form of Notes as being ‘‘Temporary Global Note
exchangeable for a Permanent Global Note’’, then the Notes will initially be in the form of a
Temporary Global Note which will be exchangeable, in whole or in part, for interests in a Permanent
Global Note, without interest coupons, not earlier than 40 days after the Issue Date of the relevant
Tranche of the Notes upon certification as to non-U.S. beneficial ownership in accordance with U.S.
Treasury Regulations. No payments will be made under the Temporary Global Note unless exchange
for interests in the Permanent Global Note is improperly withheld or refused. In addition, interest
payments in respect of the Notes cannot be collected without such certification of non-U.S. beneficial
ownership.
Whenever any interest in the Temporary Global Note is to be exchanged for
Permanent Global Note, the Issuer shall procure (in the case of first exchange)
Permanent Global Note to the bearer of the Temporary Global Note or (in
subsequent exchange) an increase in the principal amount of the Permanent
accordance with its terms against:
an interest in a
the delivery of a
the case of any
Global Note in
(i)
presentation and (in the case of final exchange) presentation and surrender of the Temporary
Global Note to or to the order of the Fiscal Agent; and
(ii)
receipt by the Fiscal Agent of a certificate or certificates of non-U.S. beneficial ownership.
The principal amount of Notes represented by the Permanent Global Note shall be equal to the
aggregate of the principal amounts specified in the certificates of non-U.S. beneficial ownership
provided, however, that in no circumstances shall the principal amount of Notes represented by the
Permanent Global Note exceed the initial principal amount of Notes represented by the Temporary
Global Note.
If:
(a)
the Permanent Global Note has not been delivered or the principal amount thereof increased by
5.00 p.m. (London time) on the seventh day after the bearer of the Temporary Global Note has
requested exchange of an interest in the Temporary Global Note for an interest in a Permanent
Global Note; or
32
(b)
the Temporary Global Note (or any part thereof) has become due and payable in accordance
with the Terms and Conditions of the Notes or the date for final redemption of the Temporary
Global Note has occurred and, in either case, payment in full of the amount of principal falling
due with all accrued interest thereon has not been made to the bearer of the Temporary Global
Note in accordance with the terms of the Temporary Global Note on the due date for payment,
then from 5.00 p.m. (London time) on such seventh day (in the case of (a) above) or at 5.00 p.m.
(London time) on such due date (in the case of (b) above) holders of interests in such Temporary
Global Note credited to their accounts with Euroclear and/or Clearstream, Luxembourg, as the case
may be (each a ‘‘TGN Accountholder’’), will become entitled to proceed directly against the Issuer on
the basis of statements of account provided by Euroclear and/or Clearstream, Luxembourg on and
subject to the terms of a deed of covenant (the ‘‘Deed of Covenant’’) dated 9 November 2015 and
executed by the Issuer. Each TGN Accountholder shall acquire such right without prejudice to the
rights which the holder may have under the Temporary Global Note and the Deed of Covenant.
Notwithstanding such right that each TGN Accountholder may acquire under the Deed of Covenant,
payment to the holder in respect of any Notes represented by the Temporary Global Note shall
constitute a discharge of the Issuer’s obligations to the extent of any such payment and nothing in
the Deed of Covenant shall oblige the Issuer to make any payment under the Notes to or to the
order of any person other than the holder.
The Permanent Global Note will become exchangeable, in whole but not in part only and at the
request of the bearer of the Permanent Global Note, for Bearer Notes in definitive form (‘‘Definitive
Notes’’):
(a)
on the expiry of such period of notice as may be specified in the Final Terms; or
(b)
at any time, if so specified in the Final Terms; or
(c)
if the Final Terms specifies ‘‘in the limited circumstances described in the Permanent Global
Note’’, then if either of the following events occurs:
(i)
Euroclear or Clearstream, Luxembourg or any other relevant clearing system is closed for
business for a continuous period of 14 days (other than by reason of legal holidays) or
announces an intention permanently to cease business; or
(ii)
any of the circumstances described in Condition 13 (Events of Default) occurs.
Whenever the Permanent Global Note is to be exchanged for Definitive Notes, the Issuer shall
procure the prompt delivery (free of charge to the bearer) of such Definitive Notes, duly
authenticated and with Coupons and Talons attached (if so specified in the Final Terms), in an
aggregate principal amount equal to the principal amount of Notes represented by the Permanent
Global Note to the bearer of the Permanent Global Note against the surrender of the Permanent
Global Note to or to the order of the Fiscal Agent within 30 days of the bearer requesting such
exchange.
If:
(a)
Definitive Notes have not been duly delivered by 5.00 p.m. (London time) on the thirtieth day
after the bearer has requested exchange of the Permanent Global Note for Definitive Notes; or
(b)
the Permanent Global Note was originally issued in exchange for part only of a Temporary
Global Note representing the Notes and TGN Accountholders become entitled to proceed
directly against the Issuer; or
(c)
the Permanent Global Note (or any part thereof) has become due and payable in accordance
with the Terms and Conditions of the Notes or the date for final redemption of the Permanent
Global Note has occurred and, in either case, payment in full of the amount of principal falling
due with all accrued interest thereon has not been made to the bearer in accordance with the
terms of the Permanent Global Note on the due date for payment,
then from 5.00 p.m. (London time) on such thirtieth day (in the case of (a) above) or at 5.00 p.m.
(London time) on such due date (in the case of (b) above) or at 5.00 p.m. (London time) on such
due date (in the case of (c) above) holders of interests in such Permanent Global Note credited to
their accounts with Euroclear and/or Clearstream, Luxembourg, as the case may be (each a ‘‘PGN
Accountholder’’), will become entitled to proceed directly against the Issuer on the basis of statements
of account provided by Euroclear and/or Clearstream, Luxembourg on and subject to the terms of
the Deed of Covenant. Each PGN Accountholder shall acquire such right without prejudice to the
rights which the holder may have under the Temporary Global Note and the Deed of Covenant.
33
Notwithstanding such right that each PGN Accountholder may acquire under the Deed of Covenant,
payment to the holder in respect of any Notes represented by the Temporary Global Note shall
constitute a discharge of the Issuer’s obligations to the extent of any such payment and nothing in
the Deed of Covenant shall oblige the Issuer to make any payment under the Notes to or to the
order of any person other than the holder.
Temporary Global Note exchangeable for Definitive Notes
If the relevant Final Terms specifies the form of Notes as being ‘‘Temporary Global Note
exchangeable for Definitive Notes’’, then the Notes will initially be in the form of a Temporary
Global Note which will be exchangeable, in whole or in part, for Definitive Notes not earlier than 40
days after the Issue Date of the relevant Tranche of the Notes upon certification as to non-U.S.
beneficial ownership in accordance with U.S. Treasury Regulations. Interest payments in respect of
the Notes cannot be collected without such certification of non-U.S. beneficial ownership.
Whenever the Temporary Global Note is to be exchanged for Definitive Notes, the Issuer shall
procure the prompt delivery (free of charge to the bearer) of such Definitive Notes, duly
authenticated and with Coupons and Talons attached (if so specified in the relevant Final Terms), in
an aggregate principal amount equal to the principal amount of the Temporary Global Note to the
bearer of the Temporary Global Note against the surrender of the Temporary Global Note to or to
the order of the Fiscal Agent within 30 days of the bearer requesting such exchange.
If:
(a)
Definitive Notes have not been duly delivered by 5.00 p.m. (London time) on the thirtieth day
after the bearer has requested exchange of the Temporary Global Note for Definitive Notes; or
(b)
the Temporary Global Note (or any part thereof) has become due and payable in accordance
with the Terms and Conditions of the Notes or the date for final redemption of the Temporary
Global Note has occurred and, in either case, payment in full of the amount of principal falling
due with all accrued interest thereon has not been made to the bearer in accordance with the
terms of the Temporary Global Note on the due date for payment,
then from 5.00 p.m. (London time) on such thirtieth day (in the case of (a) above) or at 5.00 p.m.
(London time) on such due date (in the case of (b) above) TGN Accountholders will become entitled
to proceed directly against the Issuer on the basis of statements of account provided by Euroclear
and/or Clearstream, Luxembourg on and subject to the terms of a deed of covenant (the ‘‘Deed of
Covenant’’) dated 9 November 2015 and executed by the Issuer. Each TGN Accountholder shall
acquire such right without prejudice to the rights which the holder may have under the Temporary
Global Note and the Deed of Covenant. Notwithstanding such right that each TGN Accountholder
may acquire under the Deed of Covenant, payment to the holder in respect of any Notes represented
by the Temporary Global Note shall constitute a discharge of the Issuer’s obligations to the extent of
any such payment and nothing in the Deed of Covenant shall oblige the Issuer to make any payment
under the Notes to or to the order of any person other than the holder.
Permanent Global Note exchangeable for Definitive Notes
If the relevant Final Terms specifies the form of Notes as being ‘‘Permanent Global Note
exchangeable for Definitive Notes’’, then the Notes will initially be in the form of a Permanent
Global Note which will be exchangeable in whole, but not in part, for Definitive Notes:
(a)
on the expiry of such period of notice as may be specified in the relevant Final Terms; or
(b)
at any time, if so specified in the relevant Final Terms; or
(c)
if the relevant Final Terms specifies ‘‘in the limited circumstances described in the Permanent
Global Note’’, then if either of the following events occurs:
(i)
Euroclear or Clearstream, Luxembourg or any other relevant clearing system is closed for
business for a continuous period of 14 days (other than by reason of legal holidays) or
announces an intention permanently to cease business; or
(ii)
any of the circumstances described in Condition 13 (Events of Default) occurs.
Whenever the Permanent Global Note is to be exchanged for Definitive Notes, the Issuer shall
procure the prompt delivery (free of charge to the bearer) of such Definitive Notes, duly
authenticated and with Coupons and Talons attached (if so specified in the Final Terms), in an
aggregate principal amount equal to the principal amount of Notes represented by the Permanent
Global Note to the bearer of the Permanent Global Note against the surrender of the Permanent
34
Global Note to or to the order of the Fiscal Agent within 30 days of the bearer requesting such
exchange.
If:
(a)
Definitive Notes have not been duly delivered by 5.00 p.m. (London time) on the thirtieth day
after the bearer has requested exchange of the Permanent Global Note for Definitive Notes; or
(b)
the Permanent Global Note (or any part thereof) has become due and payable in accordance
with the Terms and Conditions of the Notes or the date for final redemption of the Permanent
Global Note has occurred and, in either case, payment in full of the amount of principal falling
due with all accrued interest thereon has not been made to the bearer in accordance with the
terms of the Permanent Global Note on the due date for payment,
then from 5.00 p.m. (London time) on such thirtieth day (in the case of (a) above) or at 5.00 p.m.
(London time) on such due date (in the case of (b) above) PGN Accountholders, will become entitled
to proceed directly against the Issuer on the basis of statements of account provided by Euroclear
and/or Clearstream, Luxembourg on and subject to the terms of the Deed of Covenant. Each PGN
Accountholder shall acquire such right without prejudice to the rights which the holder may have
under the Temporary Global Note and the Deed of Covenant. Notwithstanding such right that each
PGN Accountholder may acquire under the Deed of Covenant, payment to the holder in respect of
any Notes represented by the Temporary Global Note shall constitute a discharge of the Issuer’s
obligations to the extent of any such payment and nothing in the Deed of Covenant shall oblige the
Issuer to make any payment under the Notes to or to the order of any person other than the holder.
Terms and Conditions applicable to the Notes
The terms and conditions applicable to any Definitive Note will be endorsed on that Note and will
consist of the terms and conditions set out under ‘‘Terms and Conditions of the Notes’’ below and the
provisions of the relevant Final Terms which complete, amend and/or replace those terms and
conditions.
The terms and conditions applicable to any Note in global form will differ from those terms and
conditions which would apply to the Note were it in definitive form to the extent described under
‘‘Summary of Provisions Relating to the Notes while in Global Form’’ below.
Legend concerning United States persons
In the case of any Tranche of Bearer Notes having a maturity of more than 365 days and to which
the TEFRA D Rules are applicable, the Notes in permanent global form, the Notes in definitive form
and any Coupons and Talons appertaining thereto will bear the following legend:
‘‘Any United States person who holds this obligation will be subject to limitations under the United
States income tax laws, including the limitations provided in Sections 165(j) and 1287(a) of the
Internal Revenue Code.’’
Registered Notes
Each Tranche of Registered Notes will be in the form of either individual Note Certificates in
registered form (‘‘Individual Note Certificates’’) or global Notes in registered form (a ‘‘Global
Registered Note’’), in each case as specified in the relevant Final Terms.
Each Global Registered Note will be deposited on or around the relevant Issue Date with a
depositary or a common depositary for Euroclear and/or Clearstream, Luxembourg and/or any other
relevant clearing system and registered in the name of a nominee for such depositary and will be
exchangeable for Individual Note Certificates in accordance with its terms.
If the relevant Final Terms specifies the form of Notes as being ‘‘Individual Note Certificates’’, then
the Notes will at all times be in the form of Individual Note Certificates issued to each Noteholder in
respect of their respective holdings.
If the relevant Final Terms specifies the form of Notes as being ‘‘Global Registered Note
exchangeable for Individual Note Certificates’’, then the Notes will initially be in the form of a
Global Registered Note which will be exchangeable in whole, but not in part, for Individual Note
Certificates:
(a)
on the expiry of such period of notice as may be specified in the relevant Final Terms; or
(b)
at any time, if so specified in the relevant Final Terms; or
35
(c)
if the relevant Final Terms specifies ‘‘in the limited circumstances described in the Global
Registered Note’’, then if either of the following events occurs:
(i)
Euroclear or Clearstream, Luxembourg or any other relevant clearing system is closed for
business for a continuous period of 14 days (other than by reason of legal holidays) or
announces an intention permanently to cease business; or
(ii)
any of the circumstances described in Condition 13 (Events of Default) occurs.
Whenever the Global Registered Note is to be exchanged for Individual Note Certificates, the Issuer
shall procure that Individual Note Certificates will be issued in an aggregate principal amount equal
to the principal amount of the Global Registered Note within five business days of the delivery, by or
on behalf of the registered holder of the Global Registered Note to the Registrar of such information
as is required to complete and deliver such Individual Note Certificates (including, without limitation,
the names and addresses of the persons in whose names the Individual Note Certificates are to be
registered and the principal amount of each such person’s holding) against the surrender of the
Global Registered Note at the Specified Office of the Registrar.
Such exchange will be effected in accordance with the provisions of the Agency Agreement and the
regulations concerning the transfer and registration of Notes scheduled thereto and, in particular,
shall be effected without charge to any holder, but against such indemnity as the Registrar may
require in respect of any tax or other duty of whatsoever nature which may be levied or imposed in
connection with such exchange.
If:
(a)
Individual Note Certificates have not been delivered by 5.00 p.m. (London time) on the thirtieth
day after they are due to be issued and delivered in accordance with the terms of the Global
Registered Note; or
(b)
any of the Notes represented by a Global Registered Note (or any part of it) has become due
and payable in accordance with the Terms and Conditions of the Notes or the date for final
redemption of the Notes has occurred and, in either case, payment in full of the amount of
principal falling due with all accrued interest thereon has not been made to the holder of the
Global Registered Note in accordance with the terms of the Global Registered Note on the due
date for payment,
then, at 5.00 p.m. (London time) on such thirtieth day (in the case of (a) above) or at 5.00 p.m.
(London time) on such due date (in the case of (b) above) each person shown in the records of
Euroclear and/or Clearstream, Luxembourg (or any other relevant clearing system) as being entitled
to interest in the Notes (each an ‘‘Accountholder’’) shall acquire the right under the Deed of Covenant
to enforce against the Issuer, the Issuer’s obligations to the holder in respect of the Notes represented
by the Global Registered Note, including the obligation of the Issuer to make all payments when due
at any time in respect of such Notes as if such Notes had been duly presented and (where required
by the Conditions) surrendered on the due date in accordance with the Conditions. Each
Accountholder shall acquire such right without prejudice to the rights which the holder may have
under the Global Registered Note and the Deed of Covenant. Notwithstanding such right that each
Accountholder may acquire under the Deed of Covenant, payment to the holder in respect of any
Notes represented by the Global Registered Note shall constitute a discharge of the Issuer’s
obligations to the extent of any such payment and nothing in the Deed of Covenant shall oblige the
Issuer to make any payment under the Notes to or to the order of any person other than the holder.
Terms and Conditions applicable to the Notes
The terms and conditions applicable to any Individual Note Certificate will be endorsed on that
Individual Note Certificate and will consist of the terms and conditions set out under ‘‘Terms and
Conditions of the Notes’’ below and the provisions of the relevant Final Terms which complete,
amend and/or replace those terms and conditions.
The terms and conditions applicable to any Global Registered Note will differ from those terms and
conditions which would apply to the Note were it in definitive form to the extent described under
‘‘Summary of Provisions Relating to the Notes while in Global Form’’ below.
36
TERMS AND CONDITIONS OF THE NOTES
The following is the text of the terms and conditions which will be endorsed on each Note in definitive
form issued under the Programme. The terms and conditions applicable to any Note in global form will
differ from those terms and conditions which would apply to the Note were it in definitive form to the
extent described under ‘‘Summary of Provisions Relating to the Notes while in Global Form’’ below.
1.
(a)
Introduction
Programme: IBQ Finance Limited (the ‘‘Issuer’’) has established a Euro Medium Term Note
Programme (the ‘‘Programme’’) for the issuance of up to U.S.$2,000,000,000 in aggregate
principal amount of notes (the ‘‘Notes’’). Notes issued under the Programme are guaranteed by
International Bank of Qatar (Q.S.C.) (the ‘‘Guarantor’’). In the event of any inconsistency
between these Conditions and the relevant Final Terms, the relevant Final Terms shall prevail.
(b)
Final Terms: Notes issued under the Programme are issued in series (each a ‘‘Series’’) and each
Series may comprise one or more tranches (each a ‘‘Tranche’’) of Notes. Each Tranche is the
subject of a final terms (the ‘‘Final Terms’’) which completes these terms and conditions (the
‘‘Conditions’’). The terms and conditions applicable to any particular Tranche of Notes are these
Conditions as completed by the relevant Final Terms.
(c)
Agency Agreement: The Notes are the subject of an issue and paying agency agreement dated
9 November 2015 (the ‘‘Agency Agreement’’) between the Issuer, the Guarantor, Citibank N.A.,
London Branch as fiscal agent (the ‘‘Fiscal Agent’’, which expression includes any successor
fiscal agent appointed from time to time in connection with the Notes), Citigroup Global
Markets Deutschland AG as registrar (the ‘‘Registrar’’, which expression includes any successor
registrar appointed from time to time in connection with the Notes), the paying agents named
therein (together with the Fiscal Agent, the ‘‘Paying Agents’’, which expression includes any
successor or additional paying agents appointed from time to time in connection with the Notes)
and the transfer agents named therein (together with the Registrar, the ‘‘Transfer Agents’’, which
expression includes any successor or additional transfer agents appointed from time to time in
connection with the Notes). In these Conditions references to the ‘‘Agents’’ are to the Paying
Agents and the Transfer Agents and any reference to an ‘‘Agent’’ is to any one of them.
(d)
Deed of Guarantee: The Notes are the subject of a deed of guarantee dated 9 November 2015
(the ‘‘Deed of Guarantee’’) entered into by the Guarantor.
(e)
Deed of Covenant: The Notes may be issued in bearer form (‘‘Bearer Notes’’), or in registered
form (‘‘Registered Notes’’). Registered Notes are constituted by a deed of covenant dated
9 November 2015 (the ‘‘Deed of Covenant’’) entered into by the Issuer.
(f)
The Notes: All subsequent references in these Conditions to ‘‘Notes’’ are to the Notes which are
the subject of the relevant Final Terms. Copies of the relevant Final Terms are available for
viewing at the registered offices of the Issuer and the Fiscal Agent and copies may be obtained
from such offices.
(g)
Summaries: Certain provisions of these Conditions are summaries of the Agency Agreement and
are subject to its detailed provisions. Noteholders and the holders of the related interest
coupons, if any, (the ‘‘Couponholders’’ and the ‘‘Coupons’’, respectively) are bound by, and are
deemed to have notice of, all the provisions of the Agency Agreement, the Deed of Guarantee
and the Deed of Covenant applicable to them. Copies of the Agency Agreement, the Deed of
Guarantee and the Deed of Covenant are available for inspection by Noteholders during normal
business hours at the Specified Offices of each of the Agents, the initial Specified Offices of
which are set out in the Agency Agreement.
2.
(a)
Interpretation
Definitions: In these Conditions the following expressions have the following meanings:
‘‘Accrual Yield’’ has the meaning given in the relevant Final Terms;
‘‘Additional Business Centre(s)’’ means the city or cities specified as such in the relevant Final
Terms;
‘‘Additional Financial Centre(s)’’ means the city or cities specified as such in the relevant Final
Terms;
37
‘‘Business Day’’ means:
(i)
in relation to any sum payable in euro, a TARGET Settlement Day and a day on which
commercial banks and foreign exchange markets settle payments generally in each (if any)
Additional Business Centre; and
(ii)
in relation to any sum payable in a currency other than euro, a day on which commercial
banks and foreign exchange markets settle payments generally in London, in the Principal
Financial Centre of the relevant currency and in each (if any) Additional Business Centre;
‘‘Business Day Convention’’, in relation to any specified date, has the meaning given in the
relevant Final Terms and, if so specified in the relevant Final Terms, may have different
meanings in relation to different dates and, in this context, the following expressions shall have
the following meanings:
(i)
‘‘Following Business Day Convention’’ means that the relevant date shall be postponed to
the first following day that is a Business Day;
(ii)
‘‘Modified Following Business Day Convention’’ or ‘‘Modified Business Day Convention’’
means that the relevant date shall be postponed to the first following day that is a
Business Day unless that day falls in the next calendar month in which case that date will
be the first preceding day that is a Business Day;
(iii)
‘‘Preceding Business Day Convention’’ means that the relevant date shall be brought
forward to the first preceding day that is a Business Day;
(iv)
‘‘FRN Convention’’, ‘‘Floating Rate Convention’’ or ‘‘Eurodollar Convention’’ means that
each relevant date shall be the date which numerically corresponds to the preceding such
date in the calendar month which is the number of months specified in the relevant Final
Terms as the Specified Period after the calendar month in which the preceding such date
occurred provided, however, that:
(A) if there is no such numerically corresponding day in the calendar month in which any
such date should occur, then such date will be the last day which is a Business Day
in that calendar month;
(B) if any such date would otherwise fall on a day which is not a Business Day, then
such date will be the first following day which is a Business Day unless that day falls
in the next calendar month, in which case it will be the first preceding day which is a
Business Day; and
(C) if the preceding occurrence of the specified date occurred on the last day in a
calendar month which was a Business Day as a result of adjustment in accordance
with paragraph (A) above, then all subsequent occurrences of the specified dates will
be the last day which is a Business Day in the calendar month which is the specified
number of months after the calendar month in which the preceding occurrence of the
specified date occurred; and
(v)
‘‘No Adjustment’’ means that the relevant date shall not be adjusted in accordance with
any Business Day Convention;
‘‘Calculation Agent’’ means the Fiscal Agent or such other Person specified in the relevant Final
Terms as the party responsible for calculating the Rate(s) of Interest and Interest Amount(s)
and/or such other amount(s) as may be specified in the relevant Final Terms;
‘‘Calculation Amount’’ has the meaning given in the relevant Final Terms;
‘‘Clearstream’’ means Clearstream Banking, société anonyme;
‘‘Coupon Sheet’’ means, in respect of a Note, a coupon sheet relating to the Note;
‘‘Day Count Fraction’’ means, in respect of the calculation of an amount for any period of time
(the ‘‘Calculation Period’’), such day count fraction as may be specified in these Conditions or
the relevant Final Terms and:
(i)
if ‘‘Actual/Actual (ICMA)’’ is so specified, means:
(A) where the Calculation Period is equal to or shorter than the Regular Period during
which it falls, the actual number of days in the Calculation Period divided by the
product of (1) the actual number of days in such Regular Period and (2) the number
of Regular Periods in any year; and
38
(B) where the Calculation Period is longer than one Regular Period, the sum of:
(1)
the actual number of days in such Calculation Period falling in the Regular
Period in which it begins divided by the product of (i) the actual number of
days in such Regular Period and (ii) the number of Regular Periods in any
year; and
(2)
the actual number of days in such Calculation Period falling in the next Regular
Period divided by the product of (i) the actual number of days in such Regular
Period and (ii) the number of Regular Periods in any year;
(ii)
if ‘‘Actual/365’’ or ‘‘Actual/Actual (ISDA)’’ is so specified, means the actual number of
days in the Calculation Period divided by 365 (or, if any portion of the Calculation
Period falls in a leap year, the sum of (A) the actual number of days in that portion of
the Calculation Period falling in a leap year divided by 366 and (B) the actual number of
days in that portion of the Calculation Period falling in a non-leap year divided by 365);
(iii)
if ‘‘Actual/365 (Fixed)’’ is so specified, means the actual number of days in the Calculation
Period divided by 365;
(iv)
if ‘‘Actual/360’’ is so specified, means the actual number of days in the Calculation Period
divided by 360;
(v)
if ‘‘30/360’’ is so specified, means the number of days in the Calculation Period divided by
360 (the number of days to be calculated on the basis of a year of 360 days with 12
30- day months (unless (A) the last day of the Calculation Period is the 31st day of a
month but the first day of the Calculation Period is a day other than the 30th or 31st
day of a month, in which case the month that includes that last day shall not be
considered to be shortened to a 30-day month, or (B) the last day of the Calculation
Period is the last day of the month of February, in which case the month of February
shall not be considered to be lengthened to a 30-day month)); and
(vi)
if ‘‘30/360E’’ or ‘‘Eurobond Basis’’ is so specified means, the number of days in the
Calculation Period divided by 360 (the number of days to be calculated on the basis of a
year of 360 days with 12 30-day months, without regard to the date of the first day or
last day of the Calculation Period unless, in the case of the final Calculation Period, the
date of final maturity is the last day of the month of February, in which case the month
of February shall not be considered to be lengthened to a 30-day month),
provided, however, that in each such case the number of days in the Calculation Period is
calculated from and including the first day of the Calculation Period to but excluding the last
day of the Calculation Period;
‘‘Early Redemption Amount (Tax)’’ means, in respect of any Note, its principal amount or such
other amount as may be specified in, or determined in accordance with, the relevant Final
Terms;
‘‘Early Termination Amount’’ means, in respect of any Note, its principal amount or such other
amount as may be specified in, or determined in accordance with, these Conditions or the
relevant Final Terms;
‘‘Euroclear’’ means Euroclear Bank S.A./N.V.;
‘‘Extraordinary Resolution’’ has the meaning given in the Agency Agreement;
‘‘Final Redemption Amount’’ means, in respect of any Note, its principal amount or such other
amount as may be specified in, or determined in accordance with, the relevant Final Terms;
‘‘First Interest Payment Date’’ means the date specified in the relevant Final Terms;
‘‘Fixed Coupon Amount’’ has the meaning given in the relevant Final Terms;
‘‘Guarantee’’ means, in relation to any Indebtedness of any Person, any obligation of another
Person to pay such Indebtedness including (without limitation):
(i)
any obligation to purchase such Indebtedness;
(ii)
any obligation to lend money, to purchase or subscribe shares or other securities or to
purchase assets or services in order to provide funds for the payment of such
Indebtedness;
39
(iii)
any indemnity against the consequences of a default in the payment of such Indebtedness;
and
(iv)
any other agreement to be responsible for such Indebtedness;
‘‘Guarantee of the Notes’’ means the guarantee of the Notes given by the Guarantor in the Deed
of Guarantee;
‘‘Holder’’, in the case of Bearer Notes, has the meaning given in Condition 3(b) (Title to Bearer
Notes) and, in the case of Registered Notes, has the meaning given in Condition 3(d) (Title to
Registered Notes);
‘‘Indebtedness’’ means any indebtedness of any Person for money borrowed or raised including
(without limitation) any indebtedness for or in respect of:
(i)
amounts raised by acceptance under any acceptance credit facility;
(ii)
amounts raised under any note purchase facility;
(iii)
the amount of any liability in respect of leases or hire purchase contracts which would, in
accordance with applicable law and generally accepted accounting principles, be treated as
finance or capital leases;
(iv)
the amount of any liability in respect of any purchase price for assets or services the
payment of which is deferred for a period in excess of 60 days; and
(v)
amounts raised under any other transaction (including, without limitation, any forward
sale or purchase agreement) having the commercial effect of a borrowing;
‘‘Interest Amount’’ means, in relation to a Note and an Interest Period, the amount of interest
payable in respect of that Note for that Interest Period;
‘‘Interest Commencement Date’’ means the Issue Date of the Notes or such other date as may be
specified as the Interest Commencement Date in the relevant Final Terms;
‘‘Interest Determination Date’’ has the meaning given in the relevant Final Terms;
‘‘Interest Payment Date’’ means the First Interest Payment Date and any date or dates specified
as such in, or determined in accordance with the provisions of, the relevant Final Terms and, if
a Business Day Convention is specified in the relevant Final Terms:
(i)
as the same may be adjusted in accordance with the relevant Business Day Convention;
or
(ii)
if the Business Day Convention is the FRN Convention, Floating Rate Convention or
Eurodollar Convention and an interval of a number of calendar months is specified in the
relevant Final Terms as being the Specified Period, each of such dates as may occur in
accordance with the FRN Convention, Floating Rate Convention or Eurodollar
Convention at such Specified Period of calendar months following the Interest
Commencement Date (in the case of the first Interest Payment Date) or the previous
Interest Payment Date (in any other case);
‘‘Interest Period’’ means each period beginning on (and including) the Interest Commencement
Date or any Interest Payment Date and ending on (but excluding) the next Interest Payment
Date;
‘‘ISDA Definitions’’ means the 2006 ISDA Definitions (as amended and updated as at the date
of issue of the first Tranche of the Notes of the relevant Series as published by the International
Swaps and Derivatives Association, Inc.);
‘‘Issue Date’’ has the meaning given in the relevant Final Terms;
‘‘Margin’’ has the meaning given in the relevant Final Terms;
‘‘Material Subsidiary’’ means at any relevant time a Subsidiary of the Issuer or the Guarantor:
(i)
whose total assets or gross revenues (or, where the Subsidiary in question prepares
consolidated financial statements, whose total consolidated assets or gross consolidated
revenues, as the case may be) represents not less than 10 per cent, of the total
consolidated assets or the gross consolidated revenues of the Issuer and its Subsidiaries or,
as the case may be, the Guarantor and its Subsidiaries, all as calculated by reference to
40
the then latest audited financial statements (or consolidated accounts, as the case may be)
of such Subsidiary and the then latest audited consolidated financial statements of the
Issuer or the Guarantor; or
(ii)
to which is transferred all or substantially all of the assets and undertakings of a
Subsidiary which immediately prior to such transfer is a Material Subsidiary;
‘‘Maturity Date’’ has the meaning given in the relevant Final Terms;
‘‘Maximum Redemption Amount’’ has the meaning given in the relevant Final Terms;
‘‘Minimum Redemption Amount’’ has the meaning given in the relevant Final Terms;
‘‘Non-recourse Project, Securitisation or Asset Financing’’ means any securitisation of existing or
future assets and/or revenues or financing of all or part of the costs of the acquisition,
construction or development of any project or asset, provided that (i) any Security Interest given
by the Issuer, the Guarantor, or the relevant Material Subsidiary of the Issuer or the Guarantor
is limited solely to assets and/or revenues that are the subject of the securitisation, the project or
to the asset (as applicable), (ii) the Person or Persons participating in such securitisation or
providing such financing expressly agrees to limit their recourse to the project or asset (as
applicable) so securitised or financed and the revenues derived from such project or asset (as
applicable) as the principal source of repayment for the moneys advanced and (iii) there is no
other recourse to the Issuer, the Guarantor, or the relevant Material Subsidiary of the Issuer or
the Guarantor in respect of any default by any Person under the securitisation or financing;
‘‘Noteholder’’, in the case of Bearer Notes, has the meaning given in Condition 3(b) (Title to
Bearer Notes) and, in the case of Registered Notes, has the meaning given in Condition 3(d)
(Title to Registered Notes);
‘‘Optional Redemption Amount (Call)’’ means, in respect of any Note, its principal amount or
such other amount as may be specified in, or determined in accordance with, the relevant Final
Terms;
‘‘Optional Redemption Amount (Put)’’ means, in respect of any Note, its principal amount or
such other amount as may be specified in, or determined in accordance with, the relevant Final
Terms;
‘‘Optional Redemption Date (Call)’’ has the meaning given in the relevant Final Terms;
‘‘Optional Redemption Date (Put)’’ has the meaning given in the relevant Final Terms;
‘‘Participating Member State’’ means a Member State of the European Communities which
adopts the euro as its lawful currency in accordance with the Treaty;
‘‘Payment Business Day’’ means:
(i)
if the currency of payment is euro, any day which is:
(A) a day on which banks in the relevant place of presentation are open for presentation
and payment of bearer debt securities and for dealings in foreign currencies; and
(B) in the case of payment by transfer to an account, a TARGET Settlement Day and a
day on which dealings in foreign currencies may be carried on in each (if any)
Additional Financial Centre; or
(ii)
if the currency of payment is not euro, any day which is:
(A) a day on which banks in the relevant place of presentation are open for presentation
and payment of bearer debt securities and for dealings in foreign currencies; and
(B) in the case of payment by transfer to an account, a day on which dealings in foreign
currencies may be carried on in the Principal Financial Centre of the currency of
payment and in each (if any) Additional Financial Centre;
‘‘Permitted Reorganisation’’ means:
(i)
any disposal by any Subsidiary of the whole or a substantial part of its business,
undertaking or assets to the Issuer or the Guarantor or any wholly owned Subsidiary of
the Issuer or the Guarantor;
(ii)
any amalgamation, consolidation or merger of a Subsidiary with any other Subsidiary or
any other wholly owned Subsidiary of the Issuer or the Guarantor; or
41
(iii)
any amalgamation, consolidation, restructuring, merger or reorganisation on terms
previously approved by an Extraordinary Resolution of Noteholders;
‘‘Permitted Security Interest’’ means:
(i)
any Security Interest created or outstanding with the approval of an Extraordinary
Resolution;
(ii)
any Security Interest arising by operation of law, provided either that such Security
Interest is discharged within 30 days of arising or does not materially impair the business
of the Issuer, the Guarantor or, as the case may be, a Material Subsidiary of the Issuer
or the Guarantor and has not been enforced against the assets to which it attaches;
(iii)
any Security Interest granted by a Material Subsidiary of the Issuer or the Guarantor in
favour of the Issuer or the Guarantor, as the case may be;
(iv)
any Security Interest existing on the date of the relevant subscription agreement relating
to the issue of the first Tranche of the Notes;
(v)
any Security Interest on assets or property existing at the time the Issuer, the Guarantor
or, as the case may be, a Material Subsidiary of the Issuer or the Guarantor acquired
such assets or property provided that such Security Interest was not created in
contemplation of such acquisition and does not extend to other assets or property (other
than proceeds of such acquired assets or property), provided that the maximum amount
of Relevant Indebtedness thereafter secured by such Security Interest does not exceed the
purchase price of such property or the Relevant Indebtedness incurred solely for the
purpose of financing the acquisition of such property;
(vi)
any Security Interest securing the Relevant Indebtedness of a Person and/or its
Subsidiaries existing at the time that such Person is merged into or consolidated with the
Issuer, the Guarantor or, as the case may be, a Material Subsidiary of the Issuer or the
Guarantor, provided that such Security Interest was not created in contemplation of such
merger or consolidation and does not extend to any other assets or property of the Issuer,
the Guarantor or, as the case may be, a Material Subsidiary of the Issuer or the
Guarantor;
(vii)
any Security Interest created in connection with any Non-recourse Project, Securitisation
or Asset Financing;
(viii) any renewal of or substitution for any Security Interest permitted by any of the preceding
sub-paragraphs (i) through (vii) (inclusive), provided that with respect to any such
Security Interest incurred pursuant to this sub-paragraph (viiii), the principal amount
secured has not increased and the Security Interest has not been extended to any
additional property or assets (other than the proceeds of such property or assets);
‘‘Person’’ means any individual, company, corporation, firm, partnership, joint venture,
association, organisation, state or agency of a state or other entity, whether or not having
separate legal personality;
‘‘Principal Financial Centre’’ means, in relation to any currency, the principal financial centre for
that currency provided, however, that:
(i)
in relation to euro, it means the principal financial centre of such Member State of the
European Communities as is selected (in the case of a payment) by the payee or (in the
case of a calculation) by the Calculation Agent; and
(ii)
in relation to New Zealand dollars, it means either Wellington or Auckland as is selected
(in the case of a payment) by the payee or (in the case of a calculation) by the
Calculation Agent;
‘‘Put Option Notice’’ means a notice which must be delivered to a Paying Agent by any
Noteholder wanting to exercise a right to redeem a Note at the option of the Noteholder;
‘‘Put Option Receipt’’ means a receipt issued by a Paying Agent to a depositing Noteholder
upon deposit of a Note with such Paying Agent by any Noteholder wanting to exercise a right
to redeem a Note at the option of the Noteholder;
‘‘Rate of Interest’’ means the rate or rates (expressed as a percentage per annum) of interest
payable in respect of the Notes specified in the relevant Final Terms or calculated or determined
in accordance with the provisions of these Conditions and/or the relevant Final Terms;
42
‘‘Redemption Amount’’ means, as appropriate, the Final Redemption Amount, the Early
Redemption Amount (Tax), the Optional Redemption Amount (Call), the Optional Redemption
Amount (Put), the Early Termination Amount or such other amount in the nature of a
redemption amount as may be specified in, or determined in accordance with the provisions of,
the relevant Final Terms;
‘‘Reference Banks’’ has the meaning given in the relevant Final Terms or, if none, four major
banks selected by the Calculation Agent in the market that is most closely connected with the
Reference Rate;
‘‘Reference Price’’ has the meaning given in the relevant Final Terms;
‘‘Reference Rate’’ means one of the following benchmark rates (as specified in the relevant Final
Terms) in respect of the currency and period specified in the relevant Final Terms:
(i)
London interbank offered rate (LIBOR);
(ii)
Euro-Zone interbank offered rate (EURIBOR);
(iii)
Karachi interbank offered rate (KIBOR);
(iv)
Shanghai interbank offered rate (SHIBOR);
(v)
Hong Kong interbank offered rate (HIBOR);
(vi)
CNH Hong Kong interbank offered rate (CNH HIBOR);
(vii)
Kuala Lumpur interbank offered rate (KLIBOR);
(viii) Turkish Lira interbank offered rate (TRLIBOR or TRYLIBOR);
(ix)
Singapore interbank offered rate (SIBOR);
(x)
Emirates interbank offered rate (EIBOR);
(xi)
Tokyo interbank offered rate (TIBOR);
(xii)
Saudi Arabia interbank offered rate (SAIBOR);
(xiii) Australia Bank Bill Swap (BBSW);
(xiv) Swiss Franc London interbank offered rate (CHF LIBOR);
(xv)
Pounds Sterling London interbank offered rate (GBP LIBOR);
(xvi) Canadian dollar London interbank offered rate (CAD LIBOR);
(xvii) New Zealand dollar London interbank offered rate (NZD LIBOR);
(xviii) Danish krone London interbank offered rate (DKK LIBOR);
(xix) Swedish krone London interbank offered rate (SEK LIBOR);
(xx)
Australian dollar London interbank offered rate (AUD LIBOR);
(xxi) Japanese yen London interbank offered rate (JPY LIBOR);
(xxii) Mumbai interbank offered rate (MIBOR);
(xxiii) Prague interbank offered rate (PRIBOR);
(xxiv) London interbank bid rate (LIBID); or
(xxv) London interbank mean rate (LIMEAN).
‘‘Regular Period’’ means:
(i)
in the case of Notes where interest is scheduled to be paid only by means of regular
payments, each period from and including the Interest Commencement Date to but
excluding the first Interest Payment Date, prior to adjustment in accordance with any Day
Count Fraction, and each successive period from and including one Interest Payment
Date to but excluding the next Interest Payment Date, prior to adjustment in accordance
with any Day Count Fraction;
(ii)
in the case of Notes where, apart from the first Interest Period, interest is scheduled to be
paid only by means of regular payments, each period from and including a Regular Date
falling in any year to but excluding the next Regular Date, where ‘‘Regular Date’’ means
the day and month (but not the year) on which any Interest Payment Date is scheduled
to fall; and
43
(iii)
in the case of Notes where, apart from one Interest Period other than the first Interest
Period, interest is scheduled to be paid only by means of regular payments, each period
from and including a Regular Date falling in any year to but excluding the next Regular
Date, where ‘‘Regular Date’’ means the day and month (but not the year) on which any
Interest Payment Date is scheduled to fall, prior to adjustment in accordance with any
Day Count Fraction, other than the Interest Payment Date falling at the end of the
irregular Interest Period;
‘‘Relevant Date’’ means, in relation to any payment, whichever is the later of (a) the date on
which the payment in question first becomes due and (b) if the full amount payable has not
been received in the Principal Financial Centre of the currency of payment by the Fiscal Agent
on or prior to such due date, the date on which (the full amount having been so received)
notice to that effect has been given to the Noteholders;
‘‘Relevant Financial Centre’’ has the meaning given in the relevant Final Terms;
‘‘Relevant Indebtedness’’ means any Indebtedness which is in the form of or represented by any
bond, note, debenture, debenture stock, loan stock, certificate or other instrument which is, or is
capable of being, listed, quoted or traded on any stock exchange or in any securities market
(including, without limitation, any over-the-counter market);
‘‘Relevant Screen Page’’ means the page, section or other part of a particular information service
(including, without limitation, Reuters) specified as the Relevant Screen Page in the relevant
Final Terms, or such other page, section or other part as may replace it on that information
service or such other information service, in each case, as may be nominated by the Person
providing or sponsoring the information appearing there for the purpose of displaying rates or
prices comparable to the Reference Rate;
‘‘Relevant Time’’ has the meaning given in the relevant Final Terms;
‘‘Reserved Matter’’ means any proposal to change any date fixed for payment of principal or
interest in respect of the Notes, to reduce the amount of principal or interest payable on any
date in respect of the Notes, to alter the method of calculating the amount of any payment in
respect of the Notes or the date for any such payment, to change the currency of any payment
under the Notes, to change the quorum requirements relating to meetings or the majority
required to pass an Extraordinary Resolution or to amend the terms of the Deed of Guarantee
or this definition;
‘‘Security Interest’’ means any mortgage, charge, pledge, lien or other security interest including,
without limitation, anything analogous to any of the foregoing under the laws of any
jurisdiction;
‘‘Specified Currency’’ has the meaning given in the relevant Final Terms;
‘‘Specified Denomination(s)’’ has the meaning given in the relevant Final Terms;
‘‘Specified Office’’ has the meaning given in the Agency Agreement;
‘‘Specified Period’’ has the meaning given in the relevant Final Terms;
‘‘Subsidiary’’ means, in relation to any Person (the ‘‘first Person’’) at any particular time, any
other Person (the ‘‘second Person’’): (i) whose affairs and policies the first Person controls or has
the power to control, whether by ownership of share capital, contract, the power to appoint or
remove members of the governing body of the second Person or otherwise; or (ii) whose
financial statements are, in accordance with applicable law and generally accepted accounting
principles, consolidated with those of the first Person;
‘‘Talon’’ means a talon for further Coupons;
‘‘TARGET2’’ means the Trans-European Automated Real-Time Gross Settlement Express
Transfer payment system which utilises a single shared platform and which was launched on
19 November 2007;
‘‘TARGET Settlement Day’’ means any day on which TARGET2 is open for the settlement of
payments in euro;
‘‘Treaty’’ means the Treaty establishing the European Communities, as amended; and
‘‘Zero Coupon Note’’ means a Note specified as such in the relevant Final Terms;
44
(b)
Interpretation: In these Conditions:
(i)
if the Notes are Zero Coupon Notes, references to Coupons and Couponholders are not
applicable;
(ii)
if Talons are specified in the relevant Final Terms as being attached to the Notes at the
time of issue, references to Coupons shall be deemed to include references to Talons;
(iii)
if Talons are not specified in the relevant Final Terms as being attached to the Notes at
the time of issue, references to Talons are not applicable;
(iv)
any reference to principal shall be deemed to include the Redemption Amount, any
additional amounts in respect of principal which may be payable under Condition 12
(Taxation), any premium payable in respect of a Note and any other amount in the
nature of principal payable pursuant to these Conditions;
(v)
any reference to interest shall be deemed to include any additional amounts in respect of
interest which may be payable under Condition 12 (Taxation) and any other amount in
the nature of interest payable pursuant to these Conditions;
(vi)
references to Notes being ‘‘outstanding’’ shall be construed in accordance with the Agency
Agreement;
(vii)
if an expression is stated in Condition 2(a) (Definitions) to have the meaning given in the
relevant Final Terms, but the relevant Final Terms gives no such meaning or specifies that
such expression is ‘‘not applicable’’ then such expression is not applicable to the Notes;
and
(viii) any reference to the Agency Agreement or the Deed of Guarantee shall be construed as a
reference to the Agency Agreement or the Deed of Guarantee, as the case may be, as
amended and/or supplemented up to and including the Issue Date of the Notes.
3.
(a)
Form, Denomination, Title and Transfer
Bearer Notes: Bearer Notes are in the Specified Denomination(s) with Coupons and, if specified
in the relevant Final Terms, Talons attached at the time of issue. In the case of a Series of
Bearer Notes with more than one Specified Denomination, Bearer Notes of one Specified
Denomination will not be exchangeable for Bearer Notes of another Specified Denomination.
(b)
Title to Bearer Notes: Title to Bearer Notes and the Coupons will pass by delivery. In the case
of Bearer Notes, ‘‘Holder’’ means the holder of such Bearer Note and ‘‘Noteholder’’ and
‘‘Couponholder’’ shall be construed accordingly.
(c)
Registered Notes: Registered Notes are in the Specified Denomination(s), which may include a
minimum denomination specified in the relevant Final Terms and higher integral multiples of a
smaller amount specified in the relevant Final Terms.
(d)
Title to Registered Notes: The Registrar will maintain the register in accordance with the
provisions of the Agency Agreement. A certificate (each, a ‘‘Note Certificate’’) will be issued to
each Holder of Registered Notes in respect of its registered holding. Each Note Certificate will
be numbered serially with an identifying number which will be recorded in the Register. In the
case of Registered Notes, ‘‘Holder’’ means the person in whose name such Registered Note is
for the time being registered in the Register (or, in the case of a joint holding, the first named
thereof) and ‘‘Noteholder’’ shall be construed accordingly.
(e)
Ownership: The Holder of any Note or Coupon shall (except as otherwise required by law) be
treated as its absolute owner for all purposes (whether or not it is overdue and regardless of
any notice of ownership, trust or any other interest therein, any writing thereon or, in the case
of Registered Notes, on the Note Certificate relating thereto (other than the endorsed form of
transfer) or any notice of any previous loss or theft thereof) and no Person shall be liable for so
treating such Holder. No person shall have any right to enforce any term or condition of any
Note under the Contracts (Rights of Third Parties) Act 1999.
(f)
Transfers of Registered Notes: Subject to paragraphs (i) (Closed periods) and (j) (Regulations
concerning transfers and registration) below, a Registered Note may be transferred upon
surrender of the relevant Note Certificate, with the endorsed form of transfer duly completed, at
the Specified Office of the Registrar or any Transfer Agent, together with such evidence as the
Registrar or (as the case may be) such Transfer Agent may reasonably require to prove the title
of the transferor and the authority of the individuals who have executed the form of transfer;
45
provided, however, that a Registered Note may not be transferred unless the principal amount of
Registered Notes transferred and (where not all of the Registered Notes held by a Holder are
being transferred) the principal amount of the balance of Registered Notes not transferred are
Specified Denominations. Where not all the Registered Notes represented by the surrendered
Note Certificate are the subject of the transfer, a new Note Certificate in respect of the balance
of the Registered Notes will be issued to the transferor.
(g)
Registration and delivery of Note Certificates: Within five business days of the surrender of a
Note Certificate in accordance with paragraph (f) (Transfers of Registered Notes) above, the
Registrar will register the transfer in question and deliver a new Note Certificate of a like
principal amount to the Registered Notes transferred to each relevant Holder at its Specified
Office or (as the case may be) the Specified Office of any Transfer Agent or (at the request and
risk of any such relevant Holder) by uninsured first class mail (airmail if overseas) to the
address specified for the purpose by such relevant Holder. In this paragraph, ‘‘business day’’
means a day on which commercial banks are open for general business (including dealings in
foreign currencies) in the city where the Registrar or (as the case may be) the relevant Transfer
Agent has its Specified Office.
(h)
No charge: The transfer of a Registered Note will be effected without charge by or on behalf of
the Issuer or the Registrar or any Transfer Agent but against such indemnity as the Registrar or
(as the case may be) such Transfer Agent may require in respect of any tax or other duty of
whatsoever nature which may be levied or imposed in connection with such transfer.
(i)
Closed periods: Noteholders may not require transfers to be registered during the period of
15 days ending on the due date for any payment of principal or interest in respect of the
Registered Notes.
(j)
Regulations concerning transfers and registration: All transfers of Registered Notes and entries on
the Register are subject to the detailed regulations concerning the transfer of Registered Notes
scheduled to the Agency Agreement. The regulations may be changed by the Issuer with the
prior written approval of the Registrar. A copy of the current regulations will be mailed (free of
charge) by the Registrar to any Noteholder who requests in writing a copy of such regulations.
4.
Status and Guarantee
(a) Status of the Notes
The Notes constitute direct, unconditional, unsubordinated and (subject to the provisions of
Condition 5 (Negative Pledge)) unsecured obligations of the Issuer and rank pari passu among
themselves and (save for certain obligations required to be preferred by law) equally with all
other unsecured obligations (other than subordinated obligations, if any) of the Issuer from time
to time outstanding.
(b) Guarantee of the Notes
The obligations of the Guarantor under the Guarantee in relation to the Notes constitute direct,
unconditional, unsubordinated and (subject to the provisions of Condition 5 (Negative Pledge))
unsecured obligations of the Guarantor and rank pari passu among themselves and (save for
certain obligations required to be preferred by law) equally with all other unsecured obligations
(other than subordinated obligations, if any) of the Guarantor from time to time outstanding.
5.
Negative Pledge
So long as any Note remains outstanding (as defined in the Agency Agreement), neither the
Issuer nor the Guarantor shall, and each of the Issuer and the Guarantor shall procure that
none of their Material Subsidiaries will, create or permit to subsist any Security Interest other
than a Permitted Security Interest upon the whole or any part of its present or future
undertaking, assets or revenues (including any uncalled capital) to secure any Relevant
Indebtedness or any Guarantee of Relevant Indebtedness without (a) at the same time or prior
thereto securing the Notes equally and rateably therewith or (b) providing such other security
for the Notes as may be approved by an Extraordinary Resolution.
6.
(a)
Fixed Rate Note Provisions
Application: This Condition 6 (Fixed Rate Note Provisions) is applicable to the Notes only if the
Fixed Rate Note Provisions are specified in the relevant Final Terms as being applicable.
46
(b)
Accrual of interest: The Notes bear interest from the Interest Commencement Date at the Rate
of Interest payable in arrear on each Interest Payment Date, subject as provided in Condition
10 (Payments – Bearer Notes). Each Note will cease to bear interest from the due date for final
redemption unless, upon due presentation, payment of the Redemption Amount is improperly
withheld or refused, in which case it will continue to bear interest in accordance with this
Condition 6 (Fixed Rate Note Provisions) (as well after as before judgment) until whichever is
the earlier of (i) the day on which all sums due in respect of such Note up to that day are
received by or on behalf of the relevant Noteholder and (ii) the day which is seven days after
the Fiscal Agent has notified the Noteholders that it has received all sums due in respect of the
Notes up to such seventh day (except to the extent that there is any subsequent default in
payment).
(c)
Fixed Coupon Amount: The amount of interest payable in respect of each Note for any Interest
Period shall be the relevant Fixed Coupon Amount and, if the Notes are in more than one
Specified Denomination, shall be the relevant Fixed Coupon Amount in respect of the relevant
Specified Denomination.
(d)
Calculation of interest amount: The amount of interest payable in respect of each Note for any
period for which a Fixed Coupon Amount is not specified shall be calculated by applying the
Rate of Interest to the Calculation Amount, multiplying the product by the relevant Day Count
Fraction, rounding the resulting figure to the nearest sub-unit of the Specified Currency (half a
sub-unit being rounded upwards) and multiplying such rounded figure by a fraction equal to the
Specified Denomination of such Note divided by the Calculation Amount. For this purpose a
‘‘sub-unit’’ means, in the case of any currency other than euro, the lowest amount of such
currency that is available as legal tender in the country of such currency and, in the case of
euro, means one cent.
7.
(a)
Floating Rate Note Provisions
Application: This Condition 7 (Floating Rate Note Provisions) is applicable to the Notes only if
the Floating Rate Note Provisions are specified in the relevant Final Terms as being applicable.
(b)
Accrual of interest: The Notes bear interest from the Interest Commencement Date at the Rate
of Interest payable in arrear on each Interest Payment Date, subject as provided in Condition
10 (Payments – Bearer Notes). Each Note will cease to bear interest from the due date for final
redemption unless, upon due presentation, payment of the Redemption Amount is improperly
withheld or refused, in which case it will continue to bear interest in accordance with this
Condition (as well after as before judgment) until whichever is the earlier of (i) the day on
which all sums due in respect of such Note up to that day are received by or on behalf of the
relevant Noteholder and (ii) the day which is seven days after the Fiscal Agent has notified the
Noteholders that it has received all sums due in respect of the Notes up to such seventh day
(except to the extent that there is any subsequent default in payment).
(c)
Screen Rate Determination: If Screen Rate Determination is specified in the relevant Final Terms
as the manner in which the Rate(s) of Interest is/are to be determined, the Rate of Interest
applicable to the Notes for each Interest Period will be determined by the Calculation Agent on
the following basis:
(i)
if the Reference Rate is a composite quotation or customarily supplied by one entity, the
Calculation Agent will determine the Reference Rate which appears on the Relevant
Screen Page as of the Relevant Time on the relevant Interest Determination Date;
(ii)
if Linear Interpolation is specified as applicable in respect of an Interest Period in the
applicable Final Terms, the Rate of Interest for such Interest Period shall be calculated by
the Calculation Agent by straight-line linear interpolation by reference to two rates which
appear on the Relevant Screen Page as of the Relevant Time on the relevant Interest
Determination Date, where:
(A) one rate shall be determined as if the relevant Interest Period were the period of time
for which rates are available next shorter than the length of the relevant Interest
Period; and
(B) the other rate shall be determined as if the relevant Interest Period were the period of
time for which rates are available next longer than the length of the relevant Interest
Period;
47
(iii)
in any other case, the Calculation Agent will determine the arithmetic mean of the
Reference Rates which appear on the Relevant Screen Page as of the Relevant Time on
the relevant Interest Determination Date;
(iii)
if, in the case of (i) above, such rate does not appear on that page or, in the case of (ii)
above, fewer than two such rates appear on that page or if, in either case, the Relevant
Screen Page is unavailable, the Calculation Agent will:
(A) request the principal Relevant Financial Centre office of each of the Reference Banks
to provide a quotation of the Reference Rate at approximately the Relevant Time on
the Interest Determination Date to prime banks in the Relevant Financial Centre
interbank market in an amount that is representative for a single transaction in that
market at that time; and
(B) determine the arithmetic mean of such quotations; and
(iv)
if fewer than two such quotations are provided as requested, the Calculation Agent will
determine the arithmetic mean of the rates (being the nearest to the Reference Rate, as
determined by the Calculation Agent) quoted by major banks in the Principal Financial
Centre of the Specified Currency, selected by the Calculation Agent, at approximately
11.00 a.m. (local time in the Principal Financial Centre of the Specified Currency) on the
first day of the relevant Interest Period for loans in the Specified Currency to leading
European banks for a period equal to the relevant Interest Period and in an amount that
is representative for a single transaction in that market at that time,
and the Rate of Interest for such Interest Period shall be the sum of the Margin and the rate or
(as the case may be) the arithmetic mean so determined; provided, however, that if the
Calculation Agent is unable to determine a rate or (as the case may be) an arithmetic mean in
accordance with the above provisions in relation to any Interest Period, the Rate of Interest
applicable to the Notes during such Interest Period will be the sum of the Margin and the rate
or (as the case may be) the arithmetic mean last determined in relation to the Notes in respect
of a preceding Interest Period.
(d)
ISDA Determination: If ISDA Determination is specified in the relevant Final Terms as the
manner in which the Rate(s) of Interest is/are to be determined, the Rate of Interest applicable
to the Notes for each Interest Period will be the sum of the Margin and the relevant ISDA
Rate where ‘‘ISDA Rate’’ in relation to any Interest Period means a rate equal to the Floating
Rate (as defined in the ISDA Definitions) that would be determined by the Calculation Agent
under an interest rate swap transaction if the Calculation Agent were acting as Calculation
Agent for that interest rate swap transaction under the terms of an agreement incorporating the
ISDA Definitions and under which:
(i)
the Floating Rate Option (as defined in the ISDA Definitions) is as specified in the
relevant Final Terms;
(ii)
the Designated Maturity (as defined in the ISDA Definitions) is a period specified in the
relevant Final Terms;
(iii)
the relevant Reset Date (as defined in the ISDA Definitions) is the day specified in the
relevant Final Terms; and
(iv)
if Linear Interpolation is specified as applicable in respect of an Interest Period in the
applicable Final Terms, the Rate of Interest for such Interest Period shall be calculated by
the Calculation Agent by straight-line linear interpolation by reference to two rates based
on the relevant Floating Rate Option, where:
(A) one rate shall be determined as if the Designated Maturity (as defined in the ISDA
Definitions) were the period of time for which rates are available next shorter than
the length of the relevant Interest Period; and
(B) the other rate shall be determined as if the Designated Maturity (as defined in the
ISDA Definitions) were the period of time for which rates are available next longer
than the length of the relevant Interest Period provided, however, that if there is no
rate available for a period of time next shorter than the length of the relevant
Interest Period or, as the case may be, next longer than the length of the relevant
48
Interest Period, then the Calculation Agent shall determine such rate at such time
and by reference to such sources as it determines appropriate acting reasonably and
in good faith.
(e)
Maximum or Minimum Rate of Interest: If any Maximum Rate of Interest or Minimum Rate of
Interest is specified in the relevant Final Terms, then the Rate of Interest shall in no event be
greater than the maximum or be less than the minimum so specified.
(f)
Calculation of Interest Amount: The Calculation Agent will, as soon as practicable after the time
at which the Rate of Interest is to be determined in relation to each Interest Period, calculate
the Interest Amount payable in respect of each Note for such Interest Period. The Interest
Amount will be calculated by applying the Rate of Interest for such Interest Period to the
Calculation Amount, multiplying the product by the relevant Day Count Fraction, rounding the
resulting figure to the nearest sub-unit of the Specified Currency (half a sub-unit being rounded
upwards) and multiplying such rounded figure by a fraction equal to the Specified
Denomination of the relevant Note divided by the Calculation Amount. For this purpose a
‘‘sub-unit’’ means, in the case of any currency other than euro, the lowest amount of such
currency that is available as legal tender in the country of such currency and, in the case of
euro, means one cent.
(g)
Publication: The Calculation Agent will cause each Rate of Interest and Interest Amount
determined by it, together with the relevant Interest Payment Date, and any other amount(s)
required to be determined by it together with any relevant payment date(s) to be notified to the
Paying Agents and in the case of each competent authority, stock exchange and/or quotation
system (if any) by which the Notes have then been admitted to listing, trading and/or quotation,
upon request of the Issuer, as soon as practicable after such determination but (in the case of
each Rate of Interest, Interest Amount and Interest Payment Date) in any event not later than
the first day of the relevant Interest Period. Notice thereof shall also promptly be given to the
Noteholders. The Calculation Agent will be entitled to recalculate any Interest Amount (on the
basis of the foregoing provisions) without notice in the event of an extension or shortening of
the relevant Interest Period. If the Calculation Amount is less than the minimum Specified
Denomination the Calculation Agent shall not be obliged to publish each Interest Amount but
instead may publish only the Calculation Amount and the Interest Amount in respect of a Note
having the minimum Specified Denomination.
(h)
Notifications etc: All notifications, opinions, determinations, certificates, calculations, quotations
and decisions given, expressed, made or obtained for the purposes of this Condition by the
Calculation Agent will (in the absence of manifest error) be binding on the Issuer, the
Guarantor, the Paying Agents, the Noteholders and the Couponholders and (subject as
aforesaid) no liability to any such Person will attach to the Calculation Agent in connection
with the exercise or non-exercise by it of its powers, duties and discretions for such purposes.
8.
(a)
Zero Coupon Note Provisions
Application: This Condition 8 (Zero Coupon Note Provisions) is applicable to the Notes only if
the Zero Coupon Note Provisions are specified in the relevant Final Terms as being applicable.
(b)
Late payment on Zero Coupon Notes: If the Redemption Amount payable in respect of any Zero
Coupon Note is improperly withheld or refused, the Redemption Amount shall thereafter be an
amount equal to the sum of:
(i)
the Reference Price; and
(ii)
the product of the Accrual Yield (compounded annually) being applied to the Reference
Price on the basis of the relevant Day Count Fraction from (and including) the Issue
Date to (but excluding) whichever is the earlier of (i) the day on which all sums due in
respect of such Note up to that day are received by or on behalf of the relevant
Noteholder and
(ii)
the day which is seven days after the Fiscal Agent has notified the Noteholders that it has
received all sums due in respect of the Notes up to such seventh day (except to the extent
that there is any subsequent default in payment).
49
9.
(a)
Redemption and Purchase
Scheduled redemption: Unless previously redeemed, or purchased and cancelled, the Notes will be
redeemed at their Final Redemption Amount on the Maturity Date, subject as provided in
Condition 10 (Payments – Bearer Notes).
(b)
Redemption for tax reasons: The Notes may be redeemed at the option of the Issuer in whole,
but not in part:
(i)
at any time (if the Floating Rate Note Provisions are specified in the relevant Final
Terms as being not applicable); or
(ii)
on any Interest Payment Date (if the Floating Rate Note Provisions are specified in the
relevant Final Terms as being applicable),
on giving not less than 30 nor more than 60 days’ notice to the Noteholders (which notice shall
be irrevocable), at their Early Redemption Amount (Tax), together with interest accrued (if any)
to the date fixed for redemption, if:
(A)
(1) the Issuer has or will become obliged to pay additional amounts as provided or
referred to in Condition 12 (Taxation) as a result of any change in, or amendment to, the
laws or regulations of the Cayman Islands or any political subdivision or any authority
thereof or therein having power to tax, or any change in the application or official
interpretation of such laws or regulations (including a holding by a court of competent
jurisdiction), which change or amendment becomes effective (or, in the case of application
or official interpretation, is announced) on or after the date of issue of the first Tranche
of the Notes and (2) such obligation cannot be avoided by the Issuer taking reasonable
measures available to it; or
(B)
(2) the Guarantor has or (if a demand was made under the Guarantee of the Notes)
would become obliged to pay additional amounts as provided or referred to in Condition
12 (Taxation) or in the Deed of Guarantee or the Guarantor has or will become obliged
to make any such withholding or deduction as is referred to in Condition 12 (Taxation)
or in the Deed of Guarantee from any amount paid by it to the Issuer in order to enable
the Issuer to make a payment of principal or interest in respect of the Notes, in either
case as a result of any change in, or amendment to, the laws or regulations of the State
of Qatar or any political subdivision or any authority thereof or therein having power to
tax, or any change in the application or official interpretation of such laws or regulations
(including a holding by a court of competent jurisdiction), which change or amendment
becomes effective on or after the date of issue of the first Tranche of the Notes, and (2)
such obligation cannot be avoided by the Guarantor taking reasonable measures available
to it,
provided, however, that no such notice of redemption shall be given earlier than:
(1) where the Notes may be redeemed at any time, 90 days prior to the earliest date on
which the Issuer or the Guarantor would be obliged to pay such additional amounts
or the Guarantor would be obliged to make such withholding or deduction if a
payment in respect of the Notes were then due or (as the case may be) a demand
under the Guarantee of the Notes were then made; or
(2) where the Notes may be redeemed only on an Interest Payment Date, 60 days prior
to the Interest Payment Date occurring immediately before the earliest date on which
the Issuer or the Guarantor would be obliged to pay such additional amounts or the
Guarantor would be obliged to make such withholding or deduction if a payment in
respect of the Notes were then due or (as the case may be) a demand under the
Guarantee of the Notes were then made.
Prior to the publication of any notice of redemption pursuant to this paragraph, the
Issuer shall deliver or procure that there is delivered to the Fiscal Agent to make
available at its Specified Office to the Noteholders (1) a certificate signed by two
directors of the Issuer stating that the Issuer is entitled to effect such redemption and
setting forth a statement of facts showing that the conditions precedent to the right
of the Issuer so to redeem have occurred and (2) an opinion of independent legal or
tax advisers of recognised standing to the effect that the Issuer or (as the case may
be) the Guarantor has or will become obliged to pay such additional amounts or (as
the case may be) the Guarantor has or will become obliged to make such
50
withholding or deduction as a result of such change or amendment. Upon the expiry
of any such notice as is referred to in this Condition 9(b) (Redemption for tax
reasons), the Issuer shall be bound to redeem the Notes in accordance with this
Condition 9(b) (Redemption for tax reasons),
(c)
Redemption at the option of the Issuer: If the Call Option is specified as being applicable in the
relevant Final Terms as being applicable, the Notes may be redeemed at the option of the Issuer
in whole or, if so specified in the relevant Final Terms, in part on any Optional Redemption
Date (Call) at the relevant Optional Redemption Amount (Call) on the Issuer giving not less
than 30 nor more than 60 days’ notice to the Noteholders (which notice shall be irrevocable and
shall oblige the Issuer to redeem the Notes or, as the case may be, the Notes specified in such
notice on the relevant Optional Redemption Date (Call) at the Optional Redemption Amount
(Call) plus accrued interest (if any) to such date).
(d)
Partial redemption: If the Notes are to be redeemed in part only on any date in accordance with
Condition 9(c) (Redemption at the option of the Issuer), in the case of Bearer Notes, the Notes
to be redeemed shall be selected by the drawing of lots in such place as the Fiscal Agent
approves and in such manner as the Fiscal Agent considers appropriate, subject to compliance
with applicable law, the rules of each competent authority, stock exchange and/or quotation
system (if any) by which the Notes have then been admitted to listing, trading and/or quotation
and the notice to Noteholders referred to in Condition 9(c) (Redemption at the option of the
Issuer) shall specify the serial numbers of the Notes so to be redeemed, and, in the case of
Registered Notes, each Note shall be redeemed in part in the proportion which the aggregate
principal amount of the outstanding Notes to be redeemed on the relevant Optional Redemption
Date (Call) bears to the aggregate principal amount of outstanding Notes on such date. If any
Maximum Redemption Amount or Minimum Redemption Amount is specified in the relevant
Final Terms, then the Optional Redemption Amount (Call) shall in no event be greater than the
maximum or be less than the minimum so specified.
(e)
Redemption at the option of Noteholders: If the Put Option is specified as being applicable in the
relevant Final Terms as being applicable, the Issuer shall, at the option of the Holder of any
Note redeem such Note on the Optional Redemption Date (Put) specified in the relevant Put
Option Notice at the relevant Optional Redemption Amount (Put) together with interest (if any)
accrued to such date. In order to exercise the option contained in this Condition 9(e)
(Redemption at the option of Noteholders), the Holder of a Note must, not less than 30 nor more
than 60 days before the relevant Optional Redemption Date (Put), deposit with any Paying
Agent such Note together with all unmatured Coupons relating thereto and a duly completed
Put Option Notice in the form obtainable from any Paying Agent. The Paying Agent with
which a Note is so deposited shall deliver a duly completed Put Option Receipt to the
depositing Noteholder. No Note, once deposited with a duly completed Put Option Notice in
accordance with this Condition 9(e) (Redemption at the option of Noteholders), may be
withdrawn; provided, however, that if, prior to the relevant Optional Redemption Date (Put), any
such Note becomes immediately due and payable or, upon due presentation of any such Note
on the relevant Optional Redemption Date (Put), payment of the redemption moneys is
improperly withheld or refused, the relevant Paying Agent shall mail notification thereof to the
depositing Noteholder at such address as may have been given by such Noteholder in the
relevant Put Option Notice and shall hold such Note at its Specified Office for collection by the
depositing Noteholder against surrender of the relevant Put Option Receipt. For so long as any
outstanding Note is held by a Paying Agent in accordance with this Condition 9(e) (Redemption
at the option of Noteholders), the depositor of such Note and not such Paying Agent shall be
deemed to be the Holder of such Note for all purposes.
(f)
No other redemption: The Issuer shall not be entitled to redeem the Notes otherwise than as
provided in paragraphs (a) to (e) above.
(g)
Early redemption of Zero Coupon Notes: Unless otherwise specified in the relevant Final Terms,
the Redemption Amount payable on redemption of a Zero Coupon Note at any time before the
Maturity Date shall be an amount equal to the sum of:
(i)
the Reference Price; and
(ii)
the product of the Accrual Yield (compounded annually) being applied to the Reference
Price from (and including) the Issue Date to (but excluding) the date fixed for redemption
or (as the case may be) the date upon which the Note becomes due and payable.
51
Where such calculation is to be made for a period which is not a whole number of years, the
calculation in respect of the period of less than a full year shall be made on the basis of such
Day Count Fraction as may be specified in the Final Terms for the purposes of this Condition
9(h) (Early redemption of Zero Coupon Notes) or, if none is so specified, a Day Count Fraction
of 30E/360.
(h)
Purchase: The Issuer, the Guarantor or any of their respective Subsidiaries may at any time
purchase Notes in the open market or otherwise and at any price, and such Notes may be held,
reissued, resold or, at the option of the Issuer, the Guarantor or any of their respective
Subsidiaries, as the case may be, surrendered to any Paying Agent or the Registrar for
cancellation.
(i)
Cancellation: All Notes so redeemed or purchased by the Issuer, the Guarantor or any of their
respective Subsidiaries and any unmatured Coupons attached to or surrendered with them shall
be cancelled and may not be reissued or resold.
10.
Payments – Bearer Notes
This Condition 10 (Payments – Bearer Notes) is only applicable to Bearer Notes.
(a)
Principal: Payments of principal shall be made only against presentation and (provided that
payment is made in full) surrender of Bearer Notes at the Specified Office of any Paying Agent
outside the United States of America (which expression, as used herein, means the United States
of America and its dependent territories) by cheque drawn in the currency in which the payment
is due on, or by transfer to an account denominated in that currency (or, if that currency is
euro, any other account to which euro may be credited or transferred) and maintained by the
payee with, a bank in the Principal Financial Centre of that currency.
(b)
Interest: Payments of interest shall, subject to paragraph (h) below, be made only against
presentation and (provided that payment is made in full) surrender of the appropriate Coupons
at the Specified Office of any Paying Agent outside the United States in the manner described in
paragraph (a) above.
(c)
Payments in New York City: Payments of principal or interest may be made at the Specified
Office of a Paying Agent in New York City if (i) the Issuer has appointed Paying Agents
located outside the United States and its possessions with the reasonable expectation that such
Paying Agents will be able to make payment of the full amount of the interest on the Notes in
the currency in which the payment is due when due, (ii) payment of the full amount of such
interest at the offices of all such Paying Agents is illegal or effectively precluded by exchange
controls or other similar restrictions and (iii) payment is permitted by applicable United States
law.
(d)
Payments subject to fiscal laws: All payments in respect of the Bearer Notes are subject in all
cases to (i) any applicable fiscal or other laws, regulations and directives in the place of
payment, but without prejudice to the provisions of Condition 12 (Taxation), and (ii) any
withholding or deduction required pursuant to an agreement described in Section 1471(b) of the
U.S. Internal Revenue Code of 1986, as amended (the ‘‘Code’’) or otherwise imposed pursuant
to Sections 1471 through 1474 of the Code, any regulations or agreements thereunder, official
interpretations thereof, or (without prejudice to the provisions of Condition 12 (Taxation)) law
implementing an intergovernmental approach thereto. No commissions or expenses shall be
charged to the Noteholders or Couponholders in respect of such payments.
(e)
Deductions for unmatured Coupons: If the relevant Final Terms specifies that the Fixed Rate
Note Provisions are applicable and a Bearer Note is presented without all unmatured Coupons
relating thereto:
(i)
if the aggregate amount of the missing Coupons is less than or equal to the amount of
principal due for payment, a sum equal to the aggregate amount of the missing Coupons
will be deducted from the amount of principal due for payment; provided, however, that if
the gross amount available for payment is less than the amount of principal due for
payment, the sum deducted will be that proportion of the aggregate amount of such
missing Coupons which the gross amount actually available for payment bears to the
amount of principal due for payment;
(ii)
if the aggregate amount of the missing Coupons is greater than the amount of principal
due for payment:
52
(A) so many of such missing Coupons shall become void (in inverse order of maturity) as
will result in the aggregate amount of the remainder of such missing Coupons (the
‘‘Relevant Coupons’’) being equal to the amount of principal due for payment;
provided, however, that where this sub-paragraph would otherwise require a fraction
of a missing Coupon to become void, such missing Coupon shall become void in its
entirety; and
(B) a sum equal to the aggregate amount of the Relevant Coupons (or, if less, the
amount of principal due for payment) will be deducted from the amount of principal
due for payment; provided, however, that, if the gross amount available for payment is
less than the amount of principal due for payment, the sum deducted will be that
proportion of the aggregate amount of the Relevant Coupons (or, as the case may
be, the amount of principal due for payment) which the gross amount actually
available for payment bears to the amount of principal due for payment.
Each sum of principal so deducted shall be paid in the manner provided in paragraph (a)
above against presentation and (provided that payment is made in full) surrender of the
relevant missing Coupons.
(f)
Unmatured Coupons void: If the relevant Final Terms specifies that this Condition 10(f)
(Unmatured Coupons void) is applicable or that the Floating Rate Note Provisions are
applicable, on the due date for final redemption of any Note or early redemption in whole of
such Note pursuant to Condition 9(b) (Redemption for tax reasons), Condition 9(e) (Redemption
at the option of Noteholders), Condition 9(c) (Redemption at the option of the Issuer) or
Condition 13 (Events of Default), all unmatured Coupons relating thereto (whether or not still
attached) shall become void and no payment will be made in respect thereof.
(g)
Payments on business days: If the due date for payment of any amount in respect of any Bearer
Note or Coupon is not a Payment Business Day in the place of presentation, the Holder shall
not be entitled to payment in such place of the amount due until the next succeeding Payment
Business Day in such place and shall not be entitled to any further interest or other payment in
respect of any such delay.
(h)
Payments other than in respect of matured Coupons: Payments of interest other than in respect of
matured Coupons shall be made only against presentation of the relevant Bearer Notes at the
Specified Office of any Paying Agent outside the United States (or in New York City if
permitted by paragraph (c) above).
(i)
Partial payments: If a Paying Agent makes a partial payment in respect of any Bearer Note or
Coupon presented to it for payment, such Paying Agent will endorse thereon a statement
indicating the amount and date of such payment.
(j)
Exchange of Talons: On or after the maturity date of the final Coupon which is (or was at the
time of issue) part of a Coupon Sheet relating to the Bearer Notes, the Talon forming part of
such Coupon Sheet may be exchanged at the Specified Office of the Fiscal Agent for a further
Coupon Sheet (including, if appropriate, a further Talon but excluding any Coupons in respect
of which claims have already become void pursuant to Condition 14 (Prescription). Upon the
due date for redemption of any Bearer Note, any unexchanged Talon relating to such Note shall
become void and no Coupon will be delivered in respect of such Talon.
11.
Payments – Registered Notes
This Condition 11 (Payments – Registered Notes) is only applicable to Registered Notes.
(a)
Principal: Payments of principal shall be made by cheque drawn in the currency in which the
payment is due drawn on, or, upon application by a Holder of a Registered Note to the
Specified Office of the Fiscal Agent not later than the fifteenth day before the due date for any
such payment, by transfer to an account denominated in that currency (or, if that currency is
euro, any other account to which euro may be credited or transferred) and maintained by the
payee with, a bank in the Principal Financial Centre of that currency (in the case of a sterling
cheque, a town clearing branch of a bank in the City of London) and (in the case of
redemption) upon surrender (or, in the case of part payment only, endorsement) of the relevant
Note Certificates at the Specified Office of any Paying Agent.
53
(b)
Interest: Payments of interest shall be made by cheque drawn in the currency in which the
payment is due drawn on, or, upon application by a Holder of a Registered Note to the
Specified Office of the Fiscal Agent not later than the fifteenth day before the due date for any
such payment, by transfer to an account denominated in that currency (or, if that currency is
euro, any other account to which euro may be credited or transferred) and maintained by the
payee with, a bank in the Principal Financial Centre of that currency (in the case of a sterling
cheque, a town clearing branch of a bank in the City of London) and (in the case of interest
payable on redemption) upon surrender (or, in the case of part payment only, endorsement) of
the relevant Note Certificates at the Specified Office of any Paying Agent.
(c)
Payments subject to fiscal laws: All payments in respect of the Registered Notes are subject in
all cases to (i) any applicable fiscal or other laws, regulations and directives in the place of
payment, but without prejudice to the provisions of Condition 12 (Taxation), and (ii) any
withholding or deduction required pursuant to an agreement described in Section 1471(b) of the
Code or otherwise imposed pursuant to Sections 1471 through 1474 of the Code, any
regulations or agreements thereunder, official interpretations thereof, or (without prejudice to the
provisions of Condition 12 (Taxation)) any law implementing an intergovernmental approach
thereto. No commissions or expenses shall be charged to the Noteholders in respect of such
payments.
(d)
Payments on business days: Where payment is to be made by transfer to an account, payment
instructions (for value the due date, or, if the due date is not Payment Business Day, for value
the next succeeding Payment Business Day) will be initiated and, where payment is to be made
by cheque, the cheque will be mailed (i) (in the case of payments of principal and interest
payable on redemption) on the later of the due date for payment and the day on which the
relevant Note Certificate is surrendered (or, in the case of part payment only, endorsed) at the
Specified Office of a Paying Agent and (ii) (in the case of payments of interest payable other
than on redemption) on the due date for payment. A Holder of a Registered Note shall not be
entitled to any interest or other payment in respect of any delay in payment resulting from (A)
the due date for a payment not being a Payment Business Day or (B) a cheque mailed in
accordance with this Condition 11 (Payments – Registered Notes) arriving after the due date for
payment or being lost in the mail.
(e)
Partial payments: If a Paying Agent makes a partial payment in respect of any Registered Note,
the Issuer shall procure that the amount and date of such payment are noted on the Register
and, in the case of partial payment upon presentation of a Note Certificate, that a statement
indicating the amount and the date of such payment is endorsed on the relevant Note
Certificate.
(f)
Record date: Each payment in respect of a Registered Note will be made to the person shown
as the Holder in the Register at the opening of business in the place of the Registrar’s Specified
Office on the fifteenth day before the due date for such payment (the ‘‘Record Date’’). Where
payment in respect of a Registered Note is to be made by cheque, the cheque will be mailed to
the address shown as the address of the Holder in the Register at the opening of business on
the relevant Record Date.
12.
(a)
Taxation
Gross up: All payments of principal and interest in respect of the Notes and the Coupons by the
Issuer and all payments under the Guarantee by the Guarantor shall be made free and clear of,
and without withholding or deduction for or on account of, any present or future taxes, duties,
assessments or governmental charges of whatever nature imposed, levied, collected, withheld or
assessed by or on behalf of the Cayman Islands or the State of Qatar or any political
subdivision therein or any authority therein or thereof having power to tax, unless the
withholding or deduction of such taxes, duties, assessments, or governmental charges is required
by law. In that event, the Issuer or (as the case may be) the Guarantor shall pay such
additional amounts as will result in receipt by the Noteholders and the Couponholders after
such withholding or deduction of such amounts as would have been received by them had no
such withholding or deduction been required, except that no such additional amounts shall be
payable in respect of any Note or Coupon:
54
(i)
held by or on behalf of a Holder which is liable to such taxes, duties, assessments or
governmental charges in respect of such Note or Coupon by reason of its having some
connection with the jurisdiction by which such taxes, duties, assessments or charges have
been imposed, levied, collected, withheld or assessed other than the mere holding of the
Note or Coupon; or
(ii)
where such withholding or deduction is imposed on a payment to an individual and is
required to be made pursuant to European Council Directive 2003/48/EC on the taxation
of savings income or any law implementing or complying with, or introduced in order to
conform to, such Directive; or
(iii)
held by or on behalf of a Holder who would have been able to avoid such withholding or
deduction by presenting the relevant Note or Coupon to another Paying Agent in a
Member State of the EU; or
(iv)
where the relevant Note or Coupon or Note Certificate is presented or surrendered for
payment more than 30 days after the Relevant Date except to the extent that the Holder
of such Note or Coupon would have been entitled to such additional amounts on
presenting or surrendering such Note or Coupon or Note Certificate for payment on the
last day of such period of 30 days.
(b)
Taxing jurisdiction: If the Issuer or the Guarantor becomes subject at any time to any taxing
jurisdiction other than the Cayman Islands or the State of Qatar respectively, references in these
Conditions to the Cayman Islands or the State of Qatar shall be construed as references to the
Cayman Islands or (as the case may be) the State of Qatar and/or such other jurisdiction.
(c)
FATCA: Notwithstanding any other provision of these Conditions, in no event will the Issuer or
Guarantor be required to pay any additional amounts in respect of the Notes or Coupons or
under the Deed of Guarantee for, or on account of, any withholding or deduction required
pursuant to an agreement described in Section 1471(b) of the Code or otherwise imposed
pursuant to Sections 1471 through 1474 of the Code, any regulations or agreements thereunder,
or any official interpretations thereof.
13.
Events of Default
If any one or more of the following events occurs (each an ‘‘Event of Default’’):
(a)
default is made in the payment of any principal or interest due in respect of the Notes or any
of them and the default continues for a period of at least seven days in the case of principal or
at least 14 days in the case of interest; or
(b)
the Issuer or the Guarantor fails to perform or observe any of its other obligations under or in
respect of the Notes or the Guarantee of the Notes and (except in any case where the failure is
incapable of remedy when no such continuation or notice as is hereinafter mentioned will be
required) the failure continues for the period of 30 days next following the service by a
Noteholder on the Issuer and the Guarantor of written notice requiring the same to be
remedied; or
(c)
(i) any Indebtedness of the Issuer, the Guarantor or any of their respective Material Subsidiaries
is not paid when due or (as the case may be) within any originally applicable grace period, (ii)
any such Indebtedness becomes due and payable prior to its stated maturity by reason of
default (however described) or (iii) the Issuer, the Guarantor or any of their Material
Subsidiaries fails to pay when due any amount payable by it under any Guarantee of any
Indebtedness, provided that the amount of Indebtedness referred to in (i) and/ or (ii) above and/
or the amount payable under any Guarantee referred to in (iii) above individually or in the
aggregate exceeds U.S.$10,000,000 (or its equivalent in any other currency or currencies); or
(d)
one or more judgments or orders for the payment of an aggregate amount in excess of
U.S.$10,000,000 (or its equivalent in any other currency or currencies) is rendered by any court
of competent jurisdiction against the Issuer, the Guarantor or any of their respective Material
Subsidiaries and continues unsatisfied, unstayed and unappealed (or, if appealed, the appeal is
unsuccessful and thereafter the judgment continues unsatisfied and unstayed for a period of 30
days) for a period of 45 days after the date thereof; or]
(e)
any order is made by any competent court or resolution passed for the winding up, liquidation
or dissolution of the Issuer, the Guarantor or any of their respective Material Subsidiaries, save
in connection with a Permitted Reorganisation; or
55
(f)
(i) the Issuer, the Guarantor or any of their respective Material Subsidiaries ceases or threatens
to cease to carry on the whole or a substantial part of its business, save in connection with a
Permitted Reorganisation, or the Issuer, the Guarantor or (ii) any of their respective Material
Subsidiaries stops or threatens to stop payment of, or is unable to, or admits inability to, pay,
its debts (or any class of its debts) as they fall due, or is deemed by a court of competent
jurisdiction unable to pay its debts pursuant to or for the purposes of any applicable law, or is
adjudicated or found bankrupt or insolvent; or
(g)
(i) court or other formal proceedings are initiated against the Issuer, the Guarantor or any of
their respective Material Subsidiaries under any applicable liquidation, insolvency, composition,
reorganisation or other similar laws, or an application is made (or documents filed with a court)
for the appointment of an administrative or other receiver, manager, administrator or other
similar official, or an administrative or other receiver, manager, administrator or other similar
official is appointed, in relation to the Issuer, the Guarantor or any of their respective Material
Subsidiaries or, as the case may be, in relation to the whole or a substantial part of the
undertaking, assets or revenues of any of them, or an encumbrancer takes possession of the
whole or a substantial part of the undertaking, assets or revenues of any of them, or a distress,
execution, attachment, sequestration or other process is levied, enforced upon, sued out or put
in force against the whole or a substantial part of the undertaking, assets or revenues of any of
them and (ii) in any case (A) (other than the appointment of an administrator) is not discharged
within 30 days and (B) such proceedings are not being actively contested in good faith; or
(h)
the Issuer, the Guarantor or any of their respective Material Subsidiaries (i) declares a
moratorium in respect of any of its Indebtedness or any Guarantee of any Indebtedness given
by it, (ii) initiates or consents to judicial proceedings relating to itself under any applicable
liquidation, insolvency, composition, reorganisation or other similar laws (including the
obtaining of a moratorium), (iii) makes a conveyance or assignment for the benefit of, or enters
into any composition or other arrangement with, its creditors generally (or any class of its
creditors), or (iv) any meeting is convened to consider a proposal for an arrangement or
composition with its creditors generally (or any class of its creditors) save, in all cases, in
connection with a Permitted Reorganisation; or
(i)
any event occurs which under the laws of the Cayman Islands or the State of Qatar or any
other relevant jurisdiction has an analogous effect to any of the events referred to in paragraphs
(e) to (h) above; or
(j)
at any time it is or becomes unlawful for the Issuer or the Guarantor to perform or comply
with any or all of its material obligations under or in respect of the Notes, the Deed of
Guarantee or any of the material obligations of the Issuer or the Guarantor thereunder are not
or cease to be legal, valid, binding or enforceable; or
(k)
if the Issuer ceases to be a Subsidiary wholly-owned and controlled, directly or indirectly, by the
Guarantor;
then any Noteholder may give written notice to the Issuer and the Guarantor at the Specified
Office of the Fiscal Agent, effective upon the date of receipt thereof by the Fiscal Agent, that
such Note is due and payable, whereupon the same shall become forthwith due and payable at
its principal amount, together with accrued interest (if any) to the date of repayment without
presentation, demand, protest or other notice of any kind.
14.
Prescription
Claims for principal in respect of Bearer Notes shall become void unless the relevant Bearer
Notes are presented for payment within ten years of the appropriate Relevant Date. Claims for
interest in respect of Bearer Notes shall become void unless the relevant Coupons are presented
for payment within five years of the appropriate Relevant Date. Claims for principal and
interest on redemption in respect of Registered Notes shall become void unless the relevant Note
Certificates are surrendered for payment within ten years of the appropriate Relevant Date.
15.
Replacement of Notes and Coupons
If any Note, Note Certificate or Coupon is lost, stolen, mutilated, defaced or destroyed, it may
be replaced at the Specified Office of the Fiscal Agent, in the case of Bearer Notes, or the
Registrar, in the case of Registered Notes (and, if the Notes are then admitted to listing, trading
and/or quotation by any competent authority, stock exchange and/or quotation system which
56
requires the appointment of a Paying Agent or Transfer Agent in any particular place, the
Paying Agent or Transfer Agent having its Specified Office in the place required by such
competent authority, stock exchange and/or quotation system), subject to all applicable laws and
competent authority, stock exchange and/or quotation system requirements, upon payment by
the claimant of the expenses incurred in connection with such replacement and on such terms as
to evidence, security, indemnity and otherwise as the Issuer may reasonably require. Mutilated
or defaced Notes, Note Certificates or Coupons must be surrendered before replacements will be
issued.
16.
Agents
In acting under the Agency Agreement and in connection with the Notes and the Coupons, the
Agents act solely as agents of the Issuer and the Guarantor and do not assume any obligations
towards or relationship of agency or trust for or with any of the Noteholders or
Couponholders.
The initial Agents and their initial Specified Offices are listed below. The initial Calculation
Agent (if any) is specified in the relevant Final Terms. If any additional Agents are appointed in
connection with any services, the names of such Agents will be specified in Part B of the
relevant Final Terms. The Issuer and the Guarantor reserve the right at any time to vary or
terminate the appointment of any Agent and to appoint a successor fiscal agent or registrar or
Calculation Agent and additional or successor paying agents; provided, however, that:
(a)
the Issuer and the Guarantor shall at all times maintain a fiscal agent and a registrar; and
(b)
the Issuer and the Guarantor shall at all times maintain a paying agent in an EU member state
that will not be obliged to withhold or deduct tax pursuant to European Council Directive
2003/48/EC; and
(c)
if a Calculation Agent is specified in the relevant Final Terms, the Issuer and the Guarantor
shall at all times maintain a Calculation Agent; and
(d)
if and for so long as the Notes are admitted to listing, trading and/or quotation by any
competent authority, stock exchange and/or quotation system which requires the appointment of
a Paying Agent and/or a Transfer Agent in any particular place, the Issuer and the Guarantor
shall maintain a Paying Agent and/or a Transfer Agent having its Specified Office in the place
required by such competent authority, stock exchange and/or quotation system.
Notice of any change in any of the Agents or in their Specified Offices shall promptly be given
to the Noteholders.
17.
(a)
Meetings of Noteholders; Modification
Meetings of Noteholders’, The Agency Agreement contains provisions for convening meetings of
Noteholders to consider matters relating to the Notes, including the modification of any
provision of these Conditions. Any such modification may be made if sanctioned by an
Extraordinary Resolution. Such a meeting may be convened by the Issuer and the Guarantor
(acting together) and shall be convened by them upon the request in writing of Noteholders
holding not less than one-tenth of the aggregate principal amount of the outstanding Notes for
the time being remaining outstanding. The quorum at any meeting convened to vote on an
Extraordinary Resolution will be one or more Persons holding or representing one more than
half of the aggregate principal amount of the outstanding Notes for the time being remaining
outstanding or, at any adjourned meeting, one or more Persons being or representing
Noteholders whatever the principal amount of the Notes held or represented; provided, however,
that Reserved Matters may only be sanctioned by an Extraordinary Resolution passed at a
meeting of Noteholders at which one or more Persons holding or representing not less than
two-thirds or, at any adjourned meeting, one-third of the aggregate principal amount of the
outstanding Notes for the time being remaining outstanding form a quorum. An Extraordinary
Resolution may also be passed by consent being given by way of electronic consents through the
relevant clearing system(s) by or on behalf of the holders of not less than two-thirds of the
aggregate principal amount of the outstanding Notes. Any Extraordinary Resolution duly passed
at any such meeting or by way of electronic consent through the relevant clearing system(s) shall
be binding on all the Noteholders and Couponholders (whether or not present at the relevant
meeting and whether or not they voted on the resolution, including through the clearing
system(s)).
57
In addition, a resolution in writing signed by or on behalf of the Holders of not less than
ninety per cent, in principal amount of the Notes who for the time being are entitled to receive
notice of a meeting of Noteholders will take effect as if it were an Extraordinary Resolution.
Such a resolution in writing may be contained in one document or several documents in the
same form, each signed by or on behalf of one or more Noteholders.
(b)
Modification: The Fiscal Agent and the Issuer (on the written instruction of the Guarantor) may
agree, without the consent of the Noteholders or Couponholders, to:
(a)
any modification (except such modifications in respect of which an increased quorum is
required as mentioned above) of the Notes, the Coupons, the Deed of Guarantee or the
Agency Agreement which is not prejudicial to the interests of the Noteholders; or
(b)
any modification of the Notes, the Coupons, the Deed of Guarantee or the Agency
Agreement which is of a formal, minor or technical nature or is made to correct a
manifest error or to comply with mandatory provisions of the law.
Any such modification shall be binding on the Noteholders and the Couponholders and any
such modification shall be notified to the Noteholders in accordance with Condition 19 (Notices)
as soon as practicable thereafter.
18.
Further Issues
The Issuer may from time to time, without the consent of the Noteholders or the
Couponholders, create and issue further notes having the same terms and conditions as the
Notes in all respects (or in all respects except for the first payment of interest) so as to form a
single series with the Notes.
19.
(a)
Notices
Bearer Notes: Notices to the Holders of Bearer Notes shall be valid if published in a leading
English language daily newspaper published in London (which is expected to be the Financial
Times) or Dublin or, if such publication is not practicable, in a leading English language daily
newspaper having general circulation in Europe. Any such notice shall be deemed to have been
given on the date of first publication (or if required to be published in more than one
newspaper, on the first date on which publication shall have been made in all the required
newspapers). Couponholders shall be deemed for all purposes to have notice of the contents of
any notice given to the Holders of Bearer Notes.
(b)
Registered Notes: Notices to the Holders of Registered Notes shall be sent to them by first class
mail (or its equivalent) or (if posted to an overseas address) by airmail at their respective
addresses on the Register and, in addition, for so long as any Registered Notes are listed on a
stock exchange or admitted to trading by another relevant authority and the rules of that stock
exchange or relevant authority so require such notice will be published in a daily newspaper
having general circulation in the place or places required by those rules. Any such notice shall
be deemed to have been given on the fourth day after the date of mailing.
(c)
Notices from Noteholders: Notices to be given by any Noteholder shall be in writing and given
by lodging the same, together (in the case of any Note in definitive form) with the relative Note
or Notes, with the Fiscal Agent. Whilst any of the Notes are represented by a Global Note,
such notice may be given by any holder of a Note to the Fiscal Agent through Euroclear and/or
Clearstream, Luxembourg, as the case may be, in such manner as the Fiscal Agent and
Euroclear and/or Clearstream, Luxembourg, as the case may be, may approve for this purpose.
20.
Currency Indemnity
If any sum due from the Issuer in respect of the Notes or the Coupons or any order or
judgment given or made in relation thereto has to be converted from the currency (the ‘‘first
currency’’) in which the same is payable under these Conditions or such order or judgment into
another currency (the ‘‘second currency’’) for the purpose of (a) making or filing a claim or
proof against the Issuer, (b) obtaining an order or judgment in any court or other tribunal or
(c) enforcing any order or judgment given or made in relation to the Notes, the Issuer shall
indemnify each Noteholder, on the written demand of such Noteholder addressed to the Issuer
and delivered to the Issuer or to the Specified Office of the Fiscal Agent, against any loss
suffered as a result of any discrepancy between (i) the rate of exchange used for such purpose to
convert the sum in question from the first currency into the second currency and (ii) the rate or
58
rates of exchange at which such Noteholder may in the ordinary course of business purchase the
first currency with the second currency upon receipt of a sum paid to it in satisfaction, in whole
or in part, of any such order, judgment, claim or proof.
This indemnity constitutes a separate and independent obligation of the Issuer and shall give
rise to a separate and independent cause of action.
21.
Rounding
For the purposes of any calculations referred to in these Conditions (unless otherwise specified
in these Conditions or the relevant Final Terms), (a) all percentages resulting from such
calculations will be rounded, if necessary, to the nearest one hundred-thousandth of a
percentage point (with 0.000005 per cent, being rounded up to 0.00001 per cent.), (b) all United
States dollar amounts used in or resulting from such calculations will be rounded to the nearest
cent (with one half cent being rounded up), (c) all Japanese Yen amounts used in or resulting
from such calculations will be rounded downwards to the next lower whole Japanese Yen
amount, and (d) all amounts denominated in any other currency used in or resulting from such
calculations will be rounded to the nearest two decimal places in such currency, with 0.005 being
rounded upwards.
22.
(a)
Governing Law and Jurisdiction
Governing law. The Notes, the Coupons and any non-contractual obligations arising out of or in
connection with them are governed by, and shall be construed in accordance with, English law.
(b)
Arbitration: Subject to Condition 22(c) (Option to litigate), any dispute, claim, difference or
controversy arising out of, relating to or having any connection with the Notes or the Deed of
Covenant (including any dispute as to the existence, validity, interpretation, performance, breach
or termination or the consequences of their nullity or any dispute relating to any non
contractual obligations arising out of or in connection with them) (a ‘‘Dispute’’) shall be referred
to and finally resolved by arbitration in accordance with the Arbitration Rules of the London
Court of International Arbitration (‘‘LCIA’’) (the ‘‘Rules’’), which Rules (as amended from time
to time) are incorporated by reference into this Condition 22(b) (Arbitration). For these
purposes:
(c)
(i)
the seat, or legal place, of arbitration shall be London;
(ii)
there shall be three arbitrators, each of whom shall be disinterested in the arbitration,
shall have no connection with any party to the Dispute and shall be an attorney
experienced in international securities transactions . The parties to the Dispute shall each
nominate one arbitrator and both arbitrators in turn shall appoint a further arbitrator
who shall be the chairman of the tribunal. In cases where there are multiple claimants
and/or multiple respondents, the class of claimants jointly, and the class of respondents
jointly shall each nominate one arbitrator. If one party or both fails to nominate an
arbitrator within the time limits specified by the Rules, such arbitrator(s) shall be
appointed by the LCIA. If the party-nominated arbitrators fail to nominate the third
arbitrator within 15 days of the appointment of the second arbitrator, such arbitrator
shall be appointed by the LCIA; and
(iii)
the language of the arbitration shall be English.
Option to litigate: Notwithstanding Condition 22(b) (Arbitration) above, a Noteholder may, in
the alternative, and at its sole discretion, by notice in writing to the Issuer and the Guarantor:
(i)
within 28 days of service of a Request for Arbitration (as defined in the Rules); or
(ii)
in the event no arbitration is commenced,
require that a Dispute be heard by a court of law. If any Noteholder gives such notice, the
Dispute to which such notice refers shall be determined in accordance with Condition 22(d)
(Court proceedings) and, subject as provided below, any arbitration commenced under Condition
22(b) (Arbitration) in respect of that Dispute will be terminated. Each of the parties to the
terminated arbitration will bear its own costs in relation thereto.
If any notice to terminate is given after service of any Request for Arbitration in respect of any
Dispute, the relevant Noteholder must also promptly give notice to the LCIA Court and to any
Tribunal (each as defined in the Rules) already appointed in relation to the Dispute that such
Dispute will be settled by the courts. Upon receipt of such notice by the LCIA Court, the
59
arbitration and any appointment of any arbitrator in relation to such Dispute will immediately
terminate. Any such arbitrator will be deemed to be functus officio. The termination is without
prejudice to:
(d)
(e)
(i)
the validity of any act done or order made by that arbitrator or by the court in support
of that arbitration before his appointment is terminated;
(ii)
his entitlement to be paid his proper fees and disbursements; and
(iii)
the date when any claim or defence was raised for the purpose of applying any limitation
bar or any similar rule or provision.
Court proceedings: In the event that a notice pursuant to Condition 22(c) (Option to litigate) is
issued, the following provisions shall apply:
(i)
subject to sub-paragraph (iii) below, the courts of England shall have exclusive jurisdiction
to settle any Dispute and each of the Issuer and the Guarantor submits to the exclusive
jurisdiction of such courts;
(ii)
each of the Issuer and the Guarantor agrees that the courts of England are the most
appropriate and convenient courts to settle any dispute and, accordingly, that it will not
argue to the contrary; and
(iii)
this Condition 22(d) (Court proceedings) is for the benefit of the Noteholders only. As a
result, and notwithstanding sub-paragraph (i) above, any Noteholder may take
proceedings relating to a Dispute (‘‘Proceedings’’) in any other courts with jurisdiction. To
the extent allowed by law, any Noteholder may take concurrent Proceedings in any
number of jurisdictions.
Process agent: Each of the Issuer and the Guarantor agrees that the documents which start any
Proceedings and any other documents required to be served in relation to those Proceedings
may be served on it by being delivered to Maples and Calder at its registered office at 11th
Floor, 200 Aldersgate Street, London EC1A 4HD. If Maples and Calder is not or ceases to be
effectively appointed to accept service of process on behalf of the Issuer and the Guarantor, the
Issuer and the Guarantor (acting together) shall, on the written demand of any Noteholder
addressed to the Issuer and the Guarantor and delivered to the Issuer and the Guarantor
appoint a further person in England to accept service of process on its behalf and, failing such
appointment within 15 days, any Noteholder shall be entitled to appoint such a person by
written notice addressed to the Issuer and the Guarantor and delivered to the Issuer and the
Guarantor. Nothing in this paragraph shall affect the right of any Noteholder to serve process
in any other manner permitted by law. This Condition 22(e) (Process agent) applies to
Proceedings in England and to Proceedings elsewhere.
60
USE OF PROCEEDS
The net proceeds from each issue of Notes will be lent by the Issuer to the Guarantor and will be
used by the Guarantor for its general corporate purposes.
61
FORM OF FINAL TERMS
Set out below is the form of Final Terms which will be completed for each Tranche of Notes issued
under the Programme.
Final Terms dated [*]
IBQ Finance Limited
Issue of [Aggregate Nominal Amount of Tranche] [Title of Notes]
Guaranteed by International Bank of Qatar (Q.S.C.)
under the U.S.$2,000,000,000
Euro Medium Term Note Programme
PART A – CONTRACTUAL TERMS
Terms used herein shall be deemed to be defined as such for the purposes of the Conditions set forth
in the Base Prospectus dated 9 November 2015 [and the supplemental Base Prospectus dated [*]]
which [together] constitute[s] a base prospectus (the ‘‘Base Prospectus’’) for the purposes of the
Prospectus Directive. When used in the Final Terms, ‘‘Prospectus Directive’’ means Directive 2003/71/
EC (as amended, including by Directive 2010/73/EU, and includes any relevant implementing measure
in a relevant Member State). This document constitutes the Final Terms of the Notes described
herein [for the purposes of Article 5.4 of the Prospectus Directive]1 and must be read in conjunction
with such Base Prospectus.
Full information on the Issuer, the Guarantor and the offer of the Notes described herein is only
available on the basis of the combination of these Final Terms and the Base Prospectus. The Base
Prospectus and these Final Terms are available for viewing in accordance with Article 14 of the
Prospectus Directive on the website of the Central Bank of Ireland (www.centralbank.ie) and during
normal business hours at the registered offices of the Issuer (at PO Box 309, Ugland House, Grand
Cayman, KY1-1104, Cayman Islands) and the Fiscal Agent (at Citigroup Centre, Canada Square,
Canary Wharf, London, E14 5LB, United Kingdom) and copies may be obtained from such offices.
1.
2.
(i)
Issuer:
IBQ Finance Limited
(ii)
Guarantor:
International Bank of Qatar (Q.S.C.)
(i)
Series Number:
[*]
(ii) Tranche Number:
[(iii) Date on which the Notes will be
consolidated and form a single Series:]
3.
Specified Currency or Currencies:
[*]
[The Notes will be consolidated and form a single
Series with [identify earlier Tranche] on [the Issue
Date/exchange of the Temporary Global Note for
interests in the Permanent Global Notes, as referred
to in paragraph [23] below, which is expected to
occur on or about [date]/[Not Applicable]]
[*]
4.
Aggregate Nominal Amount:
(i) Series:
[*]
[*]
5.
(ii) Tranche:
Issue Price:
[*]
[*] per cent. of the Aggregate Nominal Amount
[plus accrued interest from [*] (if applicable)]
6.
(i)
Specified Denominations:
[*] excess thereof.
(ii)
(in the case of Registered Notes, this
means the minimum integral amount in
which transfers can be made)
Calculation Amount:
[*]
(i)
Issue Date:
[*]
(ii)
Interest Commencement Date:
[[*]/Issue Date/Not Applicable]
7.
1
To be deleted in case of unlisted Notes
62
8.
Maturity Date:
[*]
9.
Interest Basis:
[[*] per cent. Fixed Rate]
[[LIBOR/EURIBOR/KIBOR/SHIBOR/HIBOR/
CNH
HIBOR/KLIBOR/TRLIBOR
or
TRYLIBOR/SIBOR/EIBOR/TIBOR/SAIBOR/
BBSW/CHF LIBOR/GBP LIBOR/CAD LIBOR/
NZD LIBOR/DKK LIBOR/SEK LIBOR/AUD
LIBOR/ JPY LIBOR/MIBOR/PRIBOR/LIBID/
LIMEAN] +/- [*] per cent. Floating Rate]
[Zero Coupon]
(see paragraphs [15], [16] and [17] below)
10.
Redemption/Payment Basis:
[Subject to any purchase and cancellation or early
redemption, the Notes will be redeemed on the
Maturity Date at [*] per cent, of their nominal
amount]
11.
Change of Interest or Redemption/Payment
Basis:
[Applicable/Not Applicable]
12.
Put/Call Options:
[Investor Put]
[Issuer Call]
13.
[Date of [Board] approval for issuance of
Notes [and Guarantee] obtained:]
[*] [and [*], respectively]
14.
Method of distribution:
[Syndicated/Non-syndicated]
PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE
15.
16.
Fixed Rate Note Provisions:
[Applicable/Not Applicable]
(i)
Rate[(s)] of Interest:
[*] per cent. per annum payable [annually/semiannually/quarterly/monthly/[*]] in arrear on each
Interest Payment Date]
(ii)
Interest Payment Date(s):
[*] in each year [adjusted in accordance with
[Following Business Day Convention/ Modified
Following Business Day Convention/ Modified
Business Day Convention/ Preceding Business Day
Convention/ FRN Convention/ Floating Rate
Convention/
Eurodollar
Convention]/
not
adjusted] up to and including the maturity date
(iii) Fixed Coupon Amount[(s)]:
[*] per Calculation Amount
(iv) Broken Amount(s):
[*] per Calculation Amount, payable on the
Interest Payment Date falling [in/on] [*] [Not
Applicable]
(v)
[Actual/Actual (ICMA)/ Actual/365/ Actual/ Actual
(ISDA)/ Actual/365 (Fixed)/ Actual/360/ 30/360/ 30/
360E/ Eurobond Basis]
Day Count Fraction:
(vi) Determination Dates:
[*] in each year [Not Applicable]
Floating Rate Note Provisions:
[Applicable/Not Applicable]
(i)
Specified Period:
[Not Applicable/[*]] subject to adjustment in
accordance with the Business Day Convention
(ii)
Specified Interest Payment Dates:
[Not Applicable/[*]] subject to adjustment in
accordance with Business Day Convention
(iii) First Interest Payment Date:
[*]
(iv) Business Day Convention:
[Following Business Day Convention/ Modified
Following Business Day Convention/ Modified
Business Day Convention/ Preceding Business Day
Convention/ FRN Convention/ Floating Rate
Convention/
Eurodollar
Convention/
No
Adjustment]
63
(v)
Additional Business Centre(s):
[Not Applicable/[*]]
(vi) Manner in which the Rate of Interest
and Interest Amount is to be
determined:
[Screen Rate Determination/ISDA Determination/
[*]]
(vii) Party responsible for calculating the
Rate of Interest and/or Interest
Amount (if not the [Fiscal Agent]):
[[*] shall be the Calculation Agent]
(viii) Screen Rate Determination:
*
Reference Rate:
[LIBOR/EURIBOR/SHIBOR/HIBOR/CNH
HIBOR/KLIBOR/TRLIBOR or TRYLIBOR/
SIBOR/EIBOR/TIBOR/SAIBOR/BBSW/CHF
LIBOR/GBP LIBOR/CAD LIBOR/NZD LIBOR/
DKK LIBOR/SEK LIBOR/AUD LIBOR/JPY
LIBOR/MIBOR/PRIBOR/LIBID/LIMEAN]
*
Interest Determination Date(s):
[*]
*
Relevant Screen Page:
[*]
*
Relevant Time:
[*]
*
Relevant Financial Centre:
[*]
(ix) ISDA Determination:
(x)
17.
*
Floating Rate Option:
[*]
*
Designated Maturity:
[*]
*
Reset Date:
[*]
Linear Interpolation
[Not Applicable/Applicable – the Rate of interest
for the [long/short] [first/last] Interest Period shall be
calculated using Linear Interpolation (specify for
each short or long interest period)]
(xi) Margin(s):
[+/-][*] per cent. per annum
(xii) Minimum Rate of Interest:
[*] per cent. per annum
(xiii) Maximum Rate of Interest:
[*] per cent. per annum
(xiv) Day Count Fraction:
[Actual/Actual (ICMA)/ Actual/365/ Actual/ Actual
(ISDA)/ Actual/365 (Fixed)/ Actual/360/ 30/360/ 30/
360E/ Eurobond Basis]
Zero Coupon Note Provisions:
[Applicable/Not Applicable]
(i)
Accrual Yield:
[*] per cent. per annum
(ii)
Reference Price:
[*]
PROVISIONS RELATING TO REDEMPTION
18.
Call Option:
[Applicable/Not Applicable]
(i)
Optional Redemption Date(s):
[*]
(ii)
Optional Redemption Amount(s) of
each Note:
[*] per Calculation Amount
(iii) If redeemable in part:
19.
20.
(a)
Minimum Redemption Amount:
[*] per Calculation Amount
(b)
Maximum Redemption Amount
[*] per Calculation Amount
Put Option:
[Applicable/Not Applicable]
(i)
Optional Redemption Date(s):
[*]
(ii)
Optional Redemption Amount(s) of
each Note:
[*] per Calculation Amount
(iii) Notice periods:
[*]
Final Redemption Amount of each Note
[*] per Calculation Amount
64
21.
Early
Redemption
Amount(s)
per [Not Applicable/[*]]
Calculation Amount payable on redemption
for taxation reasons or on event of default
or other early redemption:
GENERAL PROVISIONS APPLICABLE TO THE NOTES
22.
Form of Notes:
[Bearer Notes:
[Temporary Global Note exchangeable for a
Permanent Global Note which is exchangeable for
Definitive Notes on [*] days’ notice/at any time/in
the limited circumstances specified in the Permanent
Global Note]
[Temporary Global Note exchangeable for
Definitive Notes on [*] days’ notice]
[Permanent Global Note exchangeable for
Definitive Notes on [*] days’ notice/at any time/in
the limited circumstances specified in the Permanent
Global Note]]
[Registered Notes:
Registered in the name of a nominee for [a common
depositary for Euroclear and Clearstream,
Luxembourg]
Global Registered Note exchangeable for Individual
Note Certificates on [*] days’ notice/at any time/in
the limited circumstances described in the Global
Registered Note]
(N.B. The exchange upon notice/at any time options
should not be expressed to be applicable if the
Specified Denomination of the Notes in paragraph 6
includes language substantially to the following
effect: ‘‘[A100,000] and integral multiples of
[A1,000] in excess thereof up to and including
[A199,000].’’
Furthermore,
such
Specified
Denomination construction is not permitted in
relation to any issue of Notes which is to be
represented on issue by a Temporary Global Note
exchangeable for Definitive Notes)
23.
24.
Additional Financial Centre(s):
Talons for future Coupons to be attached
to Definitive Notes:
[Not Applicable/[*]]
[Not Applicable/[*]]
25.
[Consolidation provisions:
Not Applicable/The provisions [in Condition 18
(Further Issues)] apply]
THIRD PARTY INFORMATION
[(Relevant third party information) has been extracted from (specify source). Each of the Issuer and the
Guarantor confirms that such information has been accurately reproduced and that, so far as it is
aware, and is able to ascertain from information published by (specify source), no facts have been
omitted which would render the reproduced information inaccurate or misleading.]
Signed on behalf of IBQ Finance Limited:
By: .........................................................................................
Duly authorised
Signed on behalf of International Bank of Qatar (Q.S.C.):
By: .........................................................................................
Duly authorised
65
PART B – OTHER INFORMATION
1.
LISTING
(i)
2.
Listing and admission to trading:
[Application [has been made] [is expected to be
made] by the Issuer (or on its behalf) to the Irish
Stock Exchange for the Notes to be admitted to the
Official List and trading on its Main Securities
Market with effect from [*].] [Not Applicable.]
(ii)
Estimate of total expenses related to
listing and admission to trading:
RATINGS
[*]
Ratings:
The Notes to be issued [have been] [are expected to
be] rated by:
[Fitch: [*]]
[Moody’s: [*]]
[[*] is established in the European Union and
registered under Regulation (EU) No. 1060/2009 (as
amended).]/[[*] is not established in the European
Union and has not applied for registration under
Regulation (EU) No. 1060/2009 (as amended).]/[[*]
is not established in the European Union but [*],
which is registered under Regulation (EU) No.
1060/2009 (as amended), has indicated that it
intends to endorse the ratings or [*] where
possible.]/[[*] is not established in the European
Union and has not applied for registration under
Regulation (EU) No. 1060/2009 (as amended), but
it is certified in accordance with such Regulation.]
3.
[INTERESTS OF NATURAL AND LEGAL PERSONS INVOLVED IN THE ISSUE/OFFER]
[Save for any fees payable to the [Managers/Dealers], so far as the Issuer is aware, no person
involved in the issue of the Notes has an interest material to the offer. The [Managers/Dealers]
and their affiliates have engaged, and may in the future engage, in investment banking and/or
commercial banking transactions with, and may perform other services for, the Issuer and the
Guarantor and their affiliates in the ordinary course of business – Amend as appropriate if there
are other interests]
4.
[Fixed Rate Notes only – YIELD
Indication of yield:
[*] per cent. per annum on a [quarterly/[semi-]
annual] basis
The yield is calculated at the Issue Date on the basis
of the Issue Price. It is not an indication of future
yield.
5.
[Floating Rate Notes only – HISTORIC INTEREST RATES
Details of historic [LIBOR/EURIBOR/KIBOR/SHIBOR/HIBOR/CNH HIBOR/KLIBOR/
TRLIBOR or TRYLIBOR/SIBOR/EIBOR/TIBOR/SAIBOR/BBSW/CHF LIBOR/GBP LIBOR/
CAD LIBOR/NZD LIBOR/DKK LIBOR/SEK LIBOR/AUD LIBOR/ JPY LIBOR/MIBOR/
PRIBOR/LIBID/LIMEAN] rates can be obtained from [Reuters].]
6.
OPERATIONAL INFORMATION
(i) ISIN Code:
[*]
(ii) Common Code:
(iii) Any clearing system(s) other than
Euroclear
Bank
S.A./N.V.
and
Clearstream Banking, société anonyme
and
the
relevant
identification
[*]
[Not Applicable/[*]]
66
7.
number(s):
(iv) Delivery:
Delivery [against/free of] payment
(v)
[*]
Names and addresses of additional
Paying Agent(s) (if any):
DISTRIBUTION
(i) If syndicated, names of Managers:
[Not Applicable/[*]]
(ii) Date of Subscription Agreement:
(iii) Stabilisation Manager(s) (if any):
[*]
[Not Applicable/give name]
(iv) If non-syndicated, name and address
of Dealer:
(v) U.S. Selling Restrictions:
[Not Applicable/[*]]
Reg. S Compliance Category 2
[TEFRA C/TEFRA D/TEFRA not applicable]
67
SUMMARY OF PROVISIONS RELATING TO THE NOTES
WHILE IN GLOBAL FORM
Clearing System Accountholders
In relation to any Tranche of Notes represented by a Global Note in bearer form, references in the
Terms and Conditions of the Notes to ‘‘Noteholder’’ are references to the bearer of the relevant
Global Note which, for so long as the Global Note is held by a depositary or a common depositary,
will be that depositary or common depositary.
In relation to any Tranche of Notes represented by a Global Registered Note, references in the Terms
and Conditions of the Notes to ‘‘Noteholder’’ are references to the person in whose name such
Global Registered Note is for the time being registered in the Register which, for so long as the
Global Registered Note is held by or on behalf of a depositary or a common depositary for
Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing system, will be that
depositary or common depositary or a nominee for that depositary or common depositary.
Conditions applicable to Global Notes
Each Global Note and Global Registered Note will contain provisions which modify the Terms and
Conditions of the Notes as they apply to the Global Note or Global Registered Note. The following
is a summary of certain of those provisions:
Payments: All payments in respect of the Global Note or Global Registered Note which, according to
the Terms and Conditions of the Notes, require presentation and/or surrender of a Note, Note
Certificate or Coupon will be made against presentation and (in the case of payment of principal in
full with all interest accrued thereon) surrender of the Global Note or Global Registered Note to or
to the order of any Paying Agent and will be effective to satisfy and discharge the corresponding
liabilities of the Issuer in respect of the Notes. On each occasion on which a payment of principal or
interest is made in respect of the Global Note, the Issuer shall procure that the payment is noted in a
schedule thereto.
Payment Business Day: In the case of a Global Note, or a Global Registered Note, shall be, if the
currency of payment is euro, any day which is a TARGET Settlement Day and a day on which
dealings in foreign currencies may be carried on in each (if any) Additional Financial Centre; or, if
the currency of payment is not euro, any day which is a day on which dealings in foreign currencies
may be carried on in the Principal Financial Centre of the currency of payment and in each (if any)
Additional Financial Centre.
Payment Record Date: Each payment in respect of a Global Registered Note will be made to the
person shown as the Holder in the Register at the close of business (in the relevant clearing system)
on the Clearing System Business Day before the due date for such payment (the ‘‘Record Date’’)
where ‘‘Clearing System Business Day’’ means a day on which each clearing system for which the
Global Registered Note is being held is open for business.
Exercise of put option: In order to exercise the option contained in Condition 9(e) (Redemption at the
option of Noteholders) the bearer of the Permanent Global Note or the holder of a Global Registered
Note must, within the period specified in the Conditions for the deposit of the relevant Note and put
notice, give written notice of such exercise to the Fiscal Agent specifying the principal amount of
Notes in respect of which such option is being exercised. Any such notice will be irrevocable and may
not be withdrawn.
Partial exercise of call option: In connection with an exercise of the option contained in Condition
9(c) (Redemption at the option of the Issuer) in relation to some only of the Notes, the Permanent
Global Note or Global Registered Note may be redeemed in part in the principal amount specified
by the Issuer in accordance with the Conditions and the Notes to be redeemed will not be selected as
provided in the Conditions but in accordance with the rules and procedures of Euroclear and
Clearstream, Luxembourg (to be reflected in the records of Euroclear and Clearstream, Luxembourg
as either a pool factor or a reduction in principal amount, at their discretion).
Notices: Notwithstanding Condition 19 (Notices), while all the Notes are represented by a Permanent
Global Note (or by a Permanent Global Note and/or a Temporary Global Note) or a Global
Registered Note and the Permanent Global Note is (or the Permanent Global Note and/or the
Temporary Global Note are), or the Global Registered Note is, deposited with a depositary or a
common depositary for Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing
system, notices to Noteholders may be given by delivery of the relevant notice to Euroclear and/or
68
Clearstream, Luxembourg and/or any other relevant clearing system and, in any case, such notices
shall be deemed to have been given to the Noteholders in accordance with Condition 19 (Notices) on
the date of delivery to Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing
system.
Exchange
The option for Global Notes to be exchangeable for Definitive Notes by giving notice should not be
expressed to be applicable under paragraph 23 (Form of Notes) in Part A of the relevant Final Terms
if the relevant Notes have denominations consisting of a minimum Specified Denomination plus one
or more higher integral multiples of another smaller amount. Furthermore, Notes should not be
issued which have such denominations if such Notes are to be represented on issue by a Temporary
Global Note exchangeable for Definitive Notes.
In the event that a Global Note is exchanged for Definitive Notes, such Definitive Notes shall be
issued in Specified Denomination(s) only. A Noteholder who holds a principal amount of less than
the minimum Specified Denomination will not receive a Definitive Note in respect of such holding
and would need to purchase a principal amount of Notes such that it holds an amount equal to one
or more Specified Denominations.
69
DESCRIPTION OF THE ISSUER
Registered office
The registered office of the Issuer is at PO Box 309, Ugland House, Grand Cayman, KY1-1104,
Cayman Islands and the telephone number of the registered office is +13459498066.
Date of incorporation and legal form
The Issuer is an exempted company with limited liability incorporated in the Cayman Islands under
the Companies Law (as amended) of the Cayman Islands on 1 October 2015 (with registration
number 304473).
The authorised share capital of the Issuer is U.S.$50,000 and the issued share capital of the Issuer is
comprised of one ordinary share of U.S.$1.00 par value. The Issuer is a wholly-owned subsidiary of
the Guarantor.
Purpose and business activity
The principal objects of the Issuer are unrestricted and, as set out in its Memorandum of Association,
the Issuer has full power and authority to carry out any object not prohibited by law.
The Issuer is organised as a special purpose entity and consequently does not have any employees or
own any physical assets.
The Issuer has been established to raise capital for the Guarantor by the issue of debt instruments.
The Issuer does not engage in, and has not, since its incorporation, engaged in, any activities other
than those incidental to: (i) its registration as an exempted company; (ii) the authorisation of the
offering and issue of debt instruments to which it is or will be a party; (iii) the ownership of such
interests and other assets referred to herein; (iv) the other matters contemplated in this Base
Prospectus or any other base prospectus related to the offering and issue of debt instruments to
which it is or will be a party; (v) the authorisation and execution of the other documents referred to
in this Base Prospectus or any other Base Prospectus related to the offering and issue of debt
instruments, to which it is or will be a party; and (vi) other matters which are incidental or ancillary
to those activities.
The Issuer’s ongoing activities will principally comprise: (i) the issue of the Notes under the
Programme; (ii) the entering into of any documents related to the update of the Programme and the
issue of Notes under the Programme; and (iii) the exercise of related rights and powers and other
activities referred to in this Base Prospectus or reasonably incidental to those activities.
The Issuer does not have subsidiaries or non-executive directors.
Management
The directors of the Issuer and their respective business addresses and principal activities are as
follows:
Name
H.E. Sheikh Sultan Bin Jassim Bin Mohammed Al-Thani
Chaouki Daher
Daren Warner
Occupation
Director
Banker
Chartered Accountant
The business address of each of the directors of the Issuer is c/o IBQ, Suhaim Bin Hamad Street, PO
Box 2001, Doha, State of Qatar.
There are no potential conflicts of interest between the private interests or other duties of the
directors listed above and their duties to the Issuer.
The corporate services provider of the Issuer is Maples Corporate Services Limited (the ‘‘Corporate
Services Provider’’).
The Issuer and the Corporate Services Provider have entered into a registered office agreement (the
‘‘Registered Office Agreement’’) dated 4 October 2015 pursuant to which the Corporate Services
Provider has agreed to provide certain administrative services to the Issuer. The Registered Office
Agreement is governed by the law of the Cayman Islands.
70
Independent auditors
The Issuer is not required by Cayman Islands law, and does not intend, to publish audited financial
statements or appoint any auditors. Since the date of its incorporation, no financial statements of the
Issuer have been prepared.
71
SELECTED FINANCIAL INFORMATION
The following information has been extracted from, and should be read in conjunction with, and is
qualified in its entirety by reference to, the Financial Statements, which are incorporated by reference in
this Base Prospectus.
STATEMENT OF FINANCIAL POSITION
The table below shows the Bank’s statement of financial position as at 31 December 2012, 2013 and
2014 and as at 30 June 2015.
As at
30 June
As at 31 December
2012
2013
2014
2015
Cash and balances with QCB................................
Due from banks.....................................................
Loans and advances to customers.........................
Investment securities..............................................
Property and equipment ........................................
Other assets ...........................................................
2,511
5,048
19,799
4,427
185
221
(QAR million)
1,329
1,757
2,518
5,800
17,033
19,857
7,482
2,955
64
226
252
287
1,193
4,735
19,075
2,804
224
255
Total assets ............................................................
32,191
28,678
30,882
28,286
Due to banks .........................................................
Customer deposits .................................................
Other liabilities ......................................................
4,814
22,289
856
1,538
21,827
864
4,332
21,210
798
6,445
16,914
644
Total liabilities .......................................................
27,959
24,229
26,340
24,003
Share capital ..........................................................
Legal reserve ..........................................................
Risk reserve ...........................................................
Fair value reserve ..................................................
Retained earnings ..................................................
1,100
2,026
388
(0)
718
1,100
2,026
415
104
804
1,100
2,026
483
98
835
1,100
2,026
483
91
583
Total equity............................................................
4,232
4,449
4,542
4,283
Total liabilities and equity......................................
32,191
28,678
30,882
28,286
72
INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE INCOME
Income statement
The table below shows the Bank’s income statement for 2012, 2013 and 2014 and for the six month
periods ended 30 June 2014 and 30 June 2015.
Six months ended
30 June
Year ended 31 December
2012
2013
2014
Interest income ................................
Interest expense ...............................
928
(275)
948
(255)
Net interest income ..........................
Fee and commission income ...........
Fee and commission expense...........
653
143
(32)
693
157
(30)
Net fee and commission income........
Net gain from foreign exchange......
Net income from investment
securities ......................................
111
82
2014
(QAR million)
753
(154)
2015
366
(83)
370
(79)
599
154
(30)
283
76
(15)
291
74
(13)
127
67
124
62
61
29
61
33
45
22
85
81
9
Net operating income .......................
Staff costs ........................................
Depreciation ....................................
Net impairment loss on investment
securities ......................................
Net impairment (loss)/recovery on
loans and advances to customers
Other expenses.................................
891
(207)
(20)
909
(178)
(16)
870
(165)
(19)
454
(84)
(9)
394
(78)
(9)
—
—
—
(15)
(14)
(125)
(43)
(119)
(3)
(103)
(3)
(101)
0
(44)
Profit for the year/period .................
525
553
579
257
248
73
(1)
Statement of comprehensive income
The table below shows the Bank’s statement of comprehensive income for 2012, 2013 and 2014 and
for the six month periods ended 30 June 2014 and 30 June 2015.
Six months ended
30 June
Year ended 31 December
2012
Profit for the year/period .................
525
Other comprehensive income
Items that are or may be reclassified
to the income statement
Available for sale investments:
Net change in fair value..............
Net amount transferred to
income statement ........................
2014
553
(1)
(0)
(1)
104
524
2014
(QAR million)
579
104
0
Other comprehensive income for the
year/period ...................................
Total comprehensive income for the
year/period ...................................
2013
657
2015
257
248
54
50
(13)
(59)
(62)
7
(5)
(12)
(6)
574
245
242
STATEMENT OF CASH FLOW
The table below shows selected statement of cash flow information of the Bank for 2012, 2013 and
2014 and for the six month periods ended 30 June 2014 and 30 June 2015.
Six months ended
30 June
Year ended 31 December
2012
2013
2014
2014
2015
(QAR million)
Net cash from/(used in) operating
activities ......................................
Net cash from/(used in) investing
activities ......................................
Net cash used in financing activities
Cash and cash equivalents at start of
year/period ..................................
Cash and cash equivalents at end of
year/period ..................................
1,167
(355)
(77)
(1,678)
(60)
(2,814)
(440)
4,409
(481)
2,791
(481)
111
(501)
4,711
5,266
1,657
1,657
5,508
5,266
1,657
5,508
2,289
5,058
(172)
(440)
74
SELECTED RATIOS
The table below shows selected ratios of the Bank as at, and for the years ended, 31 December in
each of 2012, 2013 and 2014 and as at, and for the six month periods ended, 30 June in each of 2014
and 2015. The ratios are unaudited and have been prepared based on management information and
information in the Financial Statements.
As at/six months ended
30 June
As at/year ended 31 December
2012
Return on average assets(1)..............
Return on average equity(2) .............
Cost income ratio(3) .........................
Net interest margin(4) ......................
Non-performing loans ratio(5) .........
Provisioning charge/gross loans ......
Net loans/customer deposits............
Total capital adequacy ratio(6) ........
Total capital adequacy ratio
(Basel III) ....................................
2013
2014
2014
2015
1.8
12.5
39.5
2.4
0.8
0.7
88.8
14.4
1.8
12.7
34.4
2.5
2.3
1.1
78.0
16.4
(per cent.)
1.9
12.9
32.9
2.2
2.0
1.1
93.6
16.6
1.9
11.9
42.8
2.2
2.4
1.3
81.4
17.8
1.7
11.2
33.2
2.1
2.1
1.2
112.8
N/A
N/A
N/A
19.5
20.9
17.8
Notes:
(1) Profit for the year or annualised profit for the six month period (see note 7) divided by average assets for the period. Average assets
are determined by reference to balances at the start and end of each period.
(2) Profit for the year or annualised profit for the six month period divided by average shareholders’ equity for the period. Average
shareholders’ equity is determined by reference to balances at the start and end of each period.
(3) General and administrative expenses, depreciation of property and equipment and other expenses divided by operating income.
(4) Net interest income as a percentage of total average interest-earning assets calculated on the basis of balances at the start and end
of each period.
(5) Non-performing loans (being loans in respect of which payments of principal or interest are overdue for more than 90 days)
divided by gross loans.
(6) Calculated according to Basel II methodology, as applied by the QCB.
(7) Annualised profit for the six month period represents (actual profit for the period) divided by n times 12, where n = number of
months in the period.
75
FINANCIAL REVIEW
The following discussion and analysis should be read in conjunction with the information set out in
‘‘Presentation of financial and other information’’, ‘‘Selected financial information’’ and the Financial
Statements.
The discussion of the Bank’s financial condition and results of operations is based upon the Financial
Statements which have been prepared in accordance with IFRS and applicable QCB regulations. This
discussion contains forward-looking statements that involve risks and uncertainties. The Bank’s actual
results could differ materially from those anticipated in these forward-looking statements as a result of
various factors, including those discussed below and elsewhere in this Base Prospectus, particularly under
the headings ‘‘Cautionary statement regarding forward-looking statements’’ and ‘‘Risk factors’’.
See ‘‘Presentation of financial and other information’’ for a discussion of the source of the numbers
presented in this section and certain other relevant information.
All information in this section as at, and relating to the six-month periods ended, 30 June 2014 and
30 June 2015 is unaudited. Results for any interim period within a year will not necessarily be indicative
of the results for the full year.
OVERVIEW
The Bank provides a range of corporate, private banking and personal banking services, principally
to customers in Qatar, and conducts treasury operations from Qatar. The Bank’s principal activities
comprise the provision of loans and advances and other financing facilities, which generate interest
income and fee and commission income, and investment activities, which principally relate to its
portfolio of fixed income securities and which generate interest income and revaluation and trading
gains or losses. The Bank’s principal source of funding is its customer deposits.
The Bank’s principal focus is currently on achieving sustainable growth in its core retail, corporate
and private banking businesses and introducing new products and services.
As at 30 June 2015, the Bank had total loans and advances to customers of QAR 19.1 billion, total
investment securities of QAR 2.8 billion and total customer deposits of QAR 16.9 billion. For the six
month period ended 30 June 2015, the Bank recorded net operating income of QAR 394 million and
profit for the period of QAR 248 million. In 2014, the Bank’s net operating income was QAR 870
million and its profit for the year was QAR 579 million.
PRINCIPAL FACTORS AFFECTING RESULTS OF OPERATIONS
The following is a discussion of the principal factors that have affected, or are expected to affect, the
Bank’s results of operations.
Economic conditions
The Bank’s revenue and results of operations are affected by economic and market conditions in
Qatar and, to a lesser extent, the broader GCC region and around the world. Based on IMF data
extracted from the October 2015 World Economic Outlook Database, Qatar’s real GDP grew by
4.9 per cent in 2012 and by 4.6 per cent in 2013. The IMF expects Qatar’s real GDP to have grown
by 4.0 per cent in 2014 and to grow by 4.7 per cent in 2015.
Historically, Qatar has benefitted from high oil and natural gas prices, with expansionary government
spending providing an additional stimulus. Reflecting the Qatari government’s shift of focus to
economic diversification and growth in the non-hydrocarbon sectors through targeted infrastructure
investments, overall GDP growth rates have been relatively constrained since 2012 as a result of
declining growth in the hydrocarbon sector in response to the government’s moratorium on increasing
liquefied natural gas (‘‘LNG’’) capacity prior to 2015. Growth in the non-hydrocarbon sector has
been robust and is centred on the construction, transport and communications, trade and hotels, and
services sectors. Average consumer price inflation in Qatar was 1.9 per cent. in 2012 and increased to
3.1 per cent. in 2013 and 3.0 per cent. in 2014, principally as a result of rental rate increases. The
IMF expects average consumer price inflation to be 1.6 per cent. in 2015, reflecting falling food and
commodity prices and a stronger U.S. dollar.
According to the IMF, real GDP growth in Qatar is expected to slow as public investment growth
slows in light of lower hydrocarbon prices while private sector investment is expected to offset only
some of this decline in growth. The IMF expects that lower hydrocarbon prices are likely to affect
Qatar’s fiscal and external sectors, with Qatar potentially recording a budget deficit and current
76
account deficit in 2016. The main downside risks identified by the IMF are lower than expected
hydrocarbon prices, rising unconventional oil supplies and, over the long-term, growing competition
in the liquid natural gas market.
Economic growth in Qatar in the next few years is expected to be focused on the non-hydrocarbon
sector. Although prevailing low hydrocarbon prices could prompt the Government to reduce certain
infrastructure spending, the IMF still projects real GDP growth of 4.9 per cent. in 2016 and 4.2 per
cent. in 2017. Over the longer term, Government spending is expected to continue to be expansionary
based on Qatar’s National Vision 2030 which includes building a world-class infrastructural backbone.
Factors affecting net interest income
The Bank’s net interest income is a major contributor to its total net operating income, comprising
73.9 per cent. of its net operating income in the six months ended 30 June 2015 and 68.9 per cent.,
76.1 per cent. and 73.4 per cent. in each of 2014, 2013 and 2012, respectively. Within net interest
income:
*
interest earned on customer loans and advances and interest earned on fixed income securities
are the major contributors to total interest income, together comprising 93.1 per cent., 93.5 per
cent. and 94.9 per cent. of total interest income in 2014, 2013 and 2012, respectively; and
*
interest paid on customer deposits is the major contributor to total interest expense, comprising
95.2 per cent., 95.2 per cent. and 93.9 per cent. of total interest expense in 2014, 2013 and 2012,
respectively.
The Bank’s net interest income is affected by a number of factors. It is primarily determined by the
volume of interest-earning assets relative to interest-bearing liabilities, as well as the differential
between rates earned on interest-earning assets and interest-bearing liabilities. The Bank’s interestearning assets principally consist of its customer loan portfolio and the fixed income securities held by
it. The Bank’s interest-bearing liabilities principally comprise its interest bearing customer deposits.
The changes in the Bank’s net interest income in the six months ended 30 June 2015 compared to the
six months ended 30 June 2014 and in each of 2014 compared to 2013 and 2013 compared to 2012
have principally been driven by changes in the mix between loans and advances to customers and
investments made by the Bank in Government debt securities such as bonds and treasury bills, as
well as in the rate of returns on loans and advances which have been affected by competition.
Increasing competition has also affected the Bank’s net interest margin. The Bank’s net interest
margin (net interest income as a percentage of total average interest-earning assets, calculated on the
basis of balances at the start and end of each period) increased from 2.4 per cent. in 2012 to 2.5 per
cent. in 2013 and then fell to 2.2 per cent. in 2014. The Bank’s net interest margin was 2.1 per cent.
in the six months ended 30 June 2015, down from 2.2 per cent. in the six months ended 30 June
2014. The Bank’s net interest spread (the difference between the average interest rate on interestbearing assets and the average interest rate on interest-bearing liabilities) increased from 2.2 per cent.
in 2012 to 2.3 per cent. in 2013 and fell to 2.1 per cent. in 2014. The Bank’s net interest spread was
flat at 2.1 per cent. in the six months ended 30 June 2015 compared to the six months ended 30 June
2014.
Changes in factors affecting the fair valuation of the Bank’s investment securities
The Bank has a significant portfolio of investment securities, principally debt instruments available for
sale, which, at 30 June 2015 amounted to QAR 2.8 billion compared to QAR 3.0 billion at
31 December 2014, QAR 7.5 billion at 31 December 2013 and QAR 1.5 billion at 31 December 2012.
The Bank manages the credit risk in its investment portfolio by investing only in high investment
grade securities. The weighted average credit rating of these assets was Aa2 at 30 June 2015.
The investment securities generate gains or losses when they are sold and fair value gains and losses
when they are re-valued at each balance sheet date. In the six months ended 30 June 2015, the net
gains realised on sales of investment securities were QAR 2.6 million. In 2014, 2013 and 2012, the net
gains realised on sales of investment securities were QAR 84 million, QAR 20 million and QAR 40
million, respectively. Net gains or losses realised on sales of investment securities may vary
significantly from period to period and will depend on the volumes of securities sold as well as the
prices realised relative to the amortised cost of the securities at the time they are sold.
The unrealised gains and losses arise when the available for sale investment securities are fair valued
at each balance sheet date. Reflecting the composition of the Bank’s investment securities portfolio, a
77
significant proportion of these unrealised gains and losses are recorded in comprehensive income. In
the six months ended 30 June 2015, the net unrealised losses on investment securities recorded in
comprehensive income were QAR 14 million compared to net unrealised gains of QAR 50 million in
the corresponding period of 2014. In 2014 and 2013, the net unrealised gains on investment securities
recorded in comprehensive income were QAR 54 million and QAR 104 million, respectively. In 2012,
the Bank recorded a net unrealised loss of QAR 494 thousand on investment securities. Net
unrealised gains or losses on investment securities may also vary significantly from period to period
and, reflecting the predominance of fixed rate debt securities in the portfolio, will depend in particular
on changes in interest rates, with falling interest rates tending to increase the fair value of the
portfolio and increasing interest rates tending to reduce the fair value of the portfolio.
In certain circumstances, the Bank’s investment securities may become impaired. This could result
from deterioration in the credit value of the issuer or from a sustained adverse movement in interest
or currency exchange rates or from other factors. In such a case, the Bank will incur impairment
losses which will reduce its profit for the year. For example, in 2014, the Bank recorded an
impairment charge of QAR 1 million, equal to 0.05 per cent. of the gross value of its investment
securities at 31 December 2014. In the six months ended 30 June 2015, the Bank recorded an
impairment charge of QAR 15 million, equal to 0.5 per cent. of the gross value of its investment
securities at 30 June 2015.
RECENT DEVELOPMENTS
The Bank has obtained approvals to increase its capital by QAR 1 billion in the near term. See
‘‘Description of the Bank—Business strengths—Strong capitalisation’’.
The Bank understands that certain shareholders are currently in advanced discussions to sell an
aggregate 30 per cent. shareholding in the Bank to a government agency, subject to all necessary
approvals being obtained.
SIGNIFICANT ACCOUNTING POLICIES
The Financial Statements have been prepared in accordance with IFRS and applicable QCB
regulations. For a discussion of the accounting policies applied by the Bank generally, see note 3 to
the 2014 Financial Statements.
CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION
UNCERTAINTY
In preparing the Bank’s financial statements, management is required to make certain estimates,
judgments and assumptions. These affect the reported amounts of the Bank’s assets and liabilities,
including disclosure of contingent assets and liabilities, at the date of the financial statements as well
as the reported amounts of its revenues and expenses during the periods presented. Management
bases its estimates and assumptions on historical experience and other factors that it believes to be
reasonable at the time the estimates and assumptions are made and evaluates the estimates and
assumptions on an ongoing basis. However, future events and their effects cannot be predicted with
certainty and the determination of appropriate estimates and assumptions requires the use of
judgment. Actual outcomes may differ from any estimates or assumptions made and such differences
may be material to the financial statements. The Bank’s key sources of estimation uncertainty relate
to its allowances for credit losses and its fair value determinations. The Bank’s critical accounting
judgments relate to its valuation of financial instruments, its classification of financial assets and
liabilities, its impairment of investments and its determinations of the useful lives of property and
equipment. See note 5 to the 2014 Financial Statements for a more detailed discussion of these
accounting estimates and judgments.
RESULTS OF OPERATIONS
Comparison of the six month periods ended 30 June 2014 and 30 June 2015
Net interest income
Interest income is the Bank’s principal source of income. The Bank earns interest income on the
customer loans and advances, on its portfolio of investment securities and on its deposits with central
banks and other banks. The Bank incurs interest expense on its customer deposits and its interbank
funding. Interest income and expense is recognised in the income statement using the effective interest
method, as explained in note 3(n) to the 2014 Financial Statements.
78
The table below shows a breakdown of the Bank’s net interest income in each of the six month
periods ended 30 June 2014 and 30 June 2015.
Six months ended 30 June
2014
(QAR
million)
2015
(% of
total)
(QAR
million)
(% of
total)
Interest income
Loans and advances to customers.........................
Investment securities..............................................
Due from banks.....................................................
Due from central banks.........................................
274
69
20
3
74.9
18.9
5.5
0.7
296
47
26
1
80.1
12.6
6.9
0.4
Total interest income..............................................
366
100.0
370
100.0
Interest expense
Customer deposits .................................................
Due to banks .........................................................
(81)
(2)
97.6
2.4
(68)
(11)
86.1
13.9
Total interest expense.............................................
(83)
100.0
(79)
100.0
Net interest income.................................................
283
The Bank’s total interest income for the six months ended
million compared to QAR 366 million in the corresponding
4 million, or 1.1 per cent., in the 2015 period compared to
Bank’s strategy of shifting its investment mix from short-term
yielding) to medium-term loans with higher yields.
291
30 June 2015 amounted to QAR 370
period of 2014. The increase of QAR
the 2014 period principally reflects the
treasury bills (which are principally low
The Bank’s total interest expense for the six months ended 30 June 2015 amounted to QAR 79 million
compared to QAR 83 million in the corresponding period of 2014. The fall of QAR 4 million, or
4.8 per cent., in the 2015 period compared to the 2014 period principally reflects the Bank’s strategy
to manage customers deposit volumes within targeted liquidity levels and rates of return and utilise
money market funding to manage the structure of the balance sheet.
Reflecting the above factors, the Bank’s net interest income in six months ended 30 June 2015
amounted to QAR 291 million, an increase of QAR 8 million, or 2.8 per cent., from the QAR
283 million net interest income recorded in the corresponding period of 2014.
The Bank’s net interest margin was 2.1 per cent. in the six months ended 30 June 2015 compared to
2.2 per cent. in the corresponding period in 2014, reflecting market-wide pressure on margins. The
Bank’s net interest spread was 2.2 per cent. in the six months ended 30 June 2015 compared to
2.1 per cent. in the corresponding period in 2014.
Net fee and commission income
The Bank earns fees and commissions on the customer loans advanced by it, on other credit facilities
such as commitments to lend and letters of credit and guarantees issued and on other bank services
provided, including account, transaction and service fees and investment management fees. The Bank
pays fees and commissions principally on cards-related charges such as clearing, Visa and MasterCard
billing settlements and local regulatory fees.
79
The table below shows a breakdown of the Bank’s net fee and commission income in each of the six
month periods ended 30 June 2014 and 30 June 2015.
Six months ended 30 June
2014
(QAR
million)
2015
(% of
total)
(QAR
million)
(% of
total)
Fee and commission income
Credit related fees..................................................
Commission on unfunded facilities .......................
Other......................................................................
32
22
23
41.3
29.2
29.5
22
20
32
30.4
26.7
42.9
Total fee and commission income ...........................
Fee and commission expense.................................
77
(15)
100.0
74
(13)
100.0
Net fee and commission income..............................
62
61
The Bank’s total fee and commission income for the six months ended 30 June 2015 amounted to
QAR 74 million compared to QAR 77 million in the corresponding period of 2014. The fall of QAR
3 million, or 3.8 per cent., in the 2015 period compared to the 2014 period is mainly due to a drop
in credit-related fees as the majority of new facilities booked in the 2015 period had lower or no
upfront management fees and early loan repayment fees were disallowed by the QCB in December
2014.
The Bank’s fee and commission expense for the six months ended 30 June 2015 amounted to QAR
13 million compared to QAR 15 million in the corresponding period of 2014.
Reflecting the above factors, the Bank’s net fee and commission income for the six months ended
30 June 2015 amounted to QAR 61 million compared to QAR 62 million for the corresponding
period of 2014.
Income from investment securities
The Bank maintains a significant portfolio of investment securities, principally comprising fixed
income securities held on an available for sale basis. Interest income derived from these securities is
recorded in the income statement under ‘‘Interest income’’. However, the Bank also realises gains or
losses on the sale of these securities which are recognised under the heading ‘‘net income from
investment securities’’ in the income statement at the time of sale. In addition, in accordance with
IFRS, the Bank’s investment securities are fair valued at each balance sheet date. Where the securities
are held at fair value through profit and loss the changes in fair value are recorded as income or loss
in the income statement. Where the securities are held as available for sale, the changes in fair value
are recorded in other comprehensive income until the securities are sold, at which point the
cumulative fair value gain or loss is reclassified to the income statement. The Bank also records as
income from investment securities dividend income on its small portfolio of equity securities.
The table below shows a breakdown of the Bank’s income from investment securities in each of the
six month periods ended 30 June 2014 and 30 June 2015.
Six months ended 30 June
2014
Net gains on sales of investment securities........................................................
Revaluation loss on investment securities at fair value through income
statement .......................................................................................................
Dividend income................................................................................................
Net income from investment securities................................................................
80
2015
(QAR million)
80
3
—
1
(0)
6
81
9
The Bank’s total income from investment securities for the six months ended 30 June 2015 amounted
to QAR 9 million compared to QAR 81 million in the corresponding period of 2014. The decrease of
QAR 72 million, or 88.9 per cent., in the 2015 period compared to the 2014 period principally reflects
the sale of Government of Qatar bonds during the first six months of 2014.
Net gain from foreign exchange
The Bank records gains and losses on foreign exchange transactions with customers, which amounted
to QAR 33 million for the six months ended 30 June 2015 compared to QAR 29 million in the
corresponding period of 2014, with the increase of QAR 4 million principally reflecting higher
volumes.
Net operating income
Reflecting the above factors, the Bank’s net operating income for the six months ended 30 June 2015
was QAR 394 million compared to QAR 454 million for the corresponding period in 2014, a fall of
QAR 60 million, or 13.2 per cent.
Staff costs
The Bank’s staff costs amounted to QAR 78 million in the six months ended 30 June 2015 and QAR
84 million in the corresponding period of 2014. The fall of QAR 6 million, or 7.1 per cent., in the
2015 period compared to the 2014 period principally reflects reductions in bonus accruals based on
current period net profit and staff redeployment. Although overall employee numbers grew during the
2015 period compared to the 2014 period, the Bank has rationalised its workforce, through replacing
staff who leave, with more junior personnel.
Depreciation
The Bank incurs depreciation costs principally on leasehold improvements, furniture and equipment
and computer equipment. Leasehold improvements are depreciated on a straight line basis over five to
seven years, furniture and equipment is depreciated on a straight line basis over its estimated useful
life, which ranges between five and seven years depending on the asset, and computer equipment and
vehicles are depreciated over three to five years and five years, respectively.
The Bank’s depreciation costs amounted to QAR 9 million in each of the six-month periods under
review.
Impairment charges
At each reporting date, the Bank assesses its financial assets (other than financial assets held at fair
value through profit and loss) for objective evidence of impairment. In particular:
*
all individually significant loans and advances to customers are assessed for specific impairment
and, if found not to be impaired, are then collectively assessed for any impairment that has
been incurred but not yet identified;
*
impairment losses on assets carried at amortised cost (including the Bank’s customer loan
portfolio) are measured as the difference between the carrying amount of the relevant asset and
the present value of the estimated future cash flows from it discounted at the asset’s original
effective interest rate; and
*
impairment losses on available for sale investment securities are recognised by transferring the
cumulative loss that has been recognised in other comprehensive income to profit and loss as a
reclassification adjustment.
For further information, see note 3(b)(vi) to the 2014 Financial Statements.
81
The table below shows details of the Bank’s impairment losses and recoveries in each of the six
month periods ended 30 June 2014 and 30 June 2015.
Six months ended 30 June
2014
Net impairment (loss)/recovery on customer loans and advances ....................
Net impairment loss on investment securities ...................................................
Total net impairment (loss)/recovery...................................................................
2015
(QAR million)
(3)
0
—
(15)
(3)
(15)
The Bank’s total net impairment loss amounted to QAR 15 million for the six months ended 30 June
2015 compared to QAR 3 million in the corresponding period of 2014. In the 2015 period, the Bank
recorded a QAR 15 million impairment on local equity investments held as available for sale. There
were no major movements in impairments of customer loans and advances over the two periods.
Other expenses
The Bank’s other expenses include rent, marketing costs, computer and IT costs, directors’
remuneration and management fees, communication expenses, legal and professional fees and expenses
associated with strategic initiatives. The Bank’s other expenses were QAR 44 million in the six
months ended 30 June 2015 compared to QAR 101 million in the corresponding period of 2014. In
the first half of 2014, the Bank had recorded on a prudent basis QAR 47 million of general
provisions against its wholesale loans and advances portfolio which was released at the year end.
Profit for the period
Reflecting the above factors, the Bank’s profit for the six months ended 30 June 2015 was QAR
248 million compared to QAR 257 million for the corresponding period in 2014, a fall of QAR
9 million, or 3.6 per cent.
Other comprehensive income for the period, net of tax
The Bank’s other comprehensive income comprises the net effect of realised and unrealised changes in
the fair value of the Bank’s available for sale securities. Fair value changes in an available for sale
security are recorded in other comprehensive income until the security is sold or impaired, where the
cumulative gains and losses recognised in respect of the investment are reclassified to the income
statement.
In the six months ended 30 June 2015, the net unrealised loss in fair value of the Bank’s available for
sale securities was QAR 14 million whilst the net loss realised on sales and impairment of such
securities and reclassified to the income statement was QAR 7 million. The loss in fair value in the
2015 period principally reflected a decline in the fair value of equity and debt securities. In the six
months ended 30 June 2014, the net unrealised gain in fair value of the Bank’s available for sale
securities was QAR 50 million whilst the net gain realised on sales of such securities and reclassified
to the income statement was QAR 63 million. The gain in fair value in the 2014 period principally
reflected profit recognised on the sale of Government of Qatar debt securities. Reflecting these factors,
the Bank’s other comprehensive net movement was a reduction of QAR 7 million in the six months
ended 30 June 2015 compared to a reduction of QAR 13 million the six months ended 30 June 2014.
Total comprehensive income for the period
Reflecting the above factors and the Bank’s profit for each period, the Bank’s total comprehensive
income for the six months ended 30 June 2015 was QAR 242 million compared to QAR 244 million
for the corresponding period in 2014.
82
Comparison of 2012, 2013 and 2014
Net interest income
The table below shows a breakdown of the Bank’s net interest income in each of 2012, 2013 and
2014.
Year ended 31 December
2012
(QAR
million)
2013
(% of
total)
(QAR
million)
2014
(% of
total)
(QAR
million)
(% of
total)
Interest income
Loans and advances to
customers............................
Debt securities ........................
Due from banks......................
Due from central banks..........
697
184
43
4
75.1
19.8
4.6
0.5
669
217
57
5
70.6
22.9
6.0
0.5
581
121
47
5
77.0
16.1
6.3
0.6
Total interest income ...............
928
100.0
948
100.0
754
100.0
Interest expense
Customer deposits ..................
Due to banks ..........................
258
17
93.9
6.1
243
12
95.2
4.8
147
7
95.2
4.8
Total interest expense..............
275
100.0
255
100.0
154
100.0
Net interest income..................
654
692
599
Interest income
The Bank’s total interest income for 2014 amounted to QAR 754 million compared to QAR
948 million for 2013 and QAR 928 million for 2012.
The fall of QAR 194 million, or 20.5 per cent., in 2014 compared to 2013 principally reflects:
*
a QAR 96 million, or 44.3 per cent., fall in interest income from debt securities due to the
maturity of QAR 3.4 billion in treasury bills in 2014 and the sale/maturity of QAR 1.2 billion
of State of Qatar debt securities in 2014; and
*
a QAR 88 million, or 13.2 per cent., fall in interest income from loans and advances as average
lending volumes dropped in 2014 in the wholesale portfolio despite actual volumes trending
upwards during the last quarter of 2014. This decrease was compounded by the suspension of
interest on a wholesale lending client whose exposure was impaired during the fourth quarter of
2013
The increase of QAR 20 million, or 2.1 per cent., in 2013 compared to 2012 principally reflects a
QAR 33 million, or 17.9 per cent., increase in interest income from debt securities as a result of an
increase in volumes of State of Qatar bonds and short-term (three to nine month) treasury bills and a
QAR 14 million or 32.6 per cent. increase in interest income from other banks due to surplus
liquidity placed. This was offset by a QAR 28 million, or 4.0 per cent., fall in interest income from
loans and advances, mainly as a result of reduced lending volumes driven by competition.
Interest expense
The Bank’s total interest expense for 2014 amounted to QAR 154 million compared to QAR
255 million for 2013 and QAR 275 million for 2012.
The fall of QAR 101 million, or 39.5 per cent., in 2014 compared to 2013 mainly reflects a QAR
96 million, or 39.5 per cent., fall in interest expense on customer deposits. This decline relates to a
decrease in the cost of funds as a result of a reduction in average interest bearing deposits. This
helped reduce the fall in the interest margin which was under pressure due to lower volumes in a low
interest rate environment.
The fall of QAR 20 million, or 7.2 per cent, in 2013 compared to 2012 reflects a QAR 15 million, or
5.9 per cent., fall in interest expense on customer deposits as a result of a market trend to reduce
rates on deposits and interbank lending.
83
Reflecting the above factors, the Bank’s net interest income in 2014 amounted to QAR 599 million, a
decrease of QAR 93 million, or 13.5 per cent., from the QAR 692 million net interest income
recorded in 2013. The Bank’s net interest income in 2013 increased by QAR 39 million, or 5.9 per
cent., from QAR 654 million in 2012.
The Bank’s net interest margin was 2.2 per cent. in 2014 compared to 2.5 per cent. in 2013 and
2.4 per cent. in 2012. The Bank’s net interest spread was 2.1 per cent. in 2014 compared to 2.3 per
cent. in 2013 and 2.2 per cent. in 2012. The Bank’s net interest spread increased in 2013 from 2012
due to the fall in liability costs being higher than the fall in yield on interest earning assets. However,
in 2014 the Bank’s net interest spread declined as the decline in asset interest rates exceeded that in
liability interest rates. The reduction in interest margins was seen across the entire banking sector in
Qatar.
Net fee and commission income
The table below shows a breakdown of the Bank’s net fee and commission income in each of 2012,
2013 and 2014.
Year ended 31 December
2012
(QAR
million)
Fee and commission income
Credit related fees...................
Commission on unfunded
facilities ..............................
Other.......................................
2013
(% of
total)
(QAR
million)
2014
(% of
total)
(QAR
million)
(% of
total)
57
39.6
71
45.3
60
38.8
40
46
27.9
32.5
41
46
25.8
28.9
45
49
29.3
31.8
Total fee and commission
income.................................
143
100.0
158
100.0
154
100.0
Fee and commission expense..
(32)
Net fee and commission income
111
0
(30)
(30)
127
124
The Bank’s total fee and commission income for 2014 amounted to QAR 154 million compared to
QAR 158 million for 2013 and QAR 143 million for 2012.
Fee and commission income
The fall of QAR 4 million, or 2.4 per cent, in 2014 compared to 2013 principally reflected a QAR
12 million, or 16.2 per cent., fall in credit related fees resulting from lower average volumes, even
though the Bank managed to increase its lending volumes, towards the end of 2014. This decline was
offset by a small increase in commissions paid on unfunded facilities and other fee and commission
income.
The increase of QAR 15 million, or 10.6 per cent., in 2013 compared to 2012 principally reflected a
QAR 15 million, or 26.3 per cent., increase in credit related fees which mainly resulted from a higher
amount of fees being recognised on short-term and pre-payment credit facilities in 2013.
Fee and commission expense
The Bank’s fee and commission expense remained flat over the period, at QAR 30 million in each of
2014 and 2013 and QAR 32 million in 2012.
Reflecting the above factors, the Bank’s net fee and commission income in 2014 amounted to QAR
124 million, a decrease of QAR 4 million, or 2.8 per cent., from the QAR 127 million net fee and
commission income recorded in 2013. The Bank’s net fee and commission income in 2013 has
increased by QAR 17 million, or 15.1 per cent., from QAR 111 million in 2012.
84
Income from investment securities
The table below shows a breakdown of the Bank’s income from investment securities in each of 2012,
2013 and 2014.
Year ended 31 December
2012
2013
Net gains on sales of investment securities .................................
Dividend income..........................................................................
40
5
Total income from investment securities .......................................
45
2014
(QAR million)
20
3
84
1
23
85
The Bank’s total income from investment securities of QAR 85 million for 2014 compared to QAR
23 million for 2013 and QAR 45 million for 2012 was mainly driven by volumes of sales in State of
Qatar debt securities and prices available in the market at points of execution.
Net gain from foreign exchange
The Bank’s net gain from foreign exchange, which was QAR 62 million in 2014, QAR 67 million in
2013 and QAR 82 million in 2012, is dependant on trading volumes from underlying client activity.
Net operating income
Reflecting the above factors, the Bank’s net operating income for 2014 was QAR 870 million
compared to QAR 909 million for 2013 and QAR 891 million for 2012, a fall of QAR 39 million, or
4.3 per cent. in 2014 and an increase of QAR 18 million, or 2.1 per cent. in 2013.
Staff costs
The Bank’s staff costs amounted to QAR 165 million in 2014 compared to QAR 178 million in 2013
and QAR 208 million in 2012. The fall of QAR 13 million, or 7.3 per cent., in 2014 is mainly from a
decline in total compensation driven by staffing level decisions undertaken in 2012 which resulted in a
1 per cent. reduction in bonus pay-out as a percentage of net profit. The decline of QAR 30 million,
or 14.4 per cent., in 2013 is mainly from a decline in total compensation driven by a restructuring in
the Retail division and a consequent 3 per cent. reduction in average head count as well as a 2 per
cent. reduction in bonus pay-out as a percentage of net profit.
Depreciation
The Bank’s depreciation costs amounted to QAR 19 million in 2014 compared to QAR 16 million in
2013 and QAR 20 million in 2012. The increase during 2014 of QAR 3 million, or 12.7 per cent.,
reflects increased depreciation on computers and equipment as a result of investments made in 2013
to upgrade the Bank’s core banking system and security systems, and to establish a new disaster
recovery centre.
Impairment charges
The table below shows details of the Bank’s impairment losses in each of 2012, 2013 and 2014.
Year ended 31 December
2012
2013
Net impairment loss on customer loans and advances ...............
Net impairment loss on investment securities .............................
(14)
—
Total net impairment loss .............................................................
(14)
2014
(QAR million)
(43)
—
(43)
(4)
(1)
(5)
The Bank’s total net impairment loss amounted to QAR 5 million in 2014 compared to QAR
43 million in 2013 and QAR 14 million in 2012. The main driver of the Bank’s impairment losses in
2012 and 2014 was its retail portfolio. In 2013, the higher impairment charge was due to two
wholesale bank customers. The Bank has reached a settlement agreement with one of the customers
85
and it expects to conclude a settlement agreement with the second customer before the end of 2015.
The Bank expects to record additional impairment charges in its full year 2015 financial results, see
‘‘Risk management—Credit risk—Loan classification and monitoring’’.
Other expenses
The Bank’s other expenses amounted to QAR 103 million in 2014 compared to QAR 119 million in
2013 and QAR 125 million in 2012.
The decrease of QAR 16 million or 13.5 per cent., in 2014 mainly reflects a QAR 9 million decline
driven by a fall in legal and professional fees as well as a QAR 7 million decline in ‘‘other’’ overhead
expenses. Legal and professional fees were inflated in 2013 by accruals against outstanding litigation
against customers which were resolved amicably during 2014.
The fall of QAR 6 million, or 4.9 per cent., in 2013 mainly reflects a QAR 12 million decline in
strategic initiative costs and a QAR 4 million decline in marketing costs. The strategic initiative costs
represent a reward loyalty ‘‘cashback’’ programme which was discontinued towards the end of 2012
and was replaced by the new, reward points-based, ‘‘Thanq’’ programme during the second half of
2013. The decline in marketing expenses reflected the fact that the Bank incurred high marketing
expenses in 2012 as part of its overall effort to create awareness of alternative channels rather than
traditional channels. These expenditure declines were offset by increases of QAR 6 million in legal
and professional fees and QAR 4 million in ‘‘other’’ overhead expenses.
Profit for the year
Reflecting the above factors, the Bank’s profit for the year was QAR 579 million in 2014 compared
to QAR 553 million in 2013 and QAR 525 million in 2012, an increase of QAR 26 million, or 4.7 per
cent., in 2014 and an increase of QAR 29 million, or 5.5 per cent., in 2013.
Other comprehensive income for the year
In 2014, the Bank recorded a reduction in other comprehensive income of QAR 6 million compared
to an increase in other comprehensive income of QAR 104 million in 2013 and zero movement in
other comprehensive income in 2012. The Bank’s other comprehensive income or loss reflects net
changes in the fair value of the Bank’s available for sale investment securities. The significant decrease
in 2014 compared to 2013 resulted from recycling part of the gains recognised in 2013 into the
income statement upon sale of securities in 2014. The increase in 2013 compared to 2012 was mainly
due to an increase in the volumes of available for sale securities following reclassification of the held
to maturity portfolio during 2013.
Total comprehensive income for the year
Reflecting the above factors and the Bank’s profit for each year, the Bank’s total comprehensive
income was QAR 573 million in 2014 compared to QAR 657 million in 2013 and QAR 524 million
in 2012, a decrease of QAR 84 million, or 12.8 per cent., in 2014 and an increase of QAR
133 million, or 25.4 per cent., in 2013.
LIQUIDITY AND FUNDING
Overview
The Bank’s liquidity needs arise primarily from making loans and advances to customers, payment of
expenses and dividends and investments in securities. To date, the Bank’s liquidity needs have been
funded largely through deposits, the proceeds of sale of investment securities and operating cash flow,
including interest received on the Bank’s loans and advances and its portfolio of fixed income
securities. See ‘‘—Funding’’ below.
86
Liquidity
The tables below show the Bank’s cash flow from operating activities, investing activities and
financing activities for each of the six month periods ended 30 June 2015 and 30 June 2014 and for
each of 2012, 2013 and 2014.
Six months ended 30 June
2014
Net cash used in operating activities .................................................................
Net cash from investing activities......................................................................
Net cash used in financing activities..................................................................
Cash and cash equivalents at period end ..........................................................
2015
(QAR million)
(1,678)
(60)
2,791
111
(481)
(501)
2,289
5,059
Year ended 31 December
2012
Net cash from/(used in) operating activities................................
Net cash from/(used in) investing activities.................................
Net cash used in financing activities............................................
Cash and cash equivalents at year end........................................
1,167
(172)
(440)
5,267
2013
(QAR million)
(355)
(2,814)
(440)
1,657
2014
(77)
4,409
(481)
5,508
Operating cash flow
Net cash used in operating activities for the six months ended 30 June 2015 was QAR 60 million
compared to QAR 1,678 million in the corresponding period of 2014. Net cash used in operating
activities is driven by the Bank’s net profit for the period with the principal adjustments relating to
changes in loans, interbank lending and borrowings and customer deposits balances.
Net cash used in operating activities in 2014 was QAR 77 million compared to QAR 355 million in
2013 and net cash from operating activities of QAR 1,167 million in 2012.
Investing cash flow
Net cash generated by investing activities for the six months ended 30 June 2015 was QAR
111 million compared to QAR 2,791 million in the corresponding period of 2014. In each period, the
principal investment activities were acquisitions and sales of investment securities.
Net cash generated by investing activities in 2014 was QAR 4,409 million compared to net cash used
in investing activities of QAR 2,814 million in 2013 and QAR 172 million in 2012. In each year, the
principal investments made were acquisitions and sales of investment securities.
Financing cash flow
Net cash used in financing activities for the six months ended 30 June 2015 was QAR 501 million
compared to QAR 481 million in the corresponding period of 2014 and in each period comprised the
dividend paid by the Bank to its shareholders.
Net cash used in financing activities in 2014 was QAR 481 million compared to QAR 440 million in
each of 2013 and 2012. In each year net cash used in financing activities comprised the dividend paid
by the Bank to its shareholders.
Funding
The Bank’s principal source of funding is its customer deposits, which were QAR 16.9 billion at
30 June 2015. The Bank also has access to a pool of unencumbered and liquid securities that it can
access to meet liquidity needs, in addition to its cash balances and placements with central banks.
The Bank’s customer deposits were QAR 16,914 million, or 70.5 per cent., of the Bank’s total
liabilities, at 30 June 2015. The Bank’s customer deposits amounted to QAR 21,210 million, or
80.5 per cent., of its total liabilities, at 31 December 2014, QAR 21,827 million, or 90.1 per cent., of
its total liabilities as at 31 December 2013 and QAR 22,289 million, or 79.7 per cent., of its total
liabilities at 31 December 2012. At 30 June, 2015, 9.4 per cent. of the Bank’s total customer deposits
were from governments and related agencies, principally in Qatar. The equivalent proportions at
87
31 December 2014, 2013 and 2012 were 19.6 per cent., 22.0 per cent. and 15.0 per cent., respectively.
See ‘‘Risk factors—Risks relating to the Bank—The Bank’s investment securities, customer loan
portfolios and deposit base are concentrated in Qatar and the Bank has significant individual customer
concentrations’’.
The Bank’s interbank funding amounted to QAR 6,445 million, or 26.8 per cent., of its total
liabilities, at 30 June 2015. The Bank’s interbank funding amounted to QAR 4,332 million, or 16.4 per
cent., of its total liabilities, at 31 December 2014, QAR 1,538 million, or 6.3 per cent., of its total
liabilities at 31 December 2013 and QAR 4,814 million, or 17.2 per cent., of its total liabilities at
31 December 2012.
The table below shows the Bank’s funding in the form of customer deposits and interbank deposits as
at 31 December in each of 2012, 2013 and 2014 and as at 30 June 2015.
As at 31 December
2012
2013
As at 30 June
2014
2015
Customer deposits .........................
Interbank deposits .........................
(QAR
million)
22,289
4,814
(%)
82.2
17.8
(QAR
million)
21,827
1,538
(%)
93.4
6.6
(QAR
million)
21,210
4,332
(%)
83.0
17.0
(QAR
million)
16,914
6,445
(%)
72.4
27.6
Total ..............................................
27,103
100.0
23,365
100.0
25,542
100.0
23,359
100.0
The declining trend in customer deposit balances from 31 December 2012 until 31 December 2014
reflects a 5 per cent. decline (QAR 1.1 billion) mainly from retail supersaver accounts where the
interest rate fell from 2.5 per cent. to 1.25 per cent., and a deliberate reduction in the corporate book
aimed at reducing expensive deposits to enhance the Bank’s liquidity profile given that its investments
in securities also declined in the same period. The 20 per cent. reduction from 31 December 2014 to
30 June 2015 reflects the payment to NBK by the Al-Thani ruling family for the transfer of shares
(which was paid using funds on deposit with the Bank) as well as a reduction in State-wide
Government balances. Interbank deposit balances are more volatile and depend on the Bank’s
liquidity situation at any time, as evidenced by the balances shown in the table above.
The table below shows a breakdown of the Bank’s customer deposits by type as at 31 December in
each of 2012, 2013 and 2014 and as at 30 June 2015.
As at 31 December
2012
2013
As at 30 June
2014
2015
Current and call deposits ..............
Saving deposits ..............................
Time deposits.................................
(QAR
million)
7,621
1,481
13,187
(%)
34.2
6.6
59.2
(QAR
million)
5,681
1,171
14,975
(%)
26.0
5.4
68.6
(QAR
million)
7,350
1,028
12,832
(%)
34.7
4.8
60.5
(QAR
million)
5,450
963
10,501
(%)
32.2
5.7
62.1
Total ..............................................
22,289
100.0
21,827
100.0
21,210
100.0
16,914
100.0
88
The table below shows a breakdown of the Bank’s customer deposits by sector as at 31 December in
each of 2012, 2013 and 2014 and as at 30 June 2015.
As at 31 December
2012
Government...................................
Government and semi-government
agencies ....................................
Individuals .....................................
Corporate ......................................
(QAR
million)
1,330
Total ..............................................
As at 30 June
2013
2014
2015
6.0
(QAR
million)
2,971
(%)
13.6
(QAR
million)
4,072
(%)
19.2
(QAR
million)
1,191
2,008
15,109
3,842
9.0
67.8
17.2
1,822
13,675
3,359
8.3
62.7
15.4
78
14,306
2,754
0.4
67.4
13.0
405
12,499
2,819
2.4
73.9
16.7
22,289
100.0
21,827
100.0
21,210
100.0
16,914
100.0
(%)
(%)
7.0
Note:
(1) An analysis of the Bank’s deposits by type from banks is contained in note 14 to each of the Annual Financial Statements.
Maturity profile
The table below shows the maturity profile of the Bank’s customer deposits and interbank deposits as
at 31 December in each of 2012, 2013 and 2014.
51 month
As at 31 December 2012
Customer deposits...............................
Deposits from banks...........................
As at 31 December 2013
Customer deposits...............................
Deposits from banks...........................
As at 31 December 2014
Customer deposits...............................
Deposits from banks...........................
1 – 3 months
3 – 12
months
4 5 years
Total
105
—
—
—
22,289
4,814
1 – 5 years
(QAR million)
3,278
—
16,350
4,705
2,556
109
18,496
1,538
2,601
—
658
—
72
—
—
—
21,827
1,538
16,141
3,386
2,764
946
2,211
—
94
—
—
—
21,210
4,332
A significant proportion of the Bank’s principal sources of funding at 31 December 2014 are shortterm in nature, with 76.5 per cent. of such funding being repayable within one month and a further
14.5 per cent. being repayable within three months. See ‘‘Risk Factors—Risks relating to the Bank—
The Bank is subject to the risk that liquidity may not always be readily available or may only be
available at significant cost’’. The establishment of the Programme is intended to help the Bank
diversify its sources of funding and issues of Notes under the Programme are expected to extend the
average maturity of the Bank’s funding. The Bank continues to diversify its sources of customer
deposits and management is focused on extending the maturity profile of its liabilities.
CAPITAL ADEQUACY
The adequacy of the Bank’s capital is monitored using, among other measures, the rules and ratios
established by the Basel Committee and adopted by the QCB in supervising the Bank.
The primary objectives of the Bank’s capital management are to ensure that the Bank complies with
externally imposed capital requirements and that the Bank maintains healthy capital ratios in order to
support its business and to maximise shareholders’ value. The Bank manages its capital structure and
makes adjustments to it in light of changes in economic conditions and the risk characteristics of its
activities.
The Bank’s capital adequacy ratio has been calculated in accordance with Basel III guidelines with
effect from 1 January 2014, as required by the QCB. The minimum capital adequacy requirement is
12.5 per cent. (which incorporates a 2.5 per cent. capital conservation buffer).
The implementation of Basel III is taking place according to the QCB phase-in timelines starting in
2013 through to 2018. From a capital adequacy perspective, the Bank already meets the most
stringent capital standards to be implemented in Qatar under Basel III.
89
The table below shows the composition of the Bank’s regulatory capital, a breakdown of its riskweighted assets and its capital ratios as at 31 December in each of 2013 and 2014 and as at 30 June
2014 under Basel II.
As at
As at 31 December
30 June
2013
Tier 1 capital................................................................................
Tier 2 capital................................................................................
2014
2014
(QAR million, except percentages)
3,449
3,461
3,449
335
330
305
Total regulatory capital................................................................
3,784
3,791
3,754
Due from banks...........................................................................
Loans and advances to customers ...............................................
Property and equipment ..............................................................
Other assets..................................................................................
Off balance sheet assets ...............................................................
1,255
14,199
64
253
4,364
2,899
12,674
226
288
3,953
1,924
11,698
63
272
4,344
Total risk weighted assets for credit risk......................................
20,135
20,040
18,301
Risk weighted assets for market risk...........................................
Risk weighted assets for operational risk....................................
1,277
1,648
1,193
1,679
1,173
1,679
Total risk weighted assets.............................................................
23,060
22,912
21,153
Regulatory capital .......................................................................
3,784
3,791
3,754
Tier 1 capital adequacy ratio........................................................
14.96%
15.10%
16.31%
Total capital adequacy ratio.........................................................
16.41%
16.55%
17.75%
The table below shows the composition of the Bank’s eligible capital, a breakdown of its riskweighted assets and its capital ratios as at 30 June in each of 2014 and 2015 and as at 31 December
2014 under Basel III.
As at
31 December
2014
Common equity tier 1 (CET 1) capital.................................
Additional tier 1 capital........................................................
As at 30 June
2014
2015
(QAR million, except percentages)
4,041
3,955
4,035
—
—
—
Tier 1 capital .........................................................................
Tier 2 capital .........................................................................
4,041
—
3,955
—
4,035
—
Total eligible capital ..............................................................
4,041
3,955
4,035
Risk weighted assets for credit risk ......................................
Risk weighted assets for market risk ....................................
Risk weighted assets for operational risk .............................
19,076
10
1,612
17,241
4
1,701
21,021
39
1,612
Total risk weighted assets ......................................................
20,698
18,946
22,672
CET 1 ratio ...........................................................................
Tier 1 capital ratio.................................................................
Total capital ratio..................................................................
19.52%
19.52%
19.52%
20.88%
20.88%
20.88%
17.80%
17.80%
17.80%
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The Bank also monitors its Basel III leverage ratio, which is calculated by dividing its Tier 1 capital
by its average total assets. This ratio was 11.1 per cent. at 31 December 2014.
CAPITAL EXPENDITURE AND OTHER COMMITMENTS
The Bank has a plot of land in Lusail on which it intends to construct a new head office. However,
no commitments in this respect have yet been made.
The Bank has commitments in respect of forward foreign exchange contracts and options entered into
to hedge the Bank’s commitments with respect to specific customer deposits and under which the
related risks and rewards are fully passed on to the customer. See note 27 to the 2014 Financial
Statements for further information in relation to these derivative contracts. As at 30 June 2015, the
Bank’s commitments in respect of forward foreign exchange contracts and options amounted to QAR
1,570 million and QAR 142 million, respectively.
The Bank also has commitments under non-cancellable operating leases in respect of its branches and
office premises. These leases typically have maturities of up to 15 years with an option for the Bank
to renew at the end of the lease term. As at 30 June 2015, the Bank’s commitments under these
leases amounted to QAR 94 million.
CONTINGENT LIABILITIES
The Bank has contingent liabilities in respect of funding commitments it has made as well as in
relation to guarantees and letters of credit issued by it. The table below shows these contingent
liabilities as at 31 December in each of 2012, 2013 and 2014 and as at 30 June 2015.
As at
30 June
As at 31 December
2012
Guarantees.............................................................
Letters of credit .....................................................
Unused credit facilities ..........................................
5,435
893
4,066
Total ......................................................................
10,394
2013
2014
(QAR million)
5,192
4,929
1,006
743
3,543
2,663
9,741
8,335
2015
4,995
430
4,115
9,540
The majority of the Bank’s commitments to extend credit expire within one year. As commitments
may expire without being drawn, and as guarantees and letters of credit are contingent upon specific
events occurring, the amounts stated above do not necessarily represent future cash requirements.
RELATED PARTY TRANSACTIONS
The Bank’s principal related party transactions are with its shareholders, directors and members of
senior management, their close family members and affiliated companies over which they have
significant control. These transactions include lending and deposit taking, rental of premises as well as
salaries and other benefits paid to senior management and fees paid to directors. All such transactions
have been entered into on arm’s length terms.
Under QCB guidelines, loans and advances extended to a member of the Board, his representative
and his or their credit group (including his ‘‘credit Bank’’ and all his family members and his/her
sons/daughters) may not exceed 7 per cent. of the Bank’s capital and reserves and the aggregate loans
and advances extended to members of the Board (and their credit Banks and family members) as a
whole may not exceed 35 per cent. of the Bank’s capital reserves. Any loan and advance extended to
a member of the Board (or his credit Bank or family members) is required to be fully secured.
Permitted security includes a cash guarantee covering the entire outstanding balance of the credit
facility, an irrevocable, unconditional bank guarantee from an internationally rated bank and security
over shares (other than shares in a company of which the Board member is a director), real estate or
land (excluding the private residence of the Board member or his relatives). Loans and advances
extended to all relatives of Board members (that is, father, mother, brother and sister) may not
exceed in aggregate 20 per cent. of the Bank’s capital and reserves. The related Board member is not
permitted to participate in the decision of whether to extend the loan or advance to his relative.
91
The QCB prohibits any preferential treatment in the conditions of granting loans or in the applicable
interest rate payable by a Board member. Board approval is required when granting or renewing any
loan facility extended to a member of the Board or his credit Bank.
Further information on the Bank’s related party transactions in 2012, 2013 and 2014 is set out in
notes to each of the Annual Financial Statements and further information on the Bank’s related party
transactions in the six month periods ended 30 June in 2014 and 2015 is set out in note 15 to the
Interim Financial Statements.
DISCLOSURES ABOUT RISK
The Bank is exposed to a number of financial risks and takes steps to mitigate certain of these risks
as described ‘‘Description of the Bank—Risk management’’ and in note 4 to the 2014 Financial
Statements.
92
DESCRIPTION OF THE BANK
INTRODUCTION
The Bank is one of the oldest existing banks in Qatar, having been incorporated on 1 November
1956 as the Ottoman Bank. The Bank is currently wholly-owned, directly or indirectly through
holding companies, by members of the Al-Thani ruling family in Qatar (the ‘‘Al-Thani family’’). The
Bank is currently the only bank in Qatar with no direct Government ownership.
In 2008, the Bank launched a new brand identity in response to the needs of its customers and to
reflect the transformation of Qatar’s economy. The Bank’s new identity is that of a customer-focused,
modern and progressive bank that is steeped in tradition. The Bank’s aim is to be become one of the
leading banks in Qatar through delivering superior products and personalised service.
The Bank provides loans, deposits and other typical banking services to corporate, retail and private
customers, principally in Qatar and the GCC.
As at 30 June 2015, the Bank had total assets of QAR 28.3 billion. The Bank’s profit for 2014 was
QAR 579 million compared to QAR 553 million for 2013. The Bank’s profit for the six months
ended 30 June 2015 was QAR 248 million compared to QAR 257 million for the corresponding
period of 2014.
The Bank had Tier 1 and total capital adequacy Basel III ratios of 17.80 per cent. as at 30 June
2015, well above the minimum requirements of the QCB and Basel III.
The Bank’s registered office is at Suhaim Bin Hamad Street, PO Box 2001, Doha, Qatar. The Bank is
a shareholding company incorporated in Qatar under commercial registration number 22788, and its
telephone number is + 974 4447 8000.
HISTORY AND AWARDS
History
The Bank was established in 1956 as the Ottoman Bank. On 31 July 2000, ANZ Grindlays Bank
Limited, a subsidiary of Australia and New Zealand Banking Group Limited (‘‘ANZ’’), acquired a 40
per cent. stake in the Bank and the remaining 60 per cent. interest was acquired by the Al-Thani
family.
On 1 August 2000, ANZ sold ANZ Grindlays Bank Limited to Standard Chartered Bank. Following
the sale, ANZ Grindlays Bank Limited changed its name to Standard Chartered Grindlays Bank
Limited.
On 1 June 2003, Standard Chartered Grindlays Bank Limited sold its 40 per cent. shareholding in the
Bank to members of the Al-Thani family.
On 30 August 2004, National Bank of Kuwait S.A.K. (‘‘NBK’’) acquired a 20 per cent. shareholding
in the Bank and the name of the Bank was changed to International Bank of Qatar (Q.S.C.) effective
1 September 2004. NBK’s shareholding increased to 30 per cent. on 1 August 2007.
Between 2004 and 2014, the Bank’s assets grew from QAR 2.0 billion to QAR 30.9 billion, a
compound annual growth rate of 31.4 per cent. Over the same period, its profit grew from QAR
37 million to QAR 579 million. From a single branch in Doha in 2004, the Bank opened three new
branches in 2006, a fifth branch and two kiosks in 2008, two new branches and two kiosks in 2009
and a new kiosk in 2010. By 2011, the total number of branches was nine in addition to five kiosks.
A fully dedicated corporate branch was opened in 2013.
Since 2004, the Bank has also overhauled its IT and operational systems (in 2008), introduced a retail
internet platform (in 2009) and a corporate internet platform (in 2010), launched a range of new
products and, in 2013, it introduced a significant customer loyalty programme (Thanq) and made
further investments in risk management, people and processes.
Between 2012 and 2014, the Bank initiated an efficiency programme focused on its branch network
and retail business and, in 2014, it re-engineered its branch model with a focus on mall locations for
branches in addition to locations that provide good business opportunities. By the end of 2014, the
Bank had five branches and one kiosk.
In 2014, NBK sold its 30 per cent. shareholding back to the Al-Thani family. The Bank understands
that certain shareholders are currently in advanced discussions to sell an aggregate 30 per cent.
shareholding in the Bank to a government agency, subject to all necessary approvals being obtained.
93
Awards
In recent years, the Bank has won numerous awards, including:
*
‘‘the fastest moving bank in the Middle East’’ in The Banker magazine’s Top 1,000 World Bank
survey in 2009;
*
private banking awards in both the high net worth individual (‘‘HNWI’’) and the ultra high net
worth Individual (‘‘UHNWI’’) categories from Euromoney in 2012/13;
*
awards for private banking and customer service from Euromoney in 2013;
*
awards for the best private banking service in Qatar, the best retail customer service in Qatar
and the best customer loyalty programme in Qatar from The Banker Middle East in 2014, the
best loyalty programme in the Middle East and Africa from the MasterCard Innovation Forum
in 2014 and Private Bank of the Year in Qatar from the International Banker in 2014; and
*
awards for the best private bank and best customer loyalty programme Qatar 2015 from
International Finance Magazine, Global Banking & Finance Review and International Banker,
best private banking services, best customer service and best customer loyalty programme Qatar
2015 from Bankers Middle East and best diversified services bank Qatar 2015 from the World
Union of Arab Bankers – Arab Banks Awards & Commendations of Excellence.
STRATEGY
The Bank’s goal is to be a leading financial institution in Qatar by distinguishing itself through the
quality of its service and the strength of its customer relationships.
The Bank’s strategy to achieve this goal includes:
Accelerating sustainable asset and liability growth in its core corporate, private banking and retail
businesses, whilst maintaining prudent, conservative risk appetite and tightly managing provisioning levels
Corporate business
The Bank’s strategy to achieve sustainable growth in its corporate business is focused on:
*
Capitalising on its deep local and strong regional market knowledge derived from the fact that
the Bank is one of the oldest banks in Qatar and from the significant relationships which its
shareholders have with key decision makers both in Qatar and internationally.
*
Implementing a total relationship banking approach with a view to maximising its ability to
cross sell products and services and thus enhance its share of its major corporate customers
spend on financial services.
*
Increasing risk diversification by expanding the client base as well as selectively targeting
geographic diversification into other GCC markets.
*
Broadening its fee income mix and enhancing its ability to acquire new clients. This is being
achieved through a strategic focus on the contracting and trading segments, both of which
generate significant trade finance volume and fee income. Two senior corporate bankers who are
specialists in contract financing have been hired and a dedicated contract finance team has been
established. In addition, two teams are targeting large local corporates with a primary focus on
the trading segment.
Private banking business
The Bank’s strategy to achieve sustainable growth in its private banking business is focused on:
*
Retaining its position as the private bank of choice in Qatar by increasing the sophistication of
its wealth management services and solutions. Between 2004 and 2014, the Bank offered its
private banking clients a unique service, involving access to overseas markets through the use of
the Switzerland-based office facilities of the Bank’s strategic partner at the time – NBK. In
2015, following the cessation of this partnership, the Bank commenced the ground work for its
new internal Wealth Management and Advisory Platform designed to offer equivalent services to
those previously offered as well as to extend products and services from a platform that will
now be managed in-house. This service, once operational, is expected to support both new and
existing business growth. The platform is scheduled to be rolled out in two phases, with the first
phase (an execution only platform) to be rolled out by December 2015 and the second phase
(an advisory and management platform) to be introduced in the first half of 2016.
94
*
Leveraging its existing relationships. One of private banking’s key strengths is its ability to build
strong and lasting relationships with various influential high net worth and ultra-high net worth
individuals in Qatar. This has been led by experienced senior team members and managers who
have valuable market background and extensive insight about key Qatari families. This strength
is also reflected in the consistent growth in the Bank’s traditional products over the years. The
Bank intends to further leverage these relationships with enhanced product opportunities
(including its new Wealth Management and Advisory Platform) in order to grow its business.
*
Acquiring and sustaining next generation wealth. As outlined above, the main strengths of
private banking are its experienced management and sizeable pool of influential clients. This
provides the Bank with an opportunity to build further long-lasting relationships with these
client’s successors and future generations, thereby ensuring business continuity and growth.
*
Developing strategic alliances with, and access to, ventures which will enable the Bank to extend
its core service capability and product offering.
Retail business
The Bank’s strategy to achieve sustainable growth in its retail business is focused on:
*
Product innovation including, for example, the Bank’s Thanq rewards programme and mortgage
product expansion (including new equity release, land finance and under construction products).
Planned future innovations include a new credit card product, additional benefits to the Thanq
programme, exploring the possibility of providing Western Union services through SMS banking
and introducing wealth management products.
*
A clear segmentation approach in retail banking under which the Bank plans to drive higher
revenue. The retail customer segmentation model is based on customer income levels with
additional income being generated from the Bank’s more affluent customer segment based on
targeted related products.
*
Leveraging technology to maximise income, for example the Bank introduced e-statements
during 2014 and plans to launch mobile banking before the end of 2015. It is also exploring
avenues to implement SMS banking and ATM expansion and upgrades.
*
Implementing its Bank@work programme which is an approach to acquiring new customers
while managing current relationships and developing cross sell opportunities. See ‘‘—Description
of the Business-Retail banking’’ below.
Notwithstanding its focus on onshore growth, the Bank intends to maintain a prudent, conservative
risk appetite which is closely aligned to its risk profile and to ensure that decision making is always
undertaken on a risk aware basis. See ‘‘Risk management’’. The Bank also intends to create a
motivated and differentiated workforce by attracting, motivating, training and retaining high quality
staff. See further ‘‘Management and employees’’.
While the Bank continues to review opportunities to expand its physical footprint beyond Qatar to
diversify income streams, capture trade opportunities and mitigate risk concentration, it intends only
to do so where there are synergies to be gained or there is a strategic business opportunity that can
positively leverage the Bank’s Qatar-based client base.
Maintain effective cost management
The Bank’s cost income ratio was 39 per cent. in 2012. This was reduced to 34 per cent. in 2013 and
was 33 per cent. in 2014. The Bank continues to monitor costs, both at the Bank and functional
levels, throughout the year, paying particular attention to cost intelligence at budget and forecast
cycles.
Further enhance governance
The Bank intends to further enhance its governance principles by implementing the new corporate
governance rules stipulated by the QCB. These rules are based on international guidance in relation
to corporate governance, including guidance issued by the Bank for International Settlements and the
Organisation for Economic Cooperation and Development. The new corporate governance rules relate
to board and senior management responsibilities and emphasise effective risk management, internal
audit and compliance and remuneration policies that encourage prudent risk taking. See further ‘‘Risk
Management—Overview—Governance’’ and ‘‘Management and employees’’ for a discussion of the
Bank’s corporate governance structure.
95
Embedding Basel III principles
The Bank aims to ensure proper understanding and implementation of Basel III principles in
accordance with the QCB rules and regulations. Through appropriate monitoring and supervision, the
Bank aims to ensure compliance with QCB regulatory ratios under Basel III, namely the leverage
ratio, the liquidity coverage ratio, the net stable funding ratio and capital adequacy ratios. The ratio
calculations are verified by external auditors who provide assurance on the accuracy of the
calculations. The ratios are also monitored and reviewed at management level by the Bank’s Asset,
Liability and Investment Committee (‘‘ALICO’’) and are presented to the Board.
BUSINESS STRENGTHS
The Bank benefits from a number of business strengths. In particular:
*
influential and supportive shareholders: The Bank is currently wholly-owned by the Al-Thani
family. The Al-Thani family have been shareholders in the Bank since 2000. The Bank’s
shareholders are personally involved in setting the Bank’s strategy and are fully committed to
achieving the strategic goals set for the Bank. Five Al-Thani family members are also directors
of the Bank, including the Chairman, who has been a Board member for 14 years.
*
strong capitalisation: At 30 June 2015, the Bank was the most highly capitalised bank in Qatar,
with tier 1 and total capital adequacy ratios (calculated according to Basel III) of 17.80 per
cent. The Bank’s leverage ratio (calculated by dividing its Tier 1 capital by its average total
assets in accordance with Basel III) was 11.1 per cent. at 31 December 2014. These ratios afford
the Bank significant flexibility in the future development of its business. The Bank’s shareholders
have approved the Board’s proposal to increase the Bank’s capital by QAR 1 billion and this
increase has also been approved by the QCB.
*
specific geographic focus: The Bank benefits from its focus on Qatar. Notwithstanding the impact
of the global financial crisis, many countries in the GCC have grown strongly, particularly
Qatar which has benefitted from real GDP growth rates in 2012, 2013 and 2014 of at least 4.0
per cent., making it one of the fastest growing economies in the world. In addition, Qatar has a
proven track record of support for its banking sector, including equity injections and real estate
loan portfolio purchases in the period following the global financial crisis.
*
strong management team with proven track record: The Bank’s Board has eight members with an
average tenure of more than 10 years and includes three members with significant banking
experience. The Bank’s senior management comprises 17 individuals with an average business
experience of more than 23 years. The Bank’s senior management team has a diverse range of
nationalities and qualifications reflecting the Bank’s aim of increasing its intellectual capital at
senior levels.
In addition, the Bank has a strong corporate governance culture, which it believes is in line with
international best practice.
SHAREHOLDERS
The table below shows the existing shareholders in the Bank. Each of these shareholders is a nominee
company for one or more members of the Al-Thani family.
Percentage
owned
Shareholder
Al Sanad Commercial Company .............................................................................................
Broog Trading Company.........................................................................................................
QIPCO .....................................................................................................................................
Alfiya Investment family..........................................................................................................
Al Mirqab Capital Company...................................................................................................
Al Areen Holding Company....................................................................................................
Al Sidra Qatari Holding Company .........................................................................................
24.5%
24.5%
10.5%
10.5%
10.0%
10.0%
10.0%
Total.........................................................................................................................................
100.0%
Following the current shareholders’ acquisition of the NBK 30 per cent. holding in the Bank, the
Bank understands that certain shareholders are currently in advanced discussions to sell an aggregate
96
30 per cent. shareholding in the Bank to a government agency, subject to all necessary approvals
being obtained.
DESCRIPTION OF THE BUSINESS
Overview
The Bank currently operates both a wholesale and a retail banking business. The Bank’s wholesale
banking business areas are:
*
corporate;
*
private banking; and
*
treasury.
Wholesale banking
The Bank’s wholesale banking business comprises its corporate, private banking and treasury
divisions. The Bank’s management team for its wholesale banking business comprises the heads of
corporate and private banking, the treasurer and the heads of business development and financial
institutions, all of whom report to the deputy chief executive officer of the Bank.
Corporate banking
As at 30 June 2015, the corporate division accounted for 41 per cent. of the Bank’s assets and had
1,217 customers. In 2014, the corporate division generated 38 per cent. of the Bank’s operating
income and 40 per cent. of its net income.
The core corporate team comprises the head and deputy head of corporate banking, four executive
managers and a senior relationship manager. Together, this seven-person team has an average of 11
years with the Bank and more than 100 years’ banking experience in total. The corporate business
model is based on stringent client selection backed by extensive market knowledge and thorough
know your customers procedures. Cash flow based lending is permitted while collateral is not
regarded as the primary or the only source of repayment.
The corporate division is primarily focused on Qatar with the primary target customers being large
local corporates in the trading and contracting sectors. Secondary and tertiary target customers are
strong Government and semi-Government companies and top tier regional and international
companies, respectively. The corporate division focuses on customers with at least QAR 100 million
in sales revenue. The Bank only engages in real estate financing for strategic customers.
The corporate division’s long-term objectives are to diversify its customer base through acquiring new
relationships, to maintain a strong fee income focus by increasing lending in Qatari riyal and
continuing to tap stable sources of well-priced liabilities.
The corporate division’s lending products include term loans with a range of maturities, overdrafts,
trade finance (including guarantees, letters of credit, performance bonds, tender bonds and advance
payment bonds), acceptances and bills discounting. Loans may be advanced directly on a bilateral
basis or as part of a syndicate and for a range of purposes, including working capital finance,
structured finance and project finance. On the liabilities side, the corporate division offers time
deposits, current accounts and call deposits. All products are offered in both Qatari riyal and foreign
currencies, principally U.S. dollars.
Private banking
At 30 June 2015, the private banking division accounted for 21 per cent. of the Bank’s assets and
had 1,212 customers. In 2014, the private banking division generated 18 per cent. of the Bank’s
operating income and 19 per cent. of its net income.
The core private banking team comprises the head and deputy head of private banking, a senior
customer service manager and a senior relationship manager. This team has extensive experience
within the Bank and internationally and has developed strong relationships with key decision makers
in Qatar. In November 2012, the Bank launched a new private banking brand identity to reinforce
the Bank’s commitment to customer centricity.
The private banking division’s customer base is segmented between UHNWIs (being those with
personal financial assets in excess of U.S.$25 million), Super HNWIs (being those with personal
financial assets of between U.S.$10 million and U.S.$25 million), HNWIs (being those with personal
97
financial assets of between U.S.$1 million and U.S.$10 million) and VIPs (being those with personal
financial assets of less than U.S.$1 million).
The private banking division’s business model is based on sustaining its market position as the bank
of choice for UHNWIs. It aims to grow its market share by targeting the next generation inheritors
of existing UHNWIs and Super HNWIs through focussing on their family members, by targeting the
under-served expatriate HNWI segment and by focussing on select new Qatari names. It also intends
to strengthen its wealth management offering to include a range of selected investment opportunities
and solutions and by sourcing third party providers to fill the gaps in the Bank’s own offering.
The private banking division’s current products include real estate lending, transactional banking
(term loans, overdrafts and credit cards), deposits (current, call and a range of savings accounts), and
investment opportunities. Within the next 12 months, the division intends to introduce an in-house
wealth management platform in collaboration with leading providers in order to help diversify the
Bank’s income. These products and services are expected to include MENA region-focused investment
opportunities, structured products with capital and partial capital protection, brokerage, real estate
funds, financing for overseas real estate investment and related advisory services and pure wealth
management.
Treasury
At 30 June 2015, the treasury division accounted for 21 per cent. of the Bank’s assets. In 2014, the
treasury division generated 8 per cent. of the Bank’s operating income and 9 per cent. of its net
income.
The treasury division’s primary objective is to manage the Bank’s liquidity and regulatory ratios in a
controlled manner. Its secondary focus is to increase the Bank’s profitability through suggesting
appropriate investments to the Bank’s ALICO and providing treasury solutions for the Bank’s clients.
The Treasury division’s main client-facing business focus is to support the treasury needs of its
customers, as discussed below. The treasury division’s own account activities are restricted to
management of the Bank’s liquidity, interest rate and foreign exchange risks. As a policy and risk
management strategy, the Bank does not assume proprietary trading positions in derivatives and
proprietary positions are permissible only for foreign exchange and local equities subject to
appropriate limits.
The core treasury team comprises the treasurer, a treasury sales and products manager and a senior
dealer.
For a discussion of the treasury division’s liquidity and capital management activities, see ‘‘Risk
management’’. The division’s current client-facing activities comprise the provision of straightforward
foreign exchange, yield enhancement and hedging solutions to the Bank’s corporate and private
banking customers. These activities are expected to increase as the Bank introduces enhanced wealth
management products for its private banking customers.
The treasury division’s investment activities involve opportunity identification (within the scope of the
Board-approved risk appetite for investment activities and investment policies and guidelines,
including credit limits for fixed income investments), and transaction execution only. The Bank’s
authorised investments currently comprise bills, certificates of deposit, sale and repurchase (repo)
obligations, bonds, equities and funds. Its investment objectives, in order of priority, are:
*
the preservation of capital;
*
the maintenance of sufficient liquidity to meet contingent requirements;
*
the avoidance of imprudent credit or market risk; and
*
the attainment of an acceptable market rate of return.
Retail banking
At 30 June 2015, the retail division accounted for 5 per cent. of the Bank’s assets and had 47,535
customers. In 2014, the retail division generated 14 per cent. of the Bank’s operating income but
made a net loss of QAR 2 million.
The core retail team comprises the head and deputy head of retail banking, and heads of sales,
products, cards and business planning and analysis. The Bank launched its retail banking activities in
2007. The retail division focuses on Qatari nationals and affluent and elite customers with a minimum
monthly income of QAR 25,000.
98
Whilst the retail business model is to continue to focus on Qatari nationals and elite clients, it also
continues to service and acquire new clients with monthly incomes of between QAR 7,000 and QAR
25,000 provided that they are employees of companies that have met the Bank’s internal criteria to
extend credit to their employees. These customers are offered a fee-based package of services.
The retail division expects to grow its branch network with a focus on mall banking while
same time increasing its visibility through a range of communication channels and targeted
awareness activities. It also intends to utilise online banking and introduce mobile banking to
it to introduce a more sales-focused structure in its branches and to transform its call
capabilities through the introduction of a sales team with revenue generating targets.
at the
brand
enable
centre
The retail division’s principal customer acquisition engine is expected to be its Bank@work referral
programme. The Bank@work programme is an approach to acquiring new customers while managing
current relationships and developing cross sell opportunities. Bank@work has five building blocks:
*
segmentation – employees of new clients, such as Government, semi-Government, Qatari
ministries, large corporates and smaller companies with a concentration of high value employees
(such as those established in the QFC) are categorised into different segments;
*
value proposition – differentiated retail products are developed for both employees and
companies, which allows the Bank to tailor its overall product portfolio and services to the
different customer segments;
*
employer acquisition – the refers to the process of acquiring new clients;
*
employee acquisition and coverage – this refers to the process of acquiring new employee clients
following the employer acquisition and then meeting the expectations of both the employer and
employee clients; and
*
performance management – this is the means by which success is measured, with management
closely monitoring the productivity of the relationship managers (who are rewarded through
variable incentive schemes) and assessing the quality and profitability of the overall Bank@work
programme.
The retail division also intends to introduce new investment products targeted at an identified
customer base where relationships are already well developed.
The retail division’s lending products include mortgage, vehicle and other term loans with a range of
maturities, overdrafts and credit cards. On the liabilities side, the retail division offers time deposits,
current accounts, savings accounts and call deposits.
LENDING AND FUNDING
Lending
The Bank’s customer loan portfolio amounted to QAR 19.1 billion, or 67.4 per cent. of its total
assets, at 30 June 2015. As at 31 December 2014, the Bank’s customer loan portfolio amounted to
QAR 19.9 billion, or 64.3 per cent. of its total assets, as at 31 December 2013, it amounted to QAR
17.0 billion, or 59.4 per cent. of its total assets and, as at 31 December 2012, it amounted to QAR
19.8 billion, or 61.5 per cent. of its total assets.
The reduction in the customer loan portfolio in 2013 and again in the first six months of 2015
principally reflected repayments and maturities from private banking and corporate banking clients.
The Bank’s customer loan portfolio grew by 16.6 per cent. during 2014. Management believes that
the Bank’s conservative credit policy and effective utilisation of risk management tools has enabled
the Bank to maintain a high quality loan portfolio.
99
The table below shows the Bank’s customer loan portfolio by type as at 31 December in each of
2012, 2013 and 2014 and as at 30 June 2015.
As at 31 December
2012
Loans...............................
Overdrafts........................
Bills discounted ...............
Bankers acceptances ........
(QAR
million)
18,027
1,464
139
317
Total gross loans and
advances ......................
19,946
Specific impairment .........
Collective impairment
allowance ....................
Total net loans .................
2013
As at 30 June
2014
2015
(QAR
(%)
million)
90.4
14,592
7.3
1,932
0.7
271
1.6
427
(QAR
(%)
million)
84.7
15,907
11.2
3,715
1.6
50
2.5
405
(QAR
(%)
million)
79.2
14,761
18.5
4,172
0.3
82
2.0
289
(%)
76.5
21.6
0.4
1.5
100.0
100.0
100.0
100.0
17,222
20,076
19,304
(145)
(185)
(216)
(225)
(2)
(4)
(4)
(4)
19,799
17,033
19,857
19,075
The table below shows the Bank’s customer loan portfolio by industry segment as at 31 December in
each of 2012, 2013 and 2014 and as at 30 June 2015.
As at 31 December
2012
Government.....................
Government agencies ......
Industry ...........................
Commercial .....................
Services ............................
Contracting......................
Real estate .......................
Personal ...........................
(QAR
million)
29
5,478
817
3,339
2,698
383
4,271
2,930
Total gross loans and
advances ......................
19,946
Specific impairment .........
Collective impairment
allowance ....................
Total net loans .................
2013
As at 30 June
2014
2015
(QAR
(%)
million)
0.1
500
27.5
5,423
4.1
536
16.7
2,950
13.5
1,477
1.9
551
21.4
2,401
14.7
3,384
(QAR
(%)
million)
2.9
5,356
31.5
1,921
3.1
489
17.1
2,925
8.6
854
3.2
683
13.9
3,340
19.6
4,507
(QAR
(%)
million)
26.7
3,166
9.6
1,457
2.4
908
14.6
2,690
4.3
284
3.4
769
16.6
5,200
22.5
4,830
(%)
16.4
7.5
4.7
13.9
1.5
4.0
27.0
25.0
100.0
100.0
100.0
100.0
17,222
20,076
19,304
(145)
(185)
(216)
(225)
(2)
(4)
(4)
(4)
19,799
17,033
19,857
19,075
The significant increase in Government loans and the significant decrease in Government agency loans
in 2014 reflected a transfer of one loan between segments. The general decline in loans to the services
sector reflects repayments of existing loans.
The increase in personal loans reflects movements mainly from private banking clients.
The increase in real estate loans during the first half of 2015 reflects new loans booked under this
segment, primarily for financing construction of real estate. All such loans are based on, among other
factors, an adequate analysis of underlying cash flows and all such loans have an amortising structure
and are collateralised by real estate assets. These loans are also in line with QCB rules on real estate
financing, which impose stringent conditions in terms of maximum aggregate lending, loan to value
ratios and maximum tenors.
100
See ‘‘Risk management—Credit risk’’ for a discussion of the Bank’s loan origination and monitoring
procedures, its loan classification system and an analysis of its non-performing loans and provisioning
and write-off policies.
Funding
For a description of the Bank’s funding, see ‘‘Financial review—Liquidity and funding—Funding’’.
INVESTMENT SECURITIES PORTFOLIO
The Bank maintains a portfolio of investment securities, principally comprising available for sale debt
securities bearing fixed rates of interest. This portfolio provides the Bank with a significant source of
interest income and is also used by the Bank as a funding tool. In 2014, interest income from the
Bank’s investment securities comprised 16.1 per cent. of the Bank’s total interest income compared to
22.9 per cent. in 2013 and 19.8 per cent. in 2012. As at 30 June 2015, none of the Bank’s debt
securities were pledged as collateral.
As at 31 December 2014, 95.4 per cent. of the Bank’s investment securities were interest bearing with
the balance being equity securities. Only 0.2 per cent. of the Bank’s interest bearing securities carried
interest at a floating rate at 31 December 2014.
The table below shows a breakdown of the Bank’s available for sale investment securities by type as
at 31 December in each of 2012, 2013 and 2014 and as at 30 June 2015.
As at 31 December
2012
Quoted
As at 30 June
2013
Unquoted
Quoted
2014
Unquoted
Quoted
2015
Unquoted
Quoted
Unquoted
(QAR million)
Equities(1)...................
State of Qatar debt
securities(2).............
Treasury bills.............
Other debt
securities(3).............
Mutual funds.............
77
—
34
0
129
0
130
0
57
798
348
—
2,059
3,393
1,929
—
1,133
—
1,559
—
1,135
—
1,534
—
229
—
—
14
67
—
—
—
134
—
—
—
5
—
—
—
Total ..........................
1,161
362
5,553
1,929
1,395
1,559
1,270
1,534
Notes:
(1) In 2015, the Bank had QAR 16 million of quoted equities which it held on an investment security basis designated at fair value
through income statement.
(2) In 2012, the Bank had QAR 2,763 million of unquoted State of Qatar debt securities which it held on a held to maturity basis.
During 2013, these securities were reclassified as available for sale.
(3) In 2012, the Bank had QAR 142 million of quoted other debt securities which it held on a held to maturity basis. During 2013,
these securities were reclassified as available for sale.
The Bank’s investment securities portfolio focuses on Government fixed income securities. During
2014, the Bank’s holding of treasury bills matured.
In June 2015, the Bank accounted for a QAR 15 million impairment on the available for sale equity
portfolio due to the general downturn in Qatar stocks. In 2014, the Bank recorded an impairment
loss of QAR 1 million in respect of certain equity securities. The Bank had no impaired investment
securities in 2012 or 2013.
COMPETITION
The Qatari banking sector is competitive, particularly with respect to retail banking activities, and is
currently comprised of 18 banks (10 of which are Qatari domestic banks), including six conventional
banks, four Islamic banks, seven local branches of foreign banks and one specialised development
bank owned by the State of Qatar.
The focus of foreign banks in Qatar is primarily related to trade finance, foreign currency operations
and Qatari government-related business, although several of these foreign banks also provide personal
101
accounts and related services to individuals residing in Qatar. Foreign banks in Qatar compete for the
same business as the Bank and other domestic banks, but operate under certain restrictions imposed
by the QCB. The lending limits of foreign banks are based on their local capital base; however,
foreign banks have historically been permitted to obtain guarantees from their head offices when
credits exceed their legal lending limits.
The Bank’s principal domestic competitors in Qatar include Qatar National Bank, Commercial Bank
of Qatar and Doha Bank, which, together, accounted for 66.6 per cent. of the Qatari market’s total
assets, 69.2 per cent. of its total loans and advances and 77.2 per cent. of its total customer deposits
as at 30 June 2015, according to Central Bank figures. As at the same date, the Bank’s equivalent
market shares were 2.6 per cent., 2.7 per cent. and 2.6 per cent., respectively.
Qatar has also established a financial centre (the ‘‘QFC’’) to attract new banks. The QFC has a lowtax environment, with a 10.0 per cent. tax on profits following a three-year tax holiday, 100.0 per
cent. foreign ownership and profit repatriation. New banks establishing in the QFC include
investment banking firms which advise regional clients from offices in Dubai and London as well as
foreign multinational banks. The QFC is targeting global institutions relevant to the energy and other
key sectors of the Qatari economy and which have expertise in banking, insurance, asset management,
financial advisory services, and securities and derivatives dealing, as well as Islamic finance.
Institutions registered with the QFC fall into two categories:
*
providers of ‘‘regulated activities’’ (essentially financial services); and
*
providers of ‘‘non-regulated’’ activities (essentially activities in support of financial services).
QFC registered banks are currently subject to explicit restrictions on their local banking activities
and, as a result, they cannot transact with retail customers in Qatar. However, these banks are often
more experienced and able to offer more sophisticated products and services to corporate and
institutional customers in Qatar, which adds another dimension to the competitive environment.
INFORMATION TECHNOLOGY
The Bank’s IT strategy is focused on providing reliable and available information and systems to its
customers and employees in a secure environment. It also assesses the Bank’s future operational needs
with reference to the Bank’s overall technology strategy and with the primary aim of delivering
efficient and cost-effective systems. The Bank upgraded its core banking and treasury systems in 2013
and 2014 and continues to invest in IT to improve its customer service and technology risk
management.
For the Bank’s customers, the focus is on delivering a convenient and efficient banking service,
offering a range of remote banking applications including ATMs, internet and telephone banking. For
the Bank’s internal businesses, the focus is on providing effective methods and processes for
promoting and delivering services to their customers.
The Bank has implemented a disaster and recovery site on remote premises that can be activated
when required, to ensure that critical systems and data continue to be fully operational and to
provide essential services to its customers. The Bank carries out daily and other periodic data backups which are stored at a location in Qatar away from its head office. Additionally, the Bank sends a
copy of its critical systems and encrypted data to an international location in compliance with QCB
instructions.
The Bank uses secure technologies, such as second factor authentication and 3D secure to protect its
electronic financial transactions. The Bank also carries out annual intrusion tests on its IT network
with the assistance of various external vendors. There is no evidence of successful intrusion attempts
to date.
102
RISK MANAGEMENT
OVERVIEW
The Bank faces a wide range of risks in its business and operations, including:
*
credit risk, which is the risk of financial loss to the Bank if a customer or counterparty to a
financial instrument fails to meet its contractual obligations, and arises principally from the
Bank’s customer loan portfolio, interbank lending and investment securities;
*
concentration risk, which is the risk that a customer, industry, geographic or other concentration
of assets and liabilities could lead to disproportionate losses for the Bank should a negative
factor affect those assets or liabilities;
*
settlement risk, which is the risk arising from failure to fulfil the terms of a contract by one
party with another party at the time of settlement. Settlement risk is normally associated with
default at settlement and any timing differences in settlement between the two parties;
*
operational risk, which is defined as the risk of loss resulting from inadequate or failed internal
processes, people and systems or from external events;
*
liquidity risk, which is the risk that the Bank will be unable to meet its obligations when they
fall due as a result of customer deposits being withdrawn, cash requirements from contractual
commitments, or other cash outflows. In extreme circumstances, lack of liquidity could result in
losses on sales of assets, or potentially an inability to fulfil lending commitments;
*
business risk, which is the risk of a negative impact on income arising from fundamental longterm decisions concerning the positioning of the Bank and changes to the competitive
environment resulting mainly in fluctuations in the core income of the Bank;
*
market risk, which is the risk arising from changes in the value of financial instruments due to
changes in interest rates and foreign exchange rates, as well as in equity and commodity prices
that may impact ‘trading portfolios’ other than foreign exchange where this impact can be had
in either trading or banking portfolios;
*
interest rate risk in the banking book, which is the risk of an adverse impact on the Bank’s
profit and/or capital on account of movement in interest rates arising from the banking
operations;
*
reputational risk, which is the risk of current or prospective losses and reduced profits arising
from adverse perceptions of the Bank by customers, counterparties, shareholders, investors,
rating agencies and regulators due to inappropriate conduct of business; and
*
regulatory risk, which is the risk that a change in applicable law or regulation will materially
impact a security, business, sector or market. A change in law or regulation made by the
Government or a regulatory body can increase the costs of operating a business, reduce the
attractiveness of investment and/or change the competitive landscape.
The Bank seeks to manage these risks as part of its Internal Capital Adequacy Assessment Process
(‘‘ICAAP’’), using appropriate governance and infrastructure around identifying, measuring,
monitoring and reporting risks. The Bank’s ICAAP involves a five stage process which:
*
identifies applicable risks and conducts a qualitative evaluation of them;
*
establishes a risk strategy, appetite, policies and limits to address those risks;
*
estimates and projects the Bank’s capital requirements based on stress testing and scenario
analysis;
*
ensures ongoing measurement of risks, including limit monitoring and risk reporting; and
*
ensures a regular review and refinement of the risk framework.
The Bank considers its risk management and ICAAP framework as indispensable in meeting its
primary objectives of protecting depositors, creditors, shareholders and the financial system at large.
Governance
Governance provides the basic corporate framework around which the Bank’s businesses and risks are
managed and includes the establishment of Board and management committees with due segregation
of roles, business and risk strategy, risk appetite and policies.
103
The Board is ultimately responsible for establishing the Bank’s strategy, identifying and controlling
risks, and for establishing and disseminating the Bank’s overall risk appetite limits. The Board is
responsible for ensuring that the overall strategic and organisational objectives of the Bank are
attained. To accomplish this objective, the Board has established five management committees which
report into four Board committees to manage and monitor the risks faced by the Bank.
Board committees
The four Board committees comprise:
*
Board Risk and Compliance Committee (the ‘‘BRCC’’), which oversees the risk and compliance
issues arising from the Bank’s current and future business activities. The BRCC oversees all
material risks to which the Bank is exposed and recommends the most appropriate risk strategy,
appetite, policies and limits to the Board. The BRCC also oversees the implementation of, and
adherence to, the Bank’s approved policies across its business lines to ensure that risk and
compliance with these policies and with regulatory requirements is properly managed, monitored,
measured and reported. The BRCC is charged amongst other things, with encouraging a risk
aware culture within the Bank at all levels of the Bank. In line with the need to maintain
independence, risk and compliance functions report to the BRCC.
*
Board Executive Committee (the ‘‘BEC’’), which oversees the strategic and overall directional
issues of the Bank’s business activities. The BEC ensures that management implements and
adheres to the approved strategic and budgetary requirements of the Bank as established by the
Board and communicated through the respective and appropriate Board Committees. The BEC
is also one of the Bank’s most senior credit approval bodies.
*
Board Audit Committee (the ‘‘BAC’’), which assists the Board in fulfilling its oversight
responsibilities through managing and monitoring issues arising from the Bank’s business
activities and through ensuring effective implementation and proper adherence to the Bank’s
approved policies and procedures as well as QCB requirements.
*
Board Remuneration, Nomination & Corporate Governance Committee (the ‘‘BRNCGC’’),
which oversees human resource and remuneration policies and procedures and corporate
governance policies and processes.
Further detail on each of these committees is provided under ‘‘Management and employees—Board of
directors—Board committees’’.
Management committees
The five management committees comprise:
*
Risk Management Committee (the ‘‘RMC’’), which, at a management level, oversees risk issues
arising from the Bank’s current and future business activities. The RMC oversees all material
risks to which the Bank is exposed as well as the implementation and adherence to the
approved policies of the Bank across its business lines. The RMC is charged with, amongst
other things, encouraging a risk aware culture within the Bank at all levels.
*
Executive Credit Committee (the ‘‘ECC’’), which exercises the power and authority delegated to
it by the Board and the BEC to review and decide on credit proposals and transactions.
*
Asset Liability and Investment Committee (the ‘‘ALICO’’), which monitors and manages the
financial position of the Bank. It also manages the Bank’s capital, funding and liquidity as well
as the market risk of the Bank’s trading and non-trading portfolios. It also develops the Bank’s
investment portfolio and assists the Bank to manage investments, optimise returns and oversee
risk.
*
Management Executive Committee (the ‘‘MEC’’), which exercises the power and authority
delegated to it by the Board or the BEC to establish operating plans to meet the Bank’s
strategic objectives and to monitor and review the progress of actions against budgets and plans.
*
Human Resources Committee (the ‘‘HRC’’), which reviews the Bank human resources strategy,
evaluates progress and administers all elements of compensation ensuring that the Bank can
successfully attract, retain and motivate employees. The HRC also reviews the Bank’s
Qatarisation initiatives, progress and strategy and develops new and innovative training concepts
to ensure that the workforce is operating at optimum levels.
104
Strategy, policies and infrastructure
The Board approves the Bank’s long-term strategy defining the primary objectives and targets. The
Board also sets the risk strategy and the constraints within which targets need to be met. Policies and
risk appetite limits are defined by the Board based on RMC and BRCC recommendations
complementary to the business and risk strategies.
The key themes of the Bank’s risk management philosophy are:
*
to achieve long-term sustainable and stable (as opposed to volatile) growth in assets, earnings
and returns to shareholders;
*
to improve the diversification of the Bank’s assets, liabilities and earnings by geography, sector
and customer; and
*
to ensure a continuous enhancement of the Bank’s staff, processes and systems to support its
business and operations.
In addition the Bank’s key risk management strategies involve:
*
monitoring essential macroeconomic parameters to protect the Bank against undue growth in
bubble-prone sectors;
*
ensuring the availability of adequate capital to cover risk-weighted exposures with a sufficient
cushion over regulatory requirements;
*
zero tolerance to regulatory and legal breaches;
*
diversifying the deposit base and minimising dependence on large depositors; and
*
enhancing operational risk management through self-assessments.
Risk management processes throughout the Bank are audited regularly by the Internal Audit
function, which examines both the adequacy of the procedures and the Bank’s compliance with the
procedures. Internal Audit discusses the results of all assessments with management and reports its
findings and recommendations to the BAC.
Monitoring and controlling risks is primarily performed based on limits established by the Board.
These limits reflect the business strategy of the Board and the market environment as well as the level
of risk approved by the Board. In addition, reports from all businesses are examined and processed
in order to analyse, control and identify risks in a timely manner. This information is presented and
discussed with the head of each business division, the RMC and the Board.
As part of its overall risk management, the Bank may use derivative and other instruments to
manage exposures resulting from changes in interest rates, currency exchange rates, equity prices and
the credit status of counterparties. The effectiveness of these transactions is monitored by the Risk
Management department on a monthly basis.
The main responsibilities of the Bank’s Risk Management department are to oversee all credit,
market, security, liquidity and operational risk matters at a Bank level and to ensure compliance with
applicable regulations and practices.
The Risk Management department conducts periodic reviews of the Bank’s risk portfolios and ensures
that all applicable policies have been efficiently applied.
CREDIT RISK
The Bank’s lending portfolios are closely monitored and controlled by ensuring adherence to the
Bank Credit Policy and Instructions that have been approved by the Board.
The BRCC exercises oversight of the credit risk management function in terms of:
*
approving risk policies;
*
delegating credit approval authorities; and
*
setting risk concentration limits.
The BRCC also monitors the performance of the credit risk management function through periodic
meetings which are held on at least a quarterly basis. At these meetings, reports are submitted as
required under the approved risk policies, covering the following issues:
*
high value credits;
*
credits approved as exceptions to the credit policies;
105
*
portfolio concentrations;
*
watch list accounts and problem loans as well as the progress of ongoing recovery actions; and
*
reports on portfolio quality, breaking down concentrations by risk rating, tenor and industry.
In addition to the guidance provided by the Bank Credit Policy and Instructions, lending by the
Bank is closely controlled by the maximum overall delegated lending authorities granted by the
Board. Any amount exceeding the delegated authority is subject to the approval of the BEC and/or
the Board.
Loan origination
The Bank has the following levels of credit approving authority for wholesale credits covering
corporate banking and private banking borrowers :
Approving body
ECC
BEC/Board
Authority limit
QAR 25-75 million (depending on the conditions stipulated in the credit authority
delegation).
All amounts in excess of the above amounts.
The Bank’s procedures for approval of loans differ depending upon the category of the proposed
customer.
Corporate credit applications are presented to the head of the corporate division by a relationship
manager, along with the necessary information and analysis to support the relationship manager’s
recommendation. Each credit application is then subject to analysis by the Bank’s Credit Analysis
department. The department’s assessment is based on an evaluation of externally and internally
compiled data on the applicant and analysis of relevant risks, covering financial, business, structural
and management risks to ascertain the proposed borrower’s repayment capability and cash flow. The
application is also analysed in terms of the intended transaction amount, tenor, security and any
relevant delinquency records. The department is required to comment upon whether the credit risk is
acceptable and consistent with the overall policy guidelines and QCB regulations, and where necessary
the department will suggest conditions to be applied to the proposed loan with a view to mitigating
the underlying risks. Corporate loan applications are approved by the ECC or, where the amount of
loan requires, the BEC or the Board.
In addition to the credit approval threshold levels described above, the Bank also has an embedded
credit philosophy. For a credit application to be approved:
*
the borrower must have a clear repayment plan with two sources of repayment identified at the
time of lending;
*
the borrower’s primary source of repayment must be from business cash flows and not from
proceeds of the sale of any collateral;
*
the borrower must provide a comprehensive suite of information, including accurate and current
financial information and, where appropriate, satisfactory collateral or security; and
*
the transaction must not fall within the scope of activities that are against the Bank’s designated
policies.
Loan classification and monitoring
The Bank has implemented a comprehensive internal credit rating system for its corporate customers.
The system allows the Bank to rate the risk of a corporate customer based on qualitative as well as
quantitative factors. Qualitative factors include competition, industry trends, management and other
factors, while quantitative factors include financial indicators and historical financial performance. A
corporate customer is assigned a rating using a blend of these factors. Personal customers are assessed
using comprehensive criteria employing factors such as income, age, organisation and current
indebtedness.
In its Financial Statements, the Bank classifies its credit exposures into one of three broad categories
as follows:
*
neither past due nor impaired – these are exposures which are fully performing and otherwise
generally satisfactory. Within this category, exposures are disclosed as low risk or special
mention;
106
*
past due but not impaired – these are exposures in relation to which payments of principal or
interest are past due, but where the Bank has not impaired the exposure, for example because it
believes that payment will be made or it has adequate collateral. A loan payable on demand is
treated as past due when a demand for payment has been made and not met. Within this
category, exposures are again disclosed as low risk or special mention; and
*
Impaired – these are exposures in respect of which a specific impairment provision has been
made on the basis that the Bank has determined that there is objective evidence of impairment
and it does not expect to collect all principal and interest due according to the contractual terms
of the exposure.
As at 30 June 2015, 97.9 per cent. of the Bank’s customer loan portfolio was classified within the first
two categories. As at 31 December in each of 2014, 2013 and 2012, the equivalent proportions were
98.0 per cent., 97.7 per cent. and 99.2 per cent., respectively.
In addition to its customer loan portfolio, the Bank also has credit exposure in relation to its
interbank lending, its investment securities portfolio and certain other risks. None of this exposure
was past due or impaired as at 31 December in each of 2012 and 2013. In 2014 and in the first six
months of 2015, the Bank accounted for impairment losses of QAR 1.5 million and QAR 15 million,
respectively, against its investment securities portfolio.
The table below shows an ageing analysis in respect of the Bank’s past due but not impaired
customer loans as at 31 December in each of 2012, 2013 and 2014 and as at 30 June 2015.
Past due up to
30 days
As
As
As
As
at
at
at
at
31
31
31
30
December 2012......................
December 2013......................
December 2014......................
June 2015 ..............................
9
13
105
45
Past due
31 to 60 days
Past due over
60 days
(QAR million)
91
4
58
162
5
6
469
274
Total
106
22
632
481
The increase in past due customer loans in 2014 compared to the previous years, principally reflects
past dues from a single corporate customer in relation to which the Bank entered into a settlement
agreement during 2015. The Bank has to date realised approximately 70 per cent. of these past dues
and, while further recoveries are expected, the Bank expects to recognise a loss of approximately
QAR 67 million on this transaction in 2015.
In appropriate cases, the Bank may agree to restructure a customer loan by extending the payment
arrangements, modifying or deferring payments or in other ways. During 2014, the Bank rescheduled
loans amounting QAR 445 million compared to QAR 398 million in 2013 and QAR 583 million in
2012. Customer loans which have been rescheduled are classified as not impaired unless there are
explicit signs of impairment.
As at 30 June 2015, the fair value of the collateral held by the Bank in respect of its impaired
customer loans amounted to 69.3 per cent. of the gross exposure under those loans. As at
31 December 2014 and 31 December 2013, the equivalent proportions were 70.0 per cent. and 76.0
per cent., respectively.
Collateral policy
The Bank holds collateral and other credit enhancements against certain of its credit exposures. The
determination of eligible collateral and the value of collateral are based on QCB regulations and are
assessed by reference to market price or indices of similar assets. The Bank’s collateral includes
blocked deposits, pledges of shares and legal mortgages. Real estate held as collateral is professionally
and independently valued once every year and listed shares pledged as collateral are valued on a
weekly basis.
The Bank ensures that all collateral is legally pledged or mortgaged in accordance with applicable
law. All collateral documentation is retained separately with adequate physical security. At least
monthly, the Bank reconciles the shares pledged to it with an independent statement from the central
custodian. On an annual basis, the Bank also independently verifies the mortgage of properties with
an independent report from the Ministry of Justice which provides a list of all properties mortgaged
with the Bank. The Bank regularly monitors its collateral values as discussed above to assess the
107
continued availability of approved coverage requirements. If there is a shortfall, a decision is taken to
either reduce the Bank’s exposure or to obtain additional collateral.
The aggregate value of the collateral held by the Bank against its past due but not impaired customer
loans at 31 December 2014 was QAR 31 million (or 29.5 per cent. coverage) for past due up to 30
days. The Bank had no collateral in respect of its customer loans that were past due in excess of 30
days at 31 December 2014.
The aggregate value of the collateral held by the Bank against its impaired customer loans at
31 December 2014 was QAR 277 million (or 152.5 per cent. coverage).
Repossessed collateral is sold as quickly as possible. The Bank held QAR 2 million of repossessed
collateral at 31 December in each of 2014, 2013 and 2012.
Loan loss provisioning
The QCB provides guidelines for classifying credit exposure in the following categories.
Type
Standard(1)
Special mention(2)
Substandard(3)
Doubtful(3)
Loss(3)
Number of days past due
Normal accounts
Up to 90
90 days up to 180 days
180 days up to 270 days
270 days and above
Provision
—
Management discretion
20 per cent.
50 per cent.
100 per cent.
Notes:
(1) Loans disclosed by the Bank as low risk in its Financial Statements (whether in the neither past due nor impaired category or the
past due but not impaired category) would typically be classified as Standard under QCB guidelines.
(2) Loans disclosed by the Bank as special mention in its Financial Statements (in both the neither past due nor impaired category or
the past due but not impaired category would typically be classified as Special mention under QCB guidelines.
(3) Loans disclosed by the Bank as impaired in its Financial Statements are also sub-categorised as Substandard, Doubtful or Bad
Debts, in each case corresponding to the QCB guidelines.
In addition to the above, the exposure can be classified based on qualitative factors. The Bank has
introduced an additional category for delinquent exposures that operates in advance of the timings
dictated by the QCB guidelines for credit exposures. This additional category draws attention to
accounts which exhibit potential weaknesses and require pre-emptive action. The result is that an
account which is identified in this category is placed on a ‘‘watch list’’ so that it may be monitored
and reviewed by relevant management.
The Bank is also required to maintain a general risk reserve of 2.5 per cent. of the total loans and
advances portfolio net of all specific provisions.
In addition to the QCB regulatory requirements described above, the Bank has its own internal policy
in relation to provisioning and follows IFRS provisioning methodology in the preparation of its
Financial Statements. Under IFRS, the Bank assesses whether there is objective evidence that a loan
may be impaired based on whether a loss event has occurred and, if so, whether the loss event has a
negative impact on the future cash flows expected under the loan. Objective evidence may include
significant financial difficulty being experienced by a borrower, a borrower’s loan being restructured in
a manner that reduces its future cash flows, indications that the borrower may become bankrupt or
the occurrence of economic conditions that correlate with increased defaults.
Under IFRS, management assesses all individually
Where loans are impaired as a result, the amount
carrying value of the loan and the present value of
loan’s original effective interest rate, after taking
estimated costs of realising that collateral.
significant loans and advances for impairment.
of the impairment is the difference between the
the expected future cash flows discounted at the
account of the value of collateral net of the
Individually significant loans which are not determined to be impaired and all other loans are also
collectively assessed for impairment by Banking together loans with similar risk characteristics and
considering factors such credit quality, portfolio size, concentrations and economic factors. In order
to determine the amount of the collective provision, assumptions are made to define the manner in
which inherent losses are modelled and to determine the necessary inputs, based on historical
experience and current economic conditions.
The QCB requires all Qatari banks to discuss their individually significant provisions with the QCB
before a final determination is made on the classification of the loan and the appropriate provisions
to be made. The early detection of accounts which demonstrate the potential to become a non108
performing loan (‘‘NPL’’) (defined as a loan in respect of which payments of principal or interest are
overdue by more than 90 days) is central to the Bank’s remedial management process. The Bank’s
Risk Management department decides whether to include an account in the watch list based upon
predefined early warning sign criteria. Factors considered would include, for example, borrowers with
declining profitability, strained cash-flows and unfavourable industry or business risk factors.
The Bank aims to ensure that any sign of deterioration in asset quality is promptly recognised and
rehabilitation of the account is initiated. For corporate and institutional accounts, the relationship
manager has direct responsibility for knowing the condition of each of the customers within his
portfolio and it is therefore the relevant relationship manager’s responsibility to identify any sign of
deterioration and initiate remedial action. The relationship manager is the primary person tasked with
the identification of problem accounts. In addition, various reports covering daily excess positions,
dormancy and loan instalment delinquency are circulated by the Risk Management department
throughout the Bank to the different business divisions and these are examined as appropriate on a
daily, weekly or monthly basis by the Bank’s relationship managers.
The tables below shows details of the Bank’s impairment charge against its customer loan portfolio in
each of 2012, 2013 and 2014, as well as details of its recoveries against previously impaired customer
loans, amounts written off (described under ‘‘—Loan write-offs’’ below) and reclassifications.
Corporate
Real Estate
Balance at 1 January 2012..............................................
—
Charge for the year ........................................................
Recoveries.......................................................................
—
—
Net charge for the year ..................................................
Amounts written off .......................................................
Reclassifications..............................................................
Collective impairment.....................................................
Personal
(QAR million)
9
Total
112
121
3
(4)
47
(25)
50
(29)
—
—
—
—
(1)
—
—
—
23
(1)
3
2
22
(1)
3
2
Balance at 31 December 2012 .........................................
—
8
139
147
Balance at 1 January 2013..............................................
—
8
139
147
Charge for the year ........................................................
Recoveries.......................................................................
—
—
0
0
66
(23)
66
(23)
Net charge for the year ..................................................
Amounts written off .......................................................
Reclassifications..............................................................
Collective impairment.....................................................
—
—
—
2
0
—
—
—
43
(2)
(1)
—
43
(2)
(1)
2
Balance at 31 December 2013 .........................................
2
8
179
189
Balance at 1 January 2014..............................................
2
8
179
189
Charge for the year ........................................................
Recoveries.......................................................................
—
—
1
0
52
(23)
53
(23)
Net charge for the year ..................................................
Amounts written off .......................................................
Reclassifications..............................................................
Collective impairment.....................................................
—
—
—
—
0
—
—
—
29
0
2
—
29
0
2
—
Balance at 31 December 2014 .........................................
2
8
210
220
Of which:
Specific impairment ........................................................
Collective impairment.....................................................
—
2
8
—
208
2
216
4
Note:
Interest in suspense of QAR 21 million at 31 December 2012, QAR 38 million at 31 December 2013 and QAR 64 million at
31 December 2014 is included in the above analysis of credit losses for the purpose of QCB regulation requirements. The movement in
interest in suspense amounted to a net charge of QAR 8 million during 2012, QAR 18 million during 2013 and QAR 26 million during
2014.
109
Loan write-offs
After all possible in-house means of recovery are exhausted and in accordance with the Bank’s
policies and procedures, the delinquent accounts are transferred to the legal department so that legal
proceedings may be instituted through external lawyers in order to recover any outstanding and
overdue debts.
The Bank writes off a loan or an investment debt security balance, and any related accrued interest
and allowances for impairment losses, once it has determined that the loan or security is uncollectible
and after QCB approval. This determination is made after considering all relevant information,
including the obligor’s financial position, sources of repayment, proceeds from collateral and legal
recourse.
LIQUIDITY RISK
The aim of the Bank’s liquidity management is to ensure that it is always in a position to honour its
payment obligations and to minimise its costs of funding.
The Bank uses various tools to measure its liquidity risk including:
*
daily liquidity management;
*
funding gap projections;
*
prudential ratios, such as a loans to deposits ratio (described below), reserves requirements and
the Basel III liquidity ratios (also described below);
*
liability-side concentration analysis;
*
scenario analysis, including a range of early warning indicators based on internal and external
events which are intended to enable the Bank to proactively forecast any impending liquidity
issues; and
*
liquidity contingency plans, which prescribe action to be taken for the orderly management of
liquidity in a stress situation.
Stress testing is also performed for a range of different scenarios.
The liquidity ratio used by the Bank for managing its liquidity risk is the ratio of net liquid assets to
deposits from customers. For this purpose, net liquid assets are considered as including cash and cash
equivalents and investment grade debt securities for which there is an active and liquid market, less
any deposits from banks, debt securities, other borrowings and commitments maturing within the next
month. A similar, but not identical, calculation is used to measure the Bank’s compliance with the
liquidity limit established by the QCB.
The table below shows details of the Bank’s average net liquid assets to customer deposits ratio for
the years ended 31 December in each of 2012, 2013 and 2014 and for the six months ended 30 June
2015.
2012
Average for the year..............................................
Maximum for the year ..........................................
Minimum for the year ...........................................
125.90
202.35
103.09
2013
2014
(per cent)
128.66
128.74
148.30
161.13
116.71
107.18
Six months
ended
30 June
2015
106.91
112.71
97.21
During the period ending 30 June 2015, the liquid assets ratio fell briefly below 100 per cent. The
regulator was aware of this situation as it was the result of a system-wide reduction in net public
sector lending.
During 2014, the Bank started to monitor its performance against the proposed Basel III liquidity
coverage ratio (‘‘LCR’’) and net stable funding ratio (‘‘NSFR’’). These ratios are designed to measure
the Bank’s ability to meet short-term liquidity stress situations and the availability to the Bank of
long-term stable funds. At 31 December 2014, the Bank’s LCR was 256.0 per cent. and its NSFR
was 115.5 per cent.
A maturity analysis of the Bank’s financial assets and liabilities is contained in note 4(c) (iii) to each
of the Annual Financial Statements.
110
In addition, the Bank is exposed to liquidity risk through its off balance sheet obligations to lend
money and its contingent obligations under guarantees and letters credit.
MARKET RISK
Market risk management aims to ensure that risk exposures from the major market risks do not
exceed the Bank’s risk appetite, as articulated in risk limits, policies and product programmes. These
controls define permissible conduct and also specify the types of financial instruments which the Bank
can acquire as part of its trading and investment activities.
The primary objective of the Bank’s market risk management function is to provide a coherent policy
and operating framework for the management of market risks, and to provide transparency into the
Bank’s market risk profiles for both internal and external stakeholders. The BRCC and the Board
approve the Bank’s market risk appetite in the form of specific limits. These limits are based on one
or a combination of notional amount, sensitivity measures and value at risk. The BRCC and the
Board also approve the market risk policies which provide guidelines to identify, measure and
monitor the Bank’s market risk exposures. ALICO is responsible for overall market risk management
with the Risk department being responsible for the development of detailed risk management policies
(subject to review and approval by ALICO and the Board) and for the day-to-day review of their
implementation.
The Risk department, which is independent of all business functions, monitors and reports all limits
and provides periodic risk reports to the BRCC and the RMC. Daily middle office reports are
provided to senior management that cover treasury activities. Stress testing and sensitivity analysis for
interest rate risk and foreign exchange risk are conducted on a regular basis and the results are
presented to the BRCC and the RMC for review. A detailed market risk review pack is submitted to
the Board on a quarterly basis.
Interest rate risk
The primary market risk to which the Bank’s non-trading portfolios (or banking book) are exposed
to, is the risk of loss from fluctuations in the future cash flows or fair values of financial instruments
because of a change in market interest rates. This risk is managed principally through monitoring
interest rate gaps. ALICO is the monitoring body for these exposures and is assisted by Treasury
division in its day-to-day management activities, which include using investment securities, advances
to banks, deposits from banks and derivative instruments to manage the overall position arising from
the Bank’s non-trading activities.
A summary of the Bank’s interest rate gap position on non-trading portfolios is set out in note
4(d)(ii) to the Annual Financial Statements. In addition, each of those notes contains an interest rate
sensitivity analysis which shows the effect of a 10 basis point change in interest rates applied to the
currencies in which the Bank’s financial assets and liabilities are denominated, with all other variables
remaining unchanged, on the Bank’s net interest income. In 2014, the effect of a 10 basis point
increase in interest rates would have been QAR 7 million increase in net interest income.
The Bank has no trading book exposure to interest risk as all fixed income exposures are available
for sale in the banking book.
Exchange rate risk
The Bank is exposed to the effects of fluctuations in prevailing foreign exchange rate on its financial
position. Note 4(d)(iii) to the Annual Financial Statements quantifies the Bank’s net exposures in its
principal currencies as at 31 December in each of 2012, 2013 and 2014 and includes a sensitivity
analysis in relation to its pound sterling, euro, UAE dirham and aggregate other currency exposure.
The Bank has set limits on the level of currency exposure, which are monitored daily. In particular,
the Bank’s foreign exchange open position is managed to a daily overall overnight limit of
U.S.$5 million and an intraday limit of U.S.$10 million. These are supported by currency limits and
stop loss limits.
Equity price risk
The Bank’s non-trading equity price risk exposure arises from equity securities classified as availablefor-sale. These securities are limited to the local market and to select shares approved by the Board.
The investments are held in the banking book as available for sale. The Bank uses Value at Risk
(‘‘VaR’’) to measure potential losses from its equity securities position. As at 31 December 2014, the
VaR on the Bank’s equity investments was 8.6 per cent of their fair value using a 99 per cent
111
confidence level and assuming a 10-days holding period. Note 4(d)(iii) to the Annual Financial
Statements also contains an equity price risk sensitivity analysis for the Bank. During 2015, the Bank
has also introduced a small trading portfolio in local equities and this is managed with appropriate
limits on total volume, stop-loss and VaR.
Operational and other risks
The Bank’s operational risk management policy sets out the overall operational risk framework,
including the roles and responsibilities for operational risk management. The Bank’s risk taking units
(both business and support) are responsible for the daily management of operational risks through
identification and appropriate mitigation. The acceptance of residual risk is subject to specific
approvals.
The Bank’s risk management
management, including:
function
provides
independent
oversight
of
operational
risk
*
preparing and updating the Bank’s operational risk management policy and framework,
reviewing new processes and all changes to existing procedures;
*
facilitating the Bank’s risk control self-assessment process;
*
co-ordinating the Bank’s business continuity and disaster recovery programmes, including
assessing the impact on the business and regular testing; and
*
managing the Bank’s insurance programme.
Operational risk measurement within the Bank is achieved through the basic indicator approach for
regulatory purposes and enhanced by the standardised approach for pillar two.
Compliance
Overview
All of the Bank’s business functions are subject to the Bank’s compliance policies and procedures. To
ensure its independent functioning, the Bank’s Compliance department reports directly to the BRCC.
Internal Audit ensures that a robust compliance framework is being proactively implemented. The
Bank’s compliance function is also reviewed by the QCB and the Bank’s external auditors.
The Bank’s compliance programme has three main pillars, namely advise, monitor and report, which
are built on a foundation of a sound understanding of the appropriate regulatory requirements.
Advising encompasses internal notification of regulatory changes, reviewing and assessing the
compliance risk associated with new products and services and other internal communications
including training and a compliance calendar. Monitoring includes procedures for compliance reviews,
breach escalation, complaints handling, whistleblowing, issues management and compliance indicators.
Reporting is for executive management, the Board and regulators.
As compliance requirements are constantly evolving, the Bank’s compliance programme, including its
compliance policies and procedures, is periodically reviewed and updated to reflect any changes in
local and international regulatory environments and to address any changes in the Bank’s risk profile.
Compliance reports and updates are provided to the BRCC to ensure proper Board level awareness
and directives on compliance issues across the Bank.
AML and CTF
Every business relationship within the Bank is reviewed and rated against defined risk parameters that
comply with local and international anti-money laundering (‘‘AML’’) regulatory requirements. These
relationships are subject to either reduced, standard or enhanced know your customer due diligence
procedures, depending on the level of assessed risk.
Compliance and business units work together to ensure that clients and transactions are monitored on
an ongoing basis to enable the Bank to comply with all AML applicable regulations and to ensure
that transactions are not conducted with entities or individuals on sanctions lists such as OFAC and
other international lists.
Internal Audit
The Internal Audit (IA) function is an independent function reporting directly to the BAC, and is
governed by Board-approved terms of reference that are reviewed and approved annually in order to
112
ensure conformity with leading industry practices, QCB regulations (including QCB’s Corporate
Governance Guidelines) and all applicable laws, regulations and international standards.
The BAC’s main responsibilities in relation to the IA function are to:
*
oversee the scope of work through approval of its key documents (audit charter and audit
manuals);
*
review and approve the annual risk based audit plan;
*
review the activities, resources and organisational structure, including approval of the annual
budget and the remuneration of the IA function;
*
ensure that audit findings and recommendations communicated by IA, and management’s
responses, are received, discussed and appropriately acted upon; and
*
receive a quarterly report on the results of the IA function’s work.
The Chief Internal Auditor has direct access to the BAC’s Chairman and is accountable to the BAC.
The BAC’s terms of reference are complemented by the IA Charter, which defines the scope,
accountability, responsibilities and authority of the IA function, and a Code of Ethics, which defines
principles (integrity, objectivity, confidentiality and competency) that IA staff are expected to apply.
Both these documents are reviewed and updated annually by IA and approved by the BAC.
The IA framework includes:
*
audit manuals;
*
various internal policies and instructions published by the Bank;
*
external laws and regulations; and
*
standards and code of ethics set by The Institute of Internal Auditors (the ‘‘IIA’’).
The overall objective of IA is to provide independent and objective assurance and consulting services
designed to add value and improve the Bank’s operations and management of risk. IA brings a
systematic and disciplined approach to evaluating operational and control processes, and provides
recommendations for improving the effectiveness of risk management, internal controls and
governance processes.
In order to achieve its overall strategic objectives, IA adopts the following operational strategy:
*
it utilises a risk-based audit methodology so that all risks are assessed across all business and
operational units of the Bank, and across all underlying processes and activities;
*
it employs skilled and experienced technical resources that are responsive to changing business
requirements and are knowledgeable about banking operations and risks;
*
it recommends constructive business and operational solutions that add value to the Bank; and
*
it operates a continuous improvement plan with key performance indicators to track progress.
IA ensures compliance with QCB instructions to audit all critical functions of the Bank periodically.
It adheres to best practices, in particular, those set by the IIA. The internal audit process consists of
five main phases:
*
risk assessment and planning;
*
execution;
*
reporting;
*
audit tracking, including periodic follow-up reviews; and
*
quarterly BAC reporting.
The IA function comprises seven skilled and experienced staff, including a dedicated IT specialist.
113
MANAGEMENT AND EMPLOYEES
BOARD OF DIRECTORS
The Board is responsible for the overall direction, supervision and control of the Bank. The day today management of the Bank is conducted by the Bank’s Chief Executive Officer & Managing
Director.
Under its Articles of Association, the Board is required to comprise up to 10 members elected by the
General Assembly of Shareholders. Each shareholder is represented by one board member except for
three shareholders who have two representing board members. A majority of the Directors, including
the Chairman, must be Qatari citizens. Board members are elected for three-year renewable terms.
The Board’s duties and responsibilities include:
*
providing leadership and guidance to the Bank’s activities;
*
overseeing the work of the management and its execution of the Bank’s business strategies;
*
managing, monitoring and overseeing the business and the corporate governance framework of
the Bank;
*
adopting strategic and financial plans;
*
adopting and ensuring the implementation of appropriate risk assessment and risk management
policies and processes (including setting and monitoring adherence to credit granting policies and
approving certain high value loans);
*
monitoring and assessing the internal controls and the Bank’s compliance with applicable laws
and regulations; and
*
approving compensation, establishing a performance review process and adopting a succession
plan for senior management.
The Board meets regularly (and is required to meet at least six times a year). Decisions of the Board
are, with limited exceptions, made by majority votes of those present (in person or by proxy) at the
meeting. The Board and senior management have delegated certain powers to committees, as
described below.
The members of the Board of Directors are:
Position
Experience
H.E. Sheikh Hamad Bin Jassim
Bin Jabor Al-Thani
Chairman
H.E. Sh. Hamad Bin Jassim Bin Jabor Al-Thani has been a member
of the Board for 14 years.
H.E. Sh. Hamad Bin Jassim Bin Jabor Al-Thani is the former
Prime Minister of Qatar (from 2007 to 2013); Minister of Foreign
Affairs of Qatar (from 1992 to 2013) and Chief Executive Officer of
Qatar Investment Authority.
Ibrahim Dabdoub
Vice Chairman
Mr. Dabdoub has been a member of the Board for 10 years. Mr.
Dabdoub Studied at the Middle East Technical University in
Ankara, Turkey and at Stanford University in California, USA.
Mr. Dabdoub’s previous experience includes Group Chief
Executive Officer of National Bank of Kuwait, which he held
from 1983 until his retirement in March 2014.
Sheikh Jabor Bin Hamad Bin
Jassim Al-Thani
Sh. Jabor Al-Thani has been a member of the Board for 14 years.
Sh. Jabor Al-Thani is a prominent businessman in the State of
Qatar and has held various Board memberships including Qatar
Insurance Company and Gulf Warehousing Company. He is a
graduate of the Royal Military Academy, Sandhurst.
H.E. Sheikh Sultan Bin Jassim Bin
Mohammed Al-Thani
H.E. Sh. Sultan Al-Thani has been a member of the Board for 14
years. H.E. Sh. Sultan Al-Thani holds a Bachelor of Science degree
in Business Administration (Marketing) from the University of
Baltimore Maryland, USA, which he gained in July 1990.
114
H.E. Sh. Sultan Al-Thani is the Director of the office of H.H. Sh.
Mohammed Bin Khalifa Bin Hamad Al-Thani (former Deputy
Prime Minister of Qatar).
H.E. Sh. Sultan Al-Thani was previously the Chairman of the
Qatar Tourism Authority.
H.E. Sheikh Thani Bin Hamad Bin
Khalifa Al-Thani
H.E. Sh. Thani Al-Thani has been a member of the Board for five
months. H.E. Sh. Thani Al-Thani holds a Degree in
Communication from Northwestern University, USA. H.E. Sh.
Thani Al-Thani is the brother of H.H. the Emir of Qatar.
Sheikh Suhaim Bin Abdullah Bin
Khalifa Al-Thani
Sh. Suhaim Al-Thani has been a member of the Board for five
years. Sh. Suhaim Al-Thani holds a BA degree in Business & Law
which he gained in 2006 from London Metropolitan University,
UK.
Sh. Suhaim Al-Thani is the Vice Chairman of Mannai Corporation
and a Board member of Qatar Investments and Projects
Development Holding Company.
Mohammed Mahmoud Al-Okar
Mr. Al-Okar has been a member of the Board for 14 years and has
more than 35 years’ banking experience. Mr. Al-Okar’s experience
includes Regional General Manager with Grindlays Private Bank
Middle East.
Omar Bouhadiba
Chief Executive Officer &
Managing Director
See ‘‘—Senior Management’’ below.
The business address of each member of the Board is Suhaim Bin Hamad Street, PO Box 2001,
Doha, Qatar. No member of the Board has any actual or potential conflict of interest between his
duties to the Bank and his private interests and/or other duties.
Board Committees
The Board has delegated certain of its duties to the following committees:
BAC: The BAC is delegated by the Board to review and monitor the integrity of the Bank’s financial
statements and financial reporting, its internal control systems, audit responsibilities and internal and
external audit matters. The BAC comprises three members and is chaired by H.E. Sh. Sultan Bin
Jassim Bin Mohd. Al-Thani. The other members are Sh. Suhaim Bin Abdullah Bin Khalifa Al-Thani
and Mr. Mohammed Al-Okar. In 2014, the BAC held six meetings.
Board Remuneration, Nominations and Corporate Governance Committee: The BRNCG assists the
Board in fulfilling its obligations by providing a focus on corporate governance and policy
governance, taking into consideration established governance best practices. The BRNCG is tasked
with approving or making recommendations regarding corporate values under the Bank Code of
Conduct, assisting the Board in determining its composition and structure and recommending
succession planning for the Board. The BRNCG comprises four members and is chaired by Mr.
Ibrahim Dabdoub. The other members are, H.E. Sh. Sultan Bin Jassim Bin Mohd. Al-Thani, Sh.
Jabor Bin Hamad Bin Jassim Al-Thani and Mr. Mohammed Al-Okar. In 2014, this committee held
three meetings.
BRCC: The functions of the BRCC are described under ‘‘Risk management—Overview—Governance—
Board committees’’. The BRCC is chaired by Mr. Ibrahim Dabdoub and comprises two other
members: Sh. Suhaim Bin Abdullah Bin Khalifa Al-Thani and Mr. Mohammed Al-Okar. The BRCC
held nine meetings in 2014.
BEC: The functions of the BEC are described under ‘‘Risk management—Overview—Governance—
Board committees’’. The BEC is chaired by Mr. Ibrahim Dabdoub and comprises two other members:
H.E. Sh. Thani Bin Hamad Bin Khalifa Al-Thani and Sh. Jabor Bin Hamad Bin Jassim Al-Thani.
The BEC held four meetings in 2014.
SENIOR MANAGEMENT
The Chief Executive Officer & Managing Director is accountable for executing the Bank’s strategy
and running the business of the Bank on a day-to-day basis. The Chief Executive Officer &
115
Managing Director reports directly to the Board and keeps the Board fully informed of all important
aspects of business performance. He is supported by an extensive senior management team.
The senior management of the Bank is as follows:
Title
Experience
Omar Bouhadiba
Chief Executive Officer &
Managing Director
Mr. Omar Bouhadiba joined the Bank in October 2015. From 2013
to 2015 he was a board member at Oman Arab Bank and Head of
the Corporate and Institutional Group for Arab Bank plc. From
2010 to 2013 he was Chief Executive Officer of the International
Banking Group of the National Bank of Kuwait, based in Kuwait.
Mr. Bouhadiba’s other experience includes eight years as head of
Corporate and Investment Banking for Mashreq Bank of the UAE
and 21 years with Bank of America in various corporate banking
positions in London, Paris, Bahrain, Athens, Brussels and Dubai.
Mr. Bouhadiba holds an MBA from the Wharton School of
Finance (Class of 1978). He was born in 1953 and holds dual
French and Tunisian nationalities.
Muhannad Kamal
Deputy Chief Executive Officer
Mr. Kamal was appointed Deputy Chief Executive Officer in July
2015. He also has overall responsibility for wholesale banking and
has 34 years’ experience in banking. He has been with the Bank
since April 2006. Prior to this, he was with National Bank of
Kuwait in New York, USA from 1998 as General Manager. Mr.
Kamal holds a Master of International Management degree with a
concentration in Finance & Marketing from Thunderbird
University, the American Graduate School of International
Management in Glendale, USA.
Sheikh Fahad Bin Hamad Bin
Jassim Al-Thani
Business Development
Sheikh Fahad Al-Thani was appointed Deputy General Manager
Business Development in January 2014. He is responsible for
managing Government relationships and strategically important
corporate customers and has nine years’ experience in banking. He
has been with the Bank since November 2006. Sheikh Fahad
Al-Thani holds a Bachelor of Business Administration from the
European University in Geneva, Switzerland.
Chaouki Daher
Head of Private Banking
Mr. Daher was appointed General Manager – Head of Private
Banking in July 2015. He is responsible for managing the Private
Banking division and growing the Bank’s wealth management
business and has 22 years’ experience in private banking,
advertising and public relations. He has been with the Bank since
November 1998. Prior to this, he was with Qatar Airways from
April 1997 where he was Advertising & Public Relations Manager.
Mr. Daher holds a Bachelor of Science degree in Business
Administration from the University of North Carolina, USA.
Bhupendra Jain
Head of Corporate Banking
Mr. Jain was appointed Deputy General Manager – Head of
Corporate Banking in July 2015. He is responsible for the
Corporate Banking division and has 27 years’ experience in
banking, risk, marketing and financial services and has been with
the Bank since July 2006. Prior to this, he was with EXL from
March 2004 as Vice President & Head of Banking & Financial
Services. Mr. Jain holds a Bachelor of Commerce Degree from
Punjab University, India and is a Chartered Accountant and
member of the Institute of Chartered Accountants of India.
Hassan Al Mulla
Head of Retail Banking
Mr. Al Mulla was appointed Head of Retail Banking in June 2015.
He is responsible for the Retail Banking division and has over 23
years’ experience in retail banking. He has been with the Bank since
May 2009. Prior to this, he was with Masraf Al Rayan from
January 2008 as Assistant General Manager – Retail Banking.
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Chandramohan Ganapathy
Chief Risk Officer
Mr. Ganapathy was appointed Chief Risk Officer in July 2014. He
is responsible for the establishment and maintenance of risk
frameworks across all risk types at unit and enterprise level and
has 24 years’ experience in risk management, primarily in the
banking industry. He has been with the Bank since July 2014. Prior
to this, he was with Commercial Bank of Kuwait from June 2000
where he last held the position of General Manager – Head of Risk
Management. Mr. Ganapathy holds a Bachelor of Commerce from
Osmania University in India. Mr. Ganapathy also holds the
following professional qualifications: Financial Risk Manager
certification from the Global Association of Risk Professionals
and Professional Risk Manager certification from the Professional
Risk Manager International Association. He is also a Chartered
Financial Analyst and a Chartered Accountant and a member of
both the CFA Institute and the Institute of Chartered Accountants
of India. He is also a Chartered Management Accountant from the
Institute of Cost Accountants of India.
Daren Warner
Chief Financial Officer
Mr. Warner was appointed Chief Financial Officer in August 2014.
He is a Fellow Chartered Accountant of the ICAEW, an Associate
member of the Association of Corporate Treasurers and a
Chartered Fellow of the Chartered Institute of Securities and
Investment. He is responsible for the Bank’s financial control,
planning and management accounting teams and has 25 years’
experience in finance, treasury, audit and risk management. He has
been with the Bank since 2014. Prior to this, he spent 16 years with
Standard Chartered Bank in various positions, most recently as
Chief Financial Officer Bahrain. Mr. Warner gained a Bachelor’s
degree in Marketing with German from Stirling University.
Shah Tajdar
Chief Credit Officer
Mr. Tajdar was appointed Chief Credit Officer in August 2012. He
leads the retail and wholesale credit functions, as well as the credit
analysis teams, and has 36 years’ banking experience. He has been
with the Bank since July 2009. Prior to this, he was with JP Morgan
Chase (International & US Commercial Banking) from 2006 as
Vice President – Credit Underwriting. Mr. Tajdar holds a Master of
Business Administration from the Institute of Business
Administration at Karachi University, Pakistan.
Fadi Abu Aitah
Treasurer
Mr. Abu Aitah was appointed Treasurer in January 2015. He is
responsible for the Bank’s treasury sales, asset and liability
management and dealing, and has 22 years’ experience in the
banking sector. He has been with the Bank since 1993. Mr. Abu
Aitah holds a Bachelor of Commerce from Madras University,
India.
Saleh Al Kawari
Head of HR & Government
Affairs
Mr. Al Kawari was appointed Assistant General Manager – Head
of HR & Government Affairs in January 2014. He is responsible
for managing the Bank’s human resources & governmental affairs
function and has 28 years’ experience in the banking and
governmental sector. He has been with the Bank since March
2009. Prior to this, he was with the Ministry of Interior in various
departments from 1987. Mr. Al Kawari holds a Bachelor of Science
in Law Enforcement with a minor in Psychology from Western
Oregon State College, USA.
Chandramohan Pillai
Head of Administration &
Facilities
Mr. Pillai was appointed Assistant General Manager – Head of
Administration & Facilities in January 2015. He is responsible for
managing the Bank’s administration and facilities teams and has 33
years’ experience in banking at the Bank. Mr. Pillai holds a
Bachelor of Commerce from Bangalore University in India.
117
Imad Chemaly
Chief Legal Counsel
Mr. Chemaly was appointed Chief Legal Counsel in July 2008. He
is responsible for managing the Bank’s legal team and has 17 years’
legal experience. He has been with the Bank since July 2008. Prior
to this, he was with Raphael & Associates Law Firm from 2003
where he was Attorney at Law. Mr. Chemaly gained a Master of
Laws from Northwestern University, USA, a Master in Private
Law from Saint Joseph University, Beirut, Lebanon and a Bachelor
degree from the same university. Mr. Chemaly also holds a
certificate in business administration from the Instituto de Empresa
University, Spain.
John Scott McIvor
Chief Internal Auditor
Mr. McIvor was appointed Chief Internal Auditor in October 2013.
He is responsible for the Bank’s audit teams and supporting the
business in the ad hoc analysis of projects, and has 20 years’
experience in audit in the banking sector. He has been with the
Bank since October 2013. Prior to this, he was with National
Commercial Bank in Saudi Arabia from May 1994 as Vice
President, Senior Audit Manager, Planning & Development
Department. Mr. McIvor holds a Bachelor of Law (LLB) degree
from Edinburgh University. He is a Chartered Accountant and
member of ICAS and an associate member of the Institute of
Internal Auditors.
Abeer Al Emadi
Head of Operations
Ms. Al Emadi was appointed Head of Operations in August 2015.
She is responsible for managing the Bank’s control agenda and has
eight years’ experience in Operations in the banking sector. She has
been with the Bank since April 2009.
Georges Hobeika
Head of IT & Applications
Support
Mr. Hobeika was appointed Head of IT in March 2015. He is
responsible for all aspects of the Bank’s IT systems and has 19
years’ experience in IT, electronic banking and IT audit in the
banking sector. He has been with the Bank since May 2008. Prior to
this, he was with Banque Libano-Francaise in Lebanon from
November 2007 as Head of Information Security. Mr. Hobeika
holds a Master of Science in Project Development from the
University of Liverpool.
Basil Falah
Head of Compliance
Mr. Falah was appointed Head of Compliance in December 2010.
He is responsible for compliance and leads the Bank’s relationship
with the regulators. He has 14 years’ experience in compliance, and
has been with the Bank since December 2010. Prior to this he was
with Federal Deposit Insurance Corporation in the United States
from May 2009 as a Risk Management Examiner. Mr. Falah holds
a Bachelor of Science in Accounting from Brooklyn College at the
University of New York, USA.
The business address of each member of senior management is Suhaim Bin Hamad Street, PO Box
2001, Doha, Qatar. No member of senior management has any actual or potential conflict of interest
between his duties to the Bank and his private interests and/or other duties.
Management Committees
The Bank’s management committees are described under ‘‘Risk management—Overview—Governance—
Management committees’’.
EMPLOYEES
As at 30 June 2015, the Bank employed 409 members of staff compared to 394 as at 31 December
2014, 387 at 31 December 2013 and 416 as at 31 December 2012. The reduction in staff in 2013
principally reflected the Bank’s efforts to restructure its Retail Banking division.
The Bank follows a remuneration policy that is in line with most other financial institutions. The
policy covers grade structure, basic salary ranges, allowances, annual bonus scheme and annual leave
entitlement. Salary and allowances are compared to external market data to ensure competitiveness
while the annual bonus plan is a discretionary scheme which is differentiated by grade and is based
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primarily on each employee’s performance ratings. The ratings are determined by the achievement of
objectives and demonstration of competencies. The performance of the Bank is also a contributing
factor with bonus payments being limited to a percentage of net profit.
The Bank is committed to the training and development of its employees and has created and
implemented a number of training and development programmes, including a graduate development
programme, a management development programme and an executive development programme. These
are focused on developing the employees and enhancing the Bank’s intellectual capital, with a specific
focus on developing Qatari talent in line with the Qatar National Vision.
The Bank is guided in its human resources decisions by the Qatari government’s recommended policy
that 20.0 per cent of its total personnel should consist of Qatari nationals and, in addition, certain
management positions in Qatari companies are required under Qatari law to be filled by Qatari
nationals. The Bank’s Qatarisation level at 30 June 2015 was 17 per cent and the Bank is
continuously working to recruit, retain and develop Qatari staff and scholarship students.
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OVERVIEW OF QATAR
Unless indicated otherwise, information in this section has been derived from Government publications.
COUNTRY PROFILE
Qatar is an independent state in the Southern Arabian Gulf. Qatar shares a land border and
maritime boundaries with Saudi Arabia and maritime boundaries with Bahrain, the UAE and Iran.
Qatar covers an area of approximately 11,493 square kilometres. Doha is the capital city of Qatar,
the seat of government and Qatar’s cultural, commercial and financial centre. It includes the country’s
main seaport and international airport and has an advanced road system linking it with the
international road network. According to the most recent full Government census, Qatar’s population
was 1,699,435 in April 2010 indicating a 128.4 per cent. growth in population since the census prior
to that was carried out in 2004. In August 2014, the Ministry of Development Planning and Statistics
estimated, on a preliminary basis, that there were 2,288,927 people within the state boundaries of
Qatar. The Ministry of Development Planning and Statistics is currently conducting a simplified middecade consensus that was launched in the first quarter of 2015, the results of which are expected to
be available by the end of 2015. A large portion of Qatar’s population is comprised of non-Qatari
nationals.
Qatar, which gained independence from the United Kingdom on 3 September 1971, was ruled by His
Highness Sheikh Hamad Bin Khalifa Al-Thani from 27 June 1995 until 25 June 2013, on which date
he handed power over to his fourth son, and the current Emir of Qatar, His Highness Sheikh Tamim
Bin Hamad Bin Khalifa Al-Thani. During his reign, H.H. Sheikh Hamad implemented various
initiatives designed to exploit Qatar’s oil and gas resources in a responsible manner, thereby making
rapid economic development and the construction of modern infrastructure possible in Qatar. During
a period of rapid economic and social progress, Qatar has maintained its cultural and traditional
values as an Arab and Islamic nation.
In terms of foreign relations and membership of international organisations, Qatar, together with
Bahrain, Kuwait, Oman, Saudi Arabia and the UAE form the GCC. Furthermore, Qatar is a
member of OPEC, the Gas Exporting Countries Forum (which was established in 2008 and has its
headquarters in Doha) and the United Nations. It is also a member of numerous international and
multilateral organisations, including the IMF, the International Bank for Reconstruction and
Development, the World Trade Organisation, the League of Arab States, The Organisation of the
Islamic Conference, the Multinational Investment Guarantee Organisation and UNESCO.
On 23 December 2008, representatives of 11 gas producing nations, including Qatar, Russia and Iran,
signed an intergovernmental memorandum and charter formally establishing the Gas Exporter
Countries Forum (the ‘‘GECF’’), which chose Doha as the future headquarters for its permanent
secretariat. The GECF Secretary General commenced his duties in Doha in February 2010 and the
GECF Liaison Office, which facilitates the affairs of the GECF, is also based in Doha. Apart from
the regular Ministerial meetings, the first GECF gas summit was held in Doha in December 2011.
The GECF’s objectives include exchanging information on a broad range of issues such as new
technologies, investment programmes, relations with natural gas consuming countries and
environmental protection.
Qatar is an advocate for regional integration and is a member of the GCC, whose other members are
Bahrain, Kuwait, the UAE, Oman and Saudi Arabia. In 2003, the GCC established a customs union
under which Qatar applies a common customs tariff of 5.0 per cent. to most products, with a limited
number of exceptions. In 2005, as part of the GCC, Qatar joined the Istanbul Cooperation Initiative,
which is a North Atlantic Treaty Organisation (‘‘NATO’’) initiative to enhance regional security in
the broader Middle East.
In 2001, the GCC proposed the establishment of a common currency with a view to deepening
economic integration. The GCC monetary union is expected to improve the efficiency of financial
services, lower transaction costs and increase transparency in the prices of goods and services. In
December 2008, finance ministers of the GCC member states (other than Oman) signed an agreement
establishing the framework of the monetary union. The agreement also provides for the establishment
of a monetary council, which will finalise the details of the monetary union and is expected to be
converted eventually into a GCC central bank. The agreement must be ratified by each member state
in order for it to take effect. Currently, four of the six GCC members have signed the accord to join
the monetary union – Qatar, Kuwait, Saudi Arabia and Bahrain – while the UAE and Oman have
opted out. In May 2009, those GCC members who intend to join the monetary union decided that
120
Riyadh would be home to the new GCC monetary council (the ‘‘GCC Monetary Council’’), a
precursor to a GCC central bank. In March 2010, Qatar, Kuwait, Saudi Arabia and Bahrain
unanimously elected Saudi Arabia’s Monetary Agency Governor as the first chairman of the GCC
Monetary Council, representing the latest step in launching a single currency and laying the
foundation for a GCC central bank. As yet, there has been no announcement of an official timetable
for the progression of the GCC Monetary Union.
LEGAL SYSTEM
Over the last decade, Qatar’s legal system has been significantly reformed by the enactment of various
pieces of legislation intended to bring Qatari laws in line with international laws, standards and
practices. Qatar’s civil law addresses a wide range of matters including conflict of laws, contracts,
rights and obligations, security, ownership and torts. Qatar’s commercial law addresses commercial
affairs and entities, competition, commercial obligations and contracts and commercial paper. The
commercial law also addresses bankruptcy matters, permitting creditors to file claims against any
corporate entity, except for certain professional companies and other companies that are at least
majority owned by the Government. The Commercial Companies Law (Qatar Law No. 11/2015)
addresses the ownership of shares, limited liability, capital contributions, payment of dividends,
shareholder rights and obligations and general principles of corporate governance. The Commercial
Companies Law also introduces the concept of a single member limited liability company, and is not
dissimilar to the companies laws of more mature legal systems.
The Government has passed other significant legislation in recent years, including the Foreign
Investment Law, the Bankruptcy Law, the Central Bank Law, the Money Laundering Law, the Doha
Securities Market Law (now the Qatar Exchange Law) and the Qatar Financial Centre Law (the
‘‘QFC Law’’), as well as competition, intellectual property, labour, property and environmental laws.
Following the establishment of the QFC in 2005, the QFC Law established a legal and regulatory
regime to govern the QFC that is generally parallel to and separate from Qatari laws and the Qatari
legal system, except for Qatari criminal law. The QFC has established its own rules and regulations
applicable to, among others, financial services companies, and which cover topics such as
employment, companies, anti-money laundering, contracts and insolvency. See further ‘‘Banking
industry and regulation in Qatar—Qatar Financial Centre’’.
Qatar is also strengthening the private sector by undertaking regulatory reforms aimed at improving
Qatar’s business climate and creating an environment that will support enterprise creation, private
competition and foreign direct investment, including through taking steps such as liberalising the
telecommunications sector and creating special economic zones. In addition, Qatar has sought to
increase the country’s attractiveness to foreign direct investment by implementing laws that allow
more foreign participation in the domestic economy. For example, the Government has established
the QFC, which enables global financial firms to operate in Qatar, although there are restrictions on
such financial institutions dealing with retail customers.
In addition, on 1 January 2010, Law No. (21) of 2009 on Income Tax (the ‘‘Income Tax Law’’) came
into effect. Under the Income Tax Law (which is applicable outside the QFC), taxable income in any
taxable year is now taxed at a flat tax rate of 10.0 per cent., except for certain oil and gas companies
that will continue to be taxed at the previous rate of 35.0 per cent. This is part of a broad plan to
diversify the Qatari economy to reduce reliance on the oil and gas sector, which accounted for
50.5 per cent. of total nominal GDP in 2014. However, Qatari companies 100 per cent. owned by
Qataris do not pay income tax.
ECONOMIC OVERVIEW
Qatar is one of the most prosperous countries in the world. According to the QCB’s June 2015
Quarterly Statistical Bulletin, Qatar’s nominal GDP per capita was QAR 348 thousand (U.S.$95
thousand) in 2014. Over the last several years, Qatar has been one of the fastest growing economies
in the world. As at 31 December 2014, Qatar’s proven reserves of oil amount to approximately 25.7
thousand million barrels while its proven reserves of natural gas amounted to 866.2 trillion cubic feet,
according to the BP Statistical Review of World Energy June 2015. Virtually all of Qatar’s proven
reserves of natural gas and condensate are located in the North Field, which is estimated by the U.S.
Energy Information Administration to be the largest non-associated gas field in the world,
representing approximately 13.3 per cent. of the world’s natural gas reserves in 2013, according to the
same report. Qatar has over 100 years of proven gas reserves at projected long-term production
levels.
121
According to the Ministry of Development Planning and Statistics, Qatar’s carefully planned
exploitation of its hydrocarbon reserves resulted in a nominal GDP compound annual growth rate
(‘‘CAGR’’) of 19.9 per cent. from 2009 to 2013. Qatar’s economy achieved a new record in 2014 with
a total nominal GDP of QAR 771,013 million (U.S.$211,816 million) representing nominal GDP
growth of 4.2 per cent. in 2014 compared to 2013. Qatar exported 103.4 billion cubic metres of liquid
natural gas (‘‘LNG’’) in 2014 and is the largest LNG exporter in the world according to BP
Statistical Review of World Energy June 2015. According to preliminary data in the QCB’s Quarterly
Statistical Bulletin for June 2015, the oil and gas sector contributed 54.4 per cent. and 50.5 per cent.
of Qatar’s total nominal GDP in 2013 and 2014, respectively. Qatar has continued to stimulate
growth in its gas network through the Barzan Project (a project to provide domestic pipeline gas),
which is currently scheduled to complete its first phase by the end of 2015. Qatar has focused on
diversifying its economy in recent years in an effort to reduce its historical dependence on oil and gas
revenues. The construction and real estate sectors have recently made substantial contributions to
Qatar’s economic growth and significant investments have been made to increase economic returns
from, in particular, petrochemicals, financial services, infrastructure development and tourism. As a
result, nominal GDP for the non-oil and gas sector grew by 13.1 per cent. in 2014, considerably
higher than the oil and gas sector which declined by 3.2 per cent. in 2014. Nominal GDP for the
non-oil and gas sector was QAR 381,575 million (U.S.$104,828 million), or 49.5 per cent. of Qatar’s
total nominal GDP, in 2014.
In recent years, Qatar has focused on developing and exploiting its natural gas resources beyond the
LNG industry by implementing a downstream strategy driven by opportunities to generate additional
revenue from its existing oil and gas production. Qatar Petroleum (‘‘QP’’) has developed pipeline gas
projects both for regional export markets and for domestic petrochemicals and industrial
consumption. In addition, QP is the majority shareholder in a number of industrial companies located
primarily at Ras Laffan City and Mesaieed Industrial City, which use natural gas as feedstock and/or
fuel to produce various value added products, such as petrochemicals, fertiliser, steel, iron and metal
coating, both for domestic consumption and for export. Qatar has also invested in exploiting various
gas-to-liquid (‘‘GTL’’) technologies and has two joint venture projects currently in operation to
generate GTL products like distillates.
Throughout a period characterised by rapid growth and development, Qatar has demonstrated fiscal
responsibility by managing its budget and public finances prudently. In 2009, Qatar’s current debt to
GDP ratio was less than 10 per cent. However, between 2009 and 2012, Qatar’s indebtedness
increased, mainly due to the support given by Qatar to the commercial banking sector during the
global financial crisis in 2009 and the issuance of bonds and treasury bills by the QCB in 2010, 2011
and 2012 to absorb excess liquidity among domestic commercial banks and to develop a yield curve
for riyal-denominated domestic bonds. Following the global financial crisis, Qatar has tightened the
regulatory framework applicable to the commercial banking sector, see ‘‘Banking Industry and
Regulation in Qatar—Qatar Central Bank’’. In recent years, Qatar has reduced its total external
indebtedness and its total internal indebtedness. According to a report by the Ministry of Finance as
sourced by the IMF, Qatar’s total direct external indebtedness was QAR 74.3 billion
(U.S.$20,412 million), or 10.1 per cent. of nominal GDP, as of 31 March 2014. Most of Qatar’s
significant energy projects are funded on a stand-alone, limited recourse basis.
A decision of the Council of Ministers, No. (17) of 2008 (as amended) established the State Finance
Policy Committee, which comprises senior Government officials, including the Minister of Finance as
chairman, a representative of the QCB as deputy chairman, and representatives of the Qatar
Investment Authority (the ‘‘QIA’’) and QP. Under its mandate, the State Finance Policy Committee
provides guidance to all Government related entities that seek to access the international capital
markets and coordinates debt offerings by Qatari issuers in order to increase liquidity and optimise
borrowing costs for Qatari borrowers.
The significant revenues generated by the oil and gas sector (which contributed U.S.$195,202 million
and U.S.$99,465 million of Qatar’s annual revenues in the fiscal years ended 31 March 2013 and
31 March 2014, respectively) have provided sustained liquidity while ensuring sizeable surpluses in the
fiscal and external accounts. Qatar has had budget surpluses since the fiscal year ended 31 March
2001, with an estimated budgeted surplus of U.S.$7,249 million for the fiscal year ended 31 March
2014. In addition, Qatar’s trade activity is strong, with total goods exported (including re-exports) in
2014 valued at QAR 479,446 million (U.S.$131,355 million) and total imports in 2014 valued at QAR
113,369 million (U.S.$31,060 million). Between 2010 and 2014, the value of Qatar’s exports increased
from QAR 272,871 million to QAR 479,446 million, and the value of imports increased from QAR
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76,210 million to QAR 113,369 million. The external sector has been characterised by a large current
account surplus each year since 2000 and robust growth in imports has been counterbalanced by a
significant rise in hydrocarbon exports.
In its March 2015 Article IV Consultation; Staff Report and Press Release on Qatar (the ‘‘2015
Article IV Report’’), the IMF noted the following:
*
Qatar continues to implement an ambitious diversification strategy through a large public
investment programme, while retaining its systemic role in the global natural gas market;
*
the recent large drop in oil and natural gas prices will lead to a substantial deterioration of the
fiscal and external balances;
*
Qatar’s growth will remain strong in 2015, but is expected to slow going forward;
*
consumer price inflation is contained, although real estate prices have grown quickly;
*
ongoing budget reforms are welcome and should be deepened further;
*
banks remain sound and the financial sector regulatory agenda is moving forward, but emerging
risks and vulnerabilities need to be carefully monitored;
*
the prospects of persistently low oil prices and slowing medium-term growth call for
intensification of diversification efforts; and
*
the fixed exchange rate regime remains appropriate for Qatar.
In recent years, Qatar has used its budget surpluses to diversify the economy through increased
spending on infrastructure, social programmes, healthcare and education, which have modernised
Qatar’s economy. Qatar’s economic growth has also enabled it to diversify its economy through
domestic and international investment into different classes of assets. This diversification will be
important to Qatar’s future Government revenues as the growth rate of the State’s revenue from the
oil and gas sector is expected to stabilise given the completion of several of the State’s long-term
hydrocarbon investment programmes. In 2005, the QIA was established to propose and implement
investments for Qatar’s growing financial reserves, both domestically and abroad. Through the QIA,
Qatar has invested in private equity, the banking sector, real estate, publicly traded securities and
alternative assets. With its growing portfolio of international and domestic long-term strategic
investments, the QIA has continued to develop Qatar’s economic diversification strategy while
contributing to the nation’s significant economic expansion.
The QIA has provided financial support to Qatar’s financial sector as a response to the global
economic downturn and as a preventative measure to preserve the general stability in Qatar’s banking
sector. See further ‘‘Banking industry and regulation in Qatar—Banking system—Commercial banks’’. A
portion of the budget surplus has also been placed into stabilisation funds administered by the QIA.
Education and health services are expected to be funded in future years by the interest derived from
revenues of designated LNG trains currently being placed into dedicated stabilisation funds. The
Government does not publish figures relating to the size, scope or performance of the portfolio of
investments administered by the QIA.
In December 2010, Qatar made the world headlines when it was awarded the right to host the
Fédération Internationale de Football Association (FIFA) 2022 World Cup (the ‘‘2022 World Cup’’).
The 2022 World Cup provides opportunities for Qatar to invest in further developing its
infrastructure and diversifying its economy.
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ANNUAL INDICATORS
The following table shows certain economic data for Qatar for the periods indicated
2012
2013
2014
2015(1)
Nominal GDP (QAR millions) ..............................
Growth rate (%) ....................................................
Oil sector share (%) ...............................................
Growth rate (%) ....................................................
Non-oil sector share (%)........................................
Growth rate (%) ....................................................
692,655
12.1
57.0
9.8
43.0
15.1
734,863
6.1
54.8
2.1
45.2
11.4
764,797
4.1
51.1
(3.0)
48.9
12.7
GDP per capita (QAR thousand)...........................
CPI-Inflation (%)(2) ................................................
377.9
1.87
366.8
3.13
345.1
3.00
152,972
(19.2)
46.9
(40.6)
53.1
4.0
Not
available
1.00
Source: QCB September 2015 Quarterly Statistical Bulletin
Note:
(1) Up to 30 June only
(2) On a yearly basis.
INFLATION
Consumer Price Index inflation (the ‘‘CPI’’) in Qatar increased every year from 0.2 per cent. in 2002
to 15.2 per cent. in 2008 with a CAGR of 9.7 per cent. over that period. Qatar witnessed deflation of
4.9 per cent. in 2009 and 2.4 per cent. in 2010, reflecting mainly a decrease in housing costs. Inflation
was 1.9 per cent. in 2011, 1.9 per cent. in 2012 and 3.1 per cent. in 2013. The QCB’s Quarterly
Statistical Bulletin for September 2015 indicates that the inflation rate in Qatar increased to 3.5 per
cent. in mid 2014 and then fell to 1.0 per cent in the second quarter of 2015.
The increase in inflation prior to 2009 was primarily accounted for by the rapid and sustained
increase in rental prices, as well as an increase in international food and raw material prices. Prior to
2009, the rental component of the CPI increased sharply by an average 19.7 per cent. in 2008,
29.2 per cent. in 2007 and 25.9 per cent. in 2006. In order to address the domestic housing shortage
and control housing prices, the Government supported several domestic and residential construction
projects. As a result, cost pressure abated and rental prices stabilised. The housing cost component of
the CPI fell by an average 12.0 per cent. in 2009, 12.7 per cent. in 2010, 4.9 per cent. in 2011 and
3.2 per cent. in 2012. However, the housing cost component of the CPI has increased since 2012 by
an average 5.8 per cent. in 2013 and 7.8 per cent. in 2014.
The QCB uses various monetary instruments to address price stability. The required reserve ratio for
commercial banks was increased to 4.75 per cent. in 2008 in an effort to absorb excess liquidity from
the domestic markets. Certificates of deposit for terms of one, three, six and nine months were
increased from zero at the end of 2007 to a total of QAR 8.0 billion (U.S.$2.2 billion) as at March
2010 and were subsequently reduced to zero in 2011. They have remained at zero until the date of
this Base Prospectus. In addition, the QCB maintained its lending interest rate at 5.5 per cent. from
2007 until April 2011 and its deposit interest rate at 2.0 per cent. from May 2008 until August 2010.
The most recent cuts took place in August 2011, when rates on lending decreased from 5.0 per cent.
to 4.5 per cent. and rates on deposits decreased from 1.0 per cent. to 0.75 per cent. The United
States Federal Reserve Bank reduced its benchmark deposit rate on several occasions from 5.25 per
cent. in September 2007 to 0.25 per cent. in December 2008.
NATIONAL VISION
In October 2008, Qatar’s General Secretariat for Development Planning developed and published the
Qatar National Vision 2030 (the ‘‘National Vision’’). The National Vision defines broad future trends
and long-term objectives for Qatar, providing the framework within which national strategies and
implementation plans can be developed. Besides establishing the foundation for developing Qatar’s
future strategies and policies, the National Vision has also helped to strengthen the coordination
among governmental agencies and integrate planning efforts for the Government, the private sector
and civic organisations. The four cornerstones of the National Vision are human, social, economic
and environmental development, in the context of which the State aims to balance: (i) modernisation
and the preservation of traditions; (ii) the needs of the current generation and the needs of future
generations; (iii) managed growth and uncontrolled expansion; (iv) the size and quality of the
124
expatriate labour force; and (v) economic growth, social development, and environmental
management. The Qatar National Vision is to be achieved through a series of medium term plans.
The first such six-year plan, referred to as the National Development Strategy (NDS 2011-16), was
released in March 2011.
125
BANKING INDUSTRY AND REGULATION IN QATAR
Unless otherwise indicated, information in this section has been derived from publications of the
Government, the QCB and the QFC’s annual report and website.
QATAR CENTRAL BANK
The QCB was established in 1993, pursuant to Emiri Decree No. 15 of 1993. It inherited to roles of
the former Qatar Monetary Authority and operates in coordination with the Ministry of Finance.
The QCB is managed by a board of directors and chaired by its Governor. The Board of Directors
includes the Deputy Governor of the QCB and at least five other members, including representatives
holding the rank of undersecretary or higher from the Ministry of Finance, the Ministry of Economy
and Trade and the Economic Adviser from the Emiri Diwan. The QCB’s main objectives in its
monetary policy are to ensure the stability of the exchange rate of the Qatari riyal and the prices of
financial services.
In its supervisory capacity, the QCB oversees the activities of Qatar’s commercial banks (both
conventional and Islamic) and non-bank financial institutions and insurance companies (outside the
QFC) with a view to minimising banking and financial risk in Qatar’s financial sector. The QCB
conducts regular inspections of banks and non-bank financial institutions and reviews reports and
other mandatory data submitted by these entities, including quarterly capital adequacy compliance
reports.
The QCB has initiated single factor stress testing of the portfolios of commercial banks in Qatar. The
testing covers the four broad areas of liquidity risk, credit risk, interest rate risk and equity market
risk. The results of these stress tests illustrate the possible impact of adverse financial conditions on a
commercial bank’s capital adequacy ratio or return on assets. Stress testing of commercial banks,
conducted on an aggregate basis by the QCB, suggested that neither the capital adequacy ratio nor
the returns on assets of Qatar’s domestic banks would be significantly impaired. The IMF noted in
their 2015 Article IV Report that the QCB stress tests suggest that non-performing loans for real
estate, construction contractors and consumer loans would need to increase to nearly 30 per cent.
before the capital ratios of banks in Qatar fell below the regulatory minimum imposed by the QCB.
The QCB has:
*
implemented
market and
requirements
banks fail to
regulations regarding non-performing loans, large exposures, country risk, money
foreign exchange accounts, credit ratios, fixed assets for banks’ use, reserve
and banks’ investments, and has the authority to impose penalties in the event that
comply with these regulations;
*
established the Qatar Credit Bureau which provides analytical data and supports banks in their
implementation of advanced risk management techniques outlined by Basel II; and
*
substantially implemented Basel III standards earlier than the required timeline for completion
of different aspects of the Basel III framework which fall between 2013 and 2019.
Banks are required to have their annual accounts audited by the QCB’s approved independent
auditors and to obtain prior approval from the QCB to appoint senior management.
In January 2014, the QCB issued a circular to all commercial banks in Qatar (No. AR/3/2014) with
instructions regarding the implementation of Basel III requirements. The QCB minimum
recommended capital adequacy requirements under Basel III were increased to 12.5 per cent.
(including a capital conservation buffer of 2.5 per cent.). Pursuant to another QCB circular (No AR/
2/2014), commercial banks in Qatar are required to maintain a minimum liquidity coverage ratio of
60 per cent. for 2014, to be increased by 10 per cent. each year to reach 100 per cent. in 2018. The
QCB has undertaken extensive groundwork in order to implement its Basel III requirements.
The QCB also issues domestic currency and conducts bank clearing operations and settlements. The
investment department of the QCB manages the investments of the QCB’s financial reserves. These
investments are primarily in the form of securities issued or guaranteed by other sovereigns with
maturities of up to 10 years and are maintained at a level at least equal to 100 per cent. of the riyals
issued by the QCB at any time.
The QCB, in order to ensure better regulation and risk management in the domestic Islamic and
conventional banking sector, issued instructions in 2011 to conventional banks to wind up their
Islamic banking operations by the end of 2011.
126
The QCB sets a maximum limit on loans and Islamic finance against transfer of salaries of QAR
2 million for Qatari citizens and QAR 400,000 for non-Qatari residents, which can be increased to
QAR 1 million for government employees against a lien on end of service benefits. The QCB provides
that the maximum terms on loans and Islamic finance are six years for Qatari citizens and four years
for non-Qatari residents. Maximum rates of interest are set at the QCB lending rate (the ‘‘QCB
Rate’’) on top of which 1.5 per cent. per annum is added for Qatari citizens and non-Qatari residents.
The QCB also sets caps in relation to the amount of total monthly obligations that an individual can
have against salary which is set at 75 per cent. of the sum of basic salary and social allowance for
Qatari citizens and 50 per cent. of total salary for non-Qatari residents.
The QCB regulations dictate that the maximum credit card withdrawal limit of an individual in Qatar
is double his or her net total salary for both Qatari citizens and the non-Qatari residents. The QCB
provides that maximum rates of interest for credit cards are set at 1 per cent. monthly for Qatari
citizens and non-Qatari residents. The QCB also provides that the maximum rate of interest on
arrears of debt arising from credit cards is set at 0.25 per cent. monthly for Qatari citizens and for
non-Qatari residents.
The QCB has specific regulations applicable to real estate financing. In cases where an individual’s
salary is the main source of repayment, the QCB provides that the maximum limit of total real estate
finance available is 70 per cent. of the value of mortgaged properties. In addition, the maximum
period permitted for repayment of the real estate finance is 20 years, including any grace period. The
QCB regulations dictate that the maximum salary deductions, including instalments and other
liabilities, are capped at 75 per cent. of the basic salary and social allowance for Qatari citizens, and
capped at 50 per cent. of total salary for non-Qatari residents, provided that the salary and post
retirement service dues are transferred to the bank offering the finance.
The QCB regulations also require that where real estate finance is granted to an individual whose
salary is not the main source of repayment, the maximum limit of total finance available to that
individual is 60 per cent. of the value of the mortgaged properties and that the maximum repayment
period of that real estate finance is 15 years, including any grace period. QCB regulations also
provide that these maximum limits may be increased to 70 per cent. and 20 years, respectively, if cash
is regularly transferred to the bank through a formal assignment of claims to cover the full instalment
during the repayment period, including rents and other contractual incomes and revenues.
The main exposure restrictions imposed by QCB are set out below:
Capital
Capital adequacy
*
the Basel III minimum ratio is 12.5 per cent. (including a capital conservation buffer of 2.5 per
cent.);
*
for credit and market risk the standardised approach is to be followed;
*
for operational risk, the basic indicator approach is to be followed;
*
banks are subject to a capital adequacy ratio (‘‘CAR’’) imposed by, and calculated in
accordance with, regulations of the QCB;
*
liquidity coverage ratio of 70 per cent. (in 2015) to be increased by 10 per cent. each year to
reach 100 per cent. by 2018;
*
net stable funds ratio of 70 per cent. (in 2015) to be increased by 10 per cent. each year to
reach 100 per cent. by 2018;
*
as of 1 January 2016, additional capital requirements for banks that are considered to be
systemically important to the domestic market (‘‘DSIBs’’) as deemed necessary by the QCB (the
Bank is not considered to be a DSIB); and
*
discretionary additional ‘‘countercyclical buffer’’ during periods of excessive credit growth that
would increase capital adequacy ratio requirements by up to 2.5 per cent.
Credit and concentration
maximum limit for a single customer may not exceed 20 per cent. of a bank’s capital and
reserves. Maximum limit for any shareholder who owns five per cent. or more of a bank’s share
capital either directly or through his minor children, spouse or through the companies in which
*
127
they own 50 per cent. or more of the shares may not exceed 10 per cent. of the bank’s capital
and reserves. Maximum limit of total of investment and credit concentration to a single
customer is 25 per cent. of a bank’s capital and reserves;
*
total real estate financing may not exceed 150 per cent. of a bank’s capital and reserves; and
*
no single customer may borrow more than QAR 8.0 billion (U.S.$2.2 billion) in aggregate from
Qatar’s commercial banks.
Foreign investment
Foreign investment in Qatari banks is not permitted, save with a specific permission from the Council
of Ministers. This restriction does not apply to Qatari banks listed on the QE, although foreign
investors are restricted to holding, in aggregate, not more than 49 per cent. of the shares of any bank
so listed.
Required reserve
The QCB instructions issued in March 2008 specified that a reserve requirement of 4.75 per cent. of a
bank’s total deposits is to be kept with the QCB. The percentage is calculated on the basis of the
average daily total deposits balances during the period from the 16th of each month to the 12th of
the following month.
Risk reserve
The QCB requires local banks to charge a risk reserve of a minimum of 2.5 per cent. on net credit
facilities with the exception of credit facilities granted to or secured by the Ministry of Finance and
credit facilities granted against cash collateral. The risk reserve is not charged as an income statement
expense but as an appropriation account and included under shareholders’ equity as a separate line
item.
Interest rates
Prior to 2000, the QCB imposed certain ceilings on the credit and deposit interest rates offered by
commercial banks. The QCB removed these restrictions in order to further liberalise the financial
sector. However, in April 2011 the QCB introduced a cap on interest rates that can be charged on
personal loans of 1.5 per cent. per annum over its QCB lending rate and 1.0 per cent. per month for
credit cards.
The QCB utilises three different interest rates: a lending rate, a deposit rate and a repo rate. The
lending rate applies to the lending facility through which commercial banks can obtain liquidity from
the QCB. The deposit rate applies to the deposit facility through which commercial banks can place
deposits with the QCB. Both of these facilities may be for various maturities, ranging from two days
to 30 days and rolled over to the next day, when transactions are executed electronically. The repo
rate is a pre-determined interest rate set by the QCB for repo transactions entered into between the
QCB and commercial banks.
Prior to July 2007, the QCB tracked the interest rates of the U.S. Federal Reserve as the Qatari riyal
is pegged to the U.S. dollar. However, and especially since the global financial crisis, the QCB has
not deemed it necessary to change interest rates in tandem with the U.S. Federal Reserve on all
occasions in view of domestic macroeconomic conditions, in particular trends in inflation. Although
the QCB’s money market rates are largely influenced by the movements in the interest rates of the
U.S. Federal Reserve due to the peg on the exchange rate, the QCB acted independently in 2010 and
2011 by changing its policy rate even as the U.S. Federal Reserve continued to keep interest rates
unchanged at near-zero levels. The QCB deposit rate which had been kept at 2 per cent. from May
2008 till July 2010 was thereafter reduced by 125 basis points in total in three phases to its current
level of 0.75 per cent. by August 2011. Since April 2011, the QCB lending rate has been reduced in
two phases by 100 basis points in total to 4.5 per cent. and the QCB repo rate has been reduced in
two phases by 105 basis points in total to 4.5 per cent. The surplus liquidity conditions in 2010 and
2011 were reflected in the general softening of interbank interest rates across the maturity spectrum.
On 6 May 2012, the QCB and Bloomberg launched the first ever Qatar Interbank Offer Rate
(‘‘QIBOR’’) fixings, in a move aimed at encouraging a more active interbank market in Qatar.
QIBOR, which uses the contributed offer rates quoted by 9 panel banks, is calculated by Bloomberg
and published on the QCB website and Bloomberg Professional service. QIBOR fixings for eight
128
different tenures ranging from overnight to one year are publicly available each business day making
market activity transparent to other banks around the world.
Liquidity and money supply
The table below shows the trend in certain money supply indicators for the Qatari banking system
for the periods indicated.
Money supply (M1) (QAR million) .......................
Growth rate (%) ....................................................
Money supply (M2) (QAR million) .......................
Growth rate (%) ....................................................
Money supply (M3) (QAR million) .......................
Growth rate (%) ....................................................
2012
2013
2014
90,939
11.1
381,053
22.9
442,481
22.2
105,931
16.5
455,715
19.6
576,814
30.4
124,256
17.3
504,025
10.6
597,910
3.7
2015(1)
126,082
(3.4)
517,511
(2.7)
579,996
(2.6)
Source: QCB September 2015 Quarterly Statistical Bulletin
Note:
(1) Up to 30 September only
The QCB, on behalf of the Government, issues bonds to absorb domestic liquidity and develop a
yield curve for riyal-denominated domestic bonds. The QCB has issued a number of domestic bonds
since 1999, including six issues in 2009 and three issues in 2010. In 2011, the QCB also issued bonds
amounting to QAR 50 billion (U.S.$13.7 billion) to Qatari domestic banks. The funds so generated
were transferred by the QCB to the State of Qatar’s account and the State of Qatar used these funds
for various Governmental uses and for investment. The QCB also prescribes reserve requirements for
commercial banks to be maintained with the QCB in order to control domestic liquidity.
Qatar launched quarterly bond sales in March 2013 to help banks manage liquidity. Qatar has
usually issued QAR3 billion (U.S.$824 million) worth of conventional bonds and QAR1 billion
(U.S.$275 million) of sukuk each quarter with maturities of three and five years. In late 2014, the
QCB indicated that it may be more flexible in planning future auctions of Government bonds,
adjusting the timing and characteristics of the issues depending on market conditions and its policy
stance. In addition to the bond auctions, the QCB has conducted monthly auctions of three, six and
nine month treasury bills since 2011.
BANKING SYSTEM
Commercial banks
Commercial banks in Qatar consist of seven locally owned conventional commercial banks, four
Islamic institutions that operate according to Islamic Shari’a principles (including the prohibition on
the charging of interest on loans) and seven foreign banks with established branches in Qatar.
Commercial banks are the primary financial institutions in Qatar, providing deposit taking, credit and
investment services, as well as foreign exchange and clearance services. The deposits made in Qatar’s
commercial banks are not insured as there is no deposit insurance scheme in Qatar.
In June 2014, Moody’s Investors Service issued a report following their review of Qatar’s banking
system. The report noted that Qatar’s banking system remained stable, unchanged since 2010, and
that the stable outlook reflected Moody’s expectation that Qatar’s strong economic environment
would continue to sustain banks’ strong earnings, sound capital buffers and low levels of nonperforming loans. However, the rating agency noted that Qatar’s reliance on the hydrocarbon sector,
the banks’ relatively high dependence on short-term foreign funding and Qatar’s still-developing
corporate-governance and risk-management culture posed risks.
The average banking sector CAR was 16.3 per cent. in 2014 compared to 16.0 per cent. in 2013,
18.9 per cent. in 2012, 20.6 per cent. in 2011 and 16.1 per cent. in 2010. In 2014, the average banking
sector regulatory tier 1 capital-to-asset ratio for all banks was 12.0 per cent. compared to 12.5 per
cent. in 2013, 12.8 per cent. in 2012, 12.6 per cent. in 2011 and 11.1 per cent. in 2010. Currently,
Qatar’s commercial banks are compliant with Basel III as implemented by the QCB.
The QIA has provided financial support to Qatar’s financial sector as a response to the global
economic downturn and as a preventative measure to preserve the general stability in Qatar’s banking
sector. In early 2009, the QIA began making direct capital injections in Qatar’s commercial banking
129
sector through a plan to purchase equity ownership interests of up to 20 per cent. in the domestic
banks listed on the QE. In line with the plan, from 2009 through to 2011, the QIA acquired equity
positions ranging from 5 per cent. to 20 per cent. in various domestic banks, including QIB, the
Commercial Bank, the Qatar International Islamic Bank, the Ahli Bank and the Doha Bank.
In addition to the equity purchases, the QIA also assisted the banking sector by purchasing certain
portions of their investment and real estate portfolios. On 22 March 2009, the QIA purchased the
investment portfolios of seven of the nine domestic banks listed on the QE at a total purchase price
of approximately QAR 6,500 million (U.S.$1,786 million) paid through a combination of cash and
domestic Government bonds. This purchase price was equal to the value of such investment portfolios
as registered in the records of each bank as of 28 February 2009. In an effort to further boost
liquidity and encourage lending, in early June 2009, the QIA made a second round of investments
and bought the real estate portfolios and investments of nine domestic commercial banks at a sale
price equivalent to the net book value of such portfolios and investments with a total ceiling amount
of QAR 15,000 million (U.S.$4,121 million). The total support to the banking sector, which includes
purchases of real estate and investment portfolio in domestic banks as well as the equity injections
has been QAR 32,700 million (U.S.$8,984 million).
The amount of credit extended by commercial banks to the private sector grew by a compound
annual growth rate of 12.5 per cent. between 2009 and 2014, increasing to QAR 353.0 billion
(U.S.$97.0 billion) from QAR 196.2 billion (U.S.$53.9 billion) in 2009.
According to the data available from the Qatar Central Bank, the level of non-performing commercial
bank loans in Qatar has remained low in recent years. The level of non-performing loans was 2.0 per
cent. in 2014, 1.9 per cent. in 2013, 1.7 per cent. in 2012, 1.0 per cent. in 2011 and 1.3 per cent. in
2010. Under QCB regulations, non-performing loans are determined by reference to a range of
indicators, and include loans that meet one of the following conditions for at least three months: (i)
the borrower is not able to meet its loan repayments and the loan is past due; (ii) other credit
facilities of that borrower are past due; (iii) the existing credit limits granted to that borrower for its
other credit facilities are not renewed; or (iv) a borrower exceeds its agreed credit limit by 10 per
cent. or more without prior authorisation. Commercial banks in Qatar categorise non-performing
loans into three groups: substandard, doubtful and bad. Substandard loans are those that have not
performed for three or more months, doubtful loans are those that have not performed for six or
more months, and bad loans are those that have not performed for nine or more months. The QCB
also obliges national banks to form a ‘‘risk reserve’’ from their net profits, which should not be less
than 2.5 per cent. of the total direct credit facilities granted by the bank and its branches and
subsidiaries inside and outside Qatar. This figure is calculated according to each bank’s consolidated
balance sheet, after deduction of the specific provisions, suspended interests and deferred profits for
Islamic banks, with the exception of credit facilities extended to the Ministry of Finance, credit
facilities guaranteed by the Ministry of Finance and credit facilities secured by cash collateral (with a
lien on cash deposits).
130
The following table sets out the consolidated balance sheet of the Qatari commercial banking sector
by economic activity as at 31 December 2010 to 31 December 2014.
2010
2011
2012
2013
2014
(QAR million)
Assets
Reserves
Cash..........................................................
Balances with the QCB ............................
1,879.4
83,578.5
2,079.1
21,802.1
2,814.3
34,264.0
3,135.8
31,388.1
3,753.5
39,862.1
Foreign assets:
Cash..........................................................
Claims on foreign banks ..........................
Foreign credit ...........................................
Foreign investments..................................
Other assets ..............................................
403.4
41,781.8
20,560.5
28,379.1
—
1,212.0
59,836.3
26,867.3
31,523.8
—
1,140.4
68,814.1
31,742.6
26,748.5
39.0
1,244.4
68,552.9
42,319.2
50,918.1
277.8
2,614.4
80,819.9
63,679.1
49,318.3
79.8
Domestic assets:
Due from Banks in Qatar ........................
Domestic credit.........................................
Domestic investments ...............................
Fixed assets...............................................
Other assets ..............................................
27,999.1
293,920.0
56,174.7
4,082.3
8,723.4
38,656.4
376,695.2
121,567.2
4,196.6
9,864.5
27,433.9
476,885.7
133,936.1
3,885.9
8,928.8
16,777.6
533,075.1
146,892.2
3,913.9
11,576.4
37,151.9
586,530.5
125,447.4
4,843.7
10,668.9
Total assets.....................................................
567,482.2
694,300.5
816,633.3
910,071.5
1,004,769.5
Liabilities:
Foreign liabilities:
Non-resident deposits ...............................
Due to foreign banks................................
Debt securities ..........................................
Other liabilities .........................................
Domestic liabilities:
Resident deposits ......................................
Due to domestic banks.............................
Due to QCB .............................................
Debt securities ..........................................
Margins.....................................................
Capital accounts .......................................
Provisions .................................................
Unclassified liabilities ...............................
29,680.8
97,103.4
12,525.1
—
19,835.2
133,276.7
8,420.1
—
40,729.1
144,770.7
31,754.7
7,292.9
33579.5
120,701.1
45,603.6
8,805.7
48,119.1
131,899.1
39,078.0
8,297.8
277,106.7
23,419.9
3,413.2
115.0
1,047.8
62,793.1
7,315.8
52,961.4
343,777.2
32,246.4
4,910.3
7,541.3
1,096.2
87,744.6
8,162.0
47,290.5
417,336.5
22,926.0
2,170.4
1,113.9
914.7
102,458.1
8,038.1
37,128.2
514,804.3
15,471.0
4,600.4
1,289.6
1,337.8
110,931.2
9,929.4
43,017.9
552,955.1
34,672.4
6,675.2
3,416.0
1,554.3
118,081.0
9,925.4
50,096.1
Total liabilities................................................
567,482.2
694,300.5
816,633.3
910,071.5
1,004,769.5
Source: QCB
The following table summarises the capital adequacy ratio and the ratio of non-performing loans to
total capital for the Qatari banking system as at 31 December 2010 to 31 December 2014.
As at 31 December
2010
Capital adequacy ratio (per cent.) ...
Non-performing loans/capital (per
cent.)............................................
2011
2012
2013
2014
16.1
20.6
18.9
16.0
16.3
1.3
1.0
1.7
1.9
2.0
Source: QCB website – Bank’s Performance Indicators. (http://www.qcb.gov.qa/English/Pages/BanksPerformanceIndicators.aspx)
131
The following table sets out the distribution of Qatari commercial bank credit facilities as at
31 December 2010 to 31 December 2014.
As at 31 December
2010
2011
2012
2013
2014
(QAR million)
Public sector:
Government ................................
Government institutions .............
Semi government institutions......
36,303.1
50,452.2
16,302.7
40,801.2
90,618.9
17,750.3
51,745.9
139,585.1
27,222.4
56,549.4
152,516.4
30,679.1
64,737.0
140,426.8
28,400.1
Total public sector loans ..................
103,058.0
149,170.4
218,553.4
239,744.9
233,563.9
Private sector:
General trade ..............................
Contractors and Real Estate.......
Consumption...............................
Other ...........................................
24,875.2
69,452,.4
56,735.1
39,799.3
26,855.3
92,440.3
67,975.3
40,253.9
33,238.2
102,107.9
71,046.4
51,939.8
35,951.5
108,719.6
80,239.5
68,419.6
48,154.4
125,509.7
99,121.7
80,180.8
Total private sector loans .................
190,862.0
227,524.8
258,332.3
293,330.2
352,966.6
Total domestic loans ........................
293,920.0
376,695.2
476,885.7
533,075.1
586,530.5
Loans outside Qatar.........................
20,560.5
26,867.3
31,742.6
42,319.2
63,679.1
Total loans .......................................
314,480.5
403,562.5
508,628.3
575,394.3
650,209.6
Source: QCB
132
The following table sets out the breakdown of Qatari commercial bank deposits as at 31 December
2010 to 31 December 2014.
As at 31 December
2010
2011
2012
2013
2014
(QAR million)
Public sector:
By term and currency:
In Qatari riyal
Demand deposits ..................
Time and savings deposits....
In foreign currencies
Demand deposits ..................
Time and savings deposits....
By sector:
Government .............................
Government institutions ..........
Semi government institutions...
13,877.7
41,875.4
19,274.6
47,655.1
19,366.2
53,060.3
17,649.0
68,630.7
19,083.3
64,526.9
10,086.2
6,231.9
25,101.1
33,844.8
18,522.3
89,780.3
18,538.0
125,313.2
15,404.9
129,121.1
18,485.8
32,276.5
21,308.9
40,824.6
57,350.9
27,700.1
44,444.7
104,378.1
31,906.3
68,294.0
124,389.7
37,447.2
59,252.3
129,608.9
39,275.0
72,071.2
125,875.6
180,729.1
230,130.9
228,136.2
51,793.1
137,392.9
61,926.2
131,942.2
69,010.7
142,011.2
83,303.1
161,526.9
97,474.7
177,305.0
10,024.3
5,825.2
11,823.2
12,210.0
10,561.2
15,024.3
14,386.9
25,456.5
16,307.8
33,731.4
90,828.1
114,207.4
103,093.1
114,808.5
116,257.2
120,350.2
145,840.6
138,832.8
162,251.4
162,567.5
Total private sector deposits.............
205,035.5
217,901.6
236,607.4
284,673.4
324,818.9
Non-resident deposits .......................
29,680.8
19,835.2
40,729.1
33,579.5
48,119.1
Total deposits ...................................
306,787.5
363,612.4
458,065.6
548,383.8
601,074.2
Total public sector deposits ..............
Private sector:
By term and currency:
In Qatari riyal
Demand deposits ..................
Time and savings deposits....
In foreign currencies
Demand deposits ..................
Time and savings deposits....
By sector:
Personal....................................
Companies and institutions......
Source: QCB
Qatar Development Bank
Qatar Development Bank (‘‘QDB’’) was established by the Government in 1997, with contributions
from national banks, under the name of Qatar Industrial Development Bank. In 2006, QDB became
a Government-owned bank and the following year changed its name to Qatar Development Bank.
QDB’s main objective is to contribute to the development and diversification of economic and
industrial investments in Qatar. QDB finances small and medium sized industrial projects and
provides technical assistance and advice to industrialists for the implementation of their projects.
QDB also provides consultancy services and financing for projects in the education, agriculture,
fisheries, healthcare, animal resources and tourism sectors. As of 31 December 2014, QDB’s paid up
capital was QAR 4.5 billion (U.S.$1.2 billion).
QATAR FINANCIAL CENTRE
The QFC is a financial and business centre established by the Government in 2005 with a view to
attracting international financial services institutions and multinational corporations to Doha in order
to grow and develop the market for financial services in the region. Unlike other financial centres in
the region, the QFC is an onshore financial and business environment.
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The QFC comprises: the QFC Authority (the ‘‘QFCA’’), the Qatar Financial Centre Regulatory
Authority (the ‘‘QFCRA’’) and the QFC Dispute Resolution Centre. The QFCA determines the
commercial strategy of the QFC and is responsible for legislation and compliance matters relating to
the QFC legal environment. The QFCRA regulates, authorises, supervises and, when necessary,
disciplines banking, securities, insurance and other financial businesses carried on in or from the
QFC. The QFCRA also registers and supervises the directors and other designated officers of the
businesses authorised by it. The QFCRA’s regulatory approach is modelled closely on that of the
UK’s Financial Conduct Authority. The QFC Civil and Commercial Court has jurisdiction over civil
and commercial disputes arising between: (i) entities established within the QFC; (ii) employees or
contractors employed by entities established in the QFC and the employing entity; (iii) QFC entities
and residents of State of Qatar; and (iv) QFC institutions and entities established in the QFC. The
QFC Regulatory Tribunal hears appeals against decisions of the QFCRA, QFCA and other QFC
institutions. The QFC Dispute Resolution Centre offers international arbitration and mediation
services. The QFCA, QFCRA, the QFC Civil and Commercial Court and the Regulatory Tribunal
are all statutory independent bodies reporting to the Council of Ministers.
Firms operating under the QFC umbrella fall into two categories: those providing financial services
(such as banking institutions; insurance, reinsurance and insurance mediation firms; and asset
management and investment firms), which are regulated activities, and those engaged in non-regulated
activities in support of financial services (such as legal, audit, tax, advisory and consultancy service
providers). All QFC firms must apply to the QFCA for a business license to conduct a permitted
activity in or from the QFC. Firms planning to conduct regulated activities also need to apply to the
QFCRA for authorisation. The operations of the Company Registration Office are handled by the
QFCA. As of September 2015, 254 companies are registered, including global financial institutions.
The QFCA imposed a tax rate of 10 per cent. on local source business profits effective 1 January
2010.
Financial institutions licensed by the QFCRA as ‘‘Category-1’’ financial institutions are authorised to
operate as universal banks and, among other things, may make various types of loans and accept
deposits in any currency. Under the QFC licensing policy, such institutions are currently prohibited
from conducting retail banking with, or on behalf of, retail customers unless they obtain
authorisation from the QFCRA. Financial institutions authorised by the QFCRA as ‘‘Category-2,’’
‘‘Category-3’’ or ‘‘Category-4’’ are permitted to undertake certain more limited activities, and
‘‘Category-5’’ institutions may undertake Islamic finance activities.
Principal regulator and collaborative regulatory approach
Law No 13 of 2012, which came into force in 2013, gave the Governor of the QCB ultimate
responsibility for governance of the QFC. While the QFCRA continues to regulate QFC entities that
offer financial services, the QCB and the QFCRA collaborate on strategic matters.
134
TAXATION
The following is a general description of certain tax considerations relating to the Notes under the
Programme. It does not purport to be a complete analysis of all tax considerations relating to the Notes
and does not constitute legal or tax advice. Prospective purchasers of Notes should consult their own tax
advisers as to which countries’ tax laws could be relevant to acquiring, holding and disposing of Notes
and receiving payments of interest, principal and/or other amounts under the Notes and the consequences
of such actions under the tax laws of those countries. This summary is based upon the law as in effect
on the date of this Base Prospectus and is subject to any change in law that may take effect after such
date.
EU Savings Directive
Under Council Directive 2003/48/EC on the taxation of savings income in the form of interest
payments (the ‘‘Savings Directive’’), EU Member States are required to provide to the tax authorities
of other EU Member States details of certain payments of interest or similar income paid or secured
by a person established in an EU Member State to or for the benefit of an individual resident in
another EU Member State or certain limited types of entities established in another EU Member
State.
For a transitional period, Austria is instead required (unless during that period it elects otherwise) to
operate a withholding system in relation to such payments (subject to a procedure whereby, on
meeting certain conditions, the beneficial owner of the interest or other income may request that no
tax be withheld). The end of the transitional period is dependent upon the conclusion of certain other
agreements relating to information exchange with certain other countries. A number of non-EU
countries and territories including Switzerland have adopted similar measures (a withholding system in
the case of Switzerland).
On 24 March 2014, the Council of the European Union adopted a Council Directive (the ‘‘Amending
Directive’’) amending and broadening the scope of the requirements described above. The Amending
Directive requires EU Member States to apply these new requirements from 1 January 2017, and if
they were to take effect the changes would expand the range of payments covered by the Savings
Directive, in particular to include additional types of income payable on securities. They would also
expand the circumstances in which payments must be reported or subject to withholding. This
approach would apply to payments made to, or secured for, persons, entities or legal arrangements
(including trusts) where certain conditions are satisfied, and may in some cases apply where the
person, entity or arrangement is established or effectively managed outside of the European Union.
However, the European Commission has proposed the repeal of the Savings Directive from 1 January
2017 in the case of Austria and from 1 January 2016 in the case of all other EU Member States
(subject to on-going requirements to fulfil administrative obligations such as the reporting and
exchange of information relating to, and accounting for withholding taxes on, payments made before
those dates). This is to prevent overlap between the Savings Directive and a new automatic exchange
of information regime to be implemented under Council Directive 2011/16/EU on Administrative
Cooperation in the field of Taxation (as amended by Council Directive 2014/107/EU). The new
regime under Council Directive 2011/16/EU (as amended) is in accordance with the Global Standard
released by the Organisation for Economic Co-operation and Development in July 2014. Council
Directive 2011/16/EU (as amended) is generally broader in scope than the Savings Directive, although
it does not impose withholding taxes. The proposal also provides that, if it proceeds, EU Member
States will not be required to apply the new requirements of the Amending Directive.
Proposed EU Financial Transactions Tax
On 14 February 2013, the European Commission published a proposal (the ‘‘Commission’s Proposal)
for a Directive for a common financial transactions tax (‘‘FTT’’) in Belgium, Germany, Estonia,
Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia (the ‘‘participating Member
States’’).
The Commission’s Proposal has very broad scope and could, if introduced, apply to certain dealings
in Notes (including secondary market transactions) in certain circumstances. The issuance and
subscription of Notes should, however, be exempt.
Under the Commission’s Proposal, the FTT could apply in certain circumstances to persons both
within and outside of the participating Member States. Generally, it would apply to certain dealings
in Notes where at least one party is a financial institution, and at least one party is established in a
135
participating Member State. A financial institution may be, or be deemed to be, ‘‘established’’ in a
participating Member State in a broad range of circumstances, including (a) by transacting with a
person established in a participating Member State or (b) where the financial instrument which is
subject to the dealings is issued in a participating Member State.
Joint statements issued by participating Member States indicate an intention to implement the FTT
by 1 January 2016.
However, the FTT proposal remains subject to negotiation between the participating Member States
and the scope of any such tax is uncertain. It may therefore be altered prior to any implementation,
the timing of which remains unclear. Additional EU Member States may decide to participate.
Prospective holders of Notes are advised to seek their own professional advice in relation to the FTT.
Cayman Islands
The following is a discussion on certain Cayman Islands income tax consequences of an investment in
Notes to be issued under the Programme. The discussion is a general summary of present law, which
is subject to prospective and retroactive change. It is not intended as tax advice, does not consider
any investor’s particular circumstances and does not consider tax consequences other than those
arising under Cayman Islands law.
Under existing Cayman Islands laws payments on Notes to be issued under the Programme will not
be subject to taxation in the Cayman Islands and no withholding will be required on the payments to
any holder of Notes nor will gains derived from the disposal of Notes be subject to Cayman Islands
income or corporation tax. The Cayman Islands currently have no income, corporation or capital
gains tax and no estate duty, inheritance or gift tax.
Subject as set out below, no capital or stamp duties are levied in the Cayman Islands on the issue,
transfer or redemption of Notes. An instrument transferring title to any Notes, if brought to or
executed in the Cayman Islands, would be subject to Cayman Islands stamp duty. An annual
registration fee is payable by the Issuer to the Cayman Islands Registrar of Companies which is
calculated by reference to the nominal amount of its authorised capital. At current rates, this annual
registration fee is approximately U.S.$853.66. The foregoing is based on current law and practice in
the Cayman Islands and this is subject to change therein.
Qatar
The following is a summary of the principal Qatari tax consequences of ownership of the Notes by
beneficial owners who or which are not incorporated in or residents of Qatar for Qatari tax purposes
and do not conduct business activities in Qatar (‘‘Non-Qatari Holders’’). The summary below of the
taxation in Qatar is based upon: (a) the Income Tax Law No. 21 of 2009 (‘‘Income Tax Law’’); (b)
Decision No. 10 of 2011 of the Minister of Finance Issuing the Executive Regulations to the Income
Tax Law (‘‘Executive Regulations’’ or ‘‘Regulations’’); and (c) the practice that has been adopted and
is applied by the Public Revenue and Taxes Department (the ‘‘PRTD’’) Income Tax Department of
the Ministry of Finance, each as in effect on the date of this Base Prospectus. This general
description is subject to any subsequent change in the Income Tax Law, Regulations and practice
that may come into effect after such date.
Under the Income Tax Law, tax is imposed on income derived from a source in Qatar. Income
derived from a source in Qatar includes gross income arising from an activity carried on in Qatar,
contracts wholly or partially performed in Qatar and real estate situated in Qatar (including the sale
of shares in companies or partnerships, the assets of which consist mainly of real estate situated in
Qatar). The gross income of Qatari natural persons resident in Qatar, including their shares in the
profits of legal entities, is exempt from Qatar tax as is the capital gains on the disposal of real estate
and securities derived by natural persons provided that the real estate and securities so disposed of do
not form part of the assets of a taxable activity. Natural or legal persons deemed subject to income
tax in Qatar will either pay tax at the standard rate of 10 per cent, on the net taxable income or, the
tax will be withheld at source from the gross payment to be made.
A withholding tax applies to certain payments made to ‘‘non-residents’’ (as defined in the Income Tax
Law) in respect of activities not connected with a permanent establishment in Qatar. Particularly, the
Income Tax Law specifies a withholding tax rate of 7 per cent, on payments of interest. The
Executive Regulations provide for certain exemptions to withholding tax on interest payments. These
exemptions are: (i) interest on deposits in banks in Qatar; (ii) interest on bonds and securities issued
by Qatar and public authorities, establishments, corporations and companies owned wholly or partly
136
by Qatar; (iii) interest on transactions, facilities and loans with banks and financial institutions; and
(iv) interest paid by a permanent establishment in Qatar to the head office or to an entity related to
the head office outside Qatar.
Any payment of interest by the Guarantor under any guarantee of Notes issued by the Issuer will be
exempt from withholding tax under (iii) above, on the basis that the Guarantor is a bank.
Payments of interest made by the Issuer in respect of the Notes will be subject to a 7 per cent.
withholding tax. In accordance with the Income Tax Law, the Issuer will be responsible for
withholding and settling the tax with the PRTD on payments of interest. If such payments are subject
to any withholding or deduction on account of tax in Qatar the Conditions provide for the Issuer to
pay such additional amounts as will result in receipt by the Noteholders after withholding or
deduction of such amounts as would otherwise have been received by them had no such withholding
or deduction been required.
If Qatar were to hold any of the share capital of the Guarantor, the Guarantor should benefit from
the withholding tax exemption under (ii) above. Similarly, no withholding tax would be applicable in
connection with any payments made by the Issuer in respect of any Notes, as, by virtue of being a
wholly-owned subsidiary of the Guarantor, it will also be treated by the PRTD as being partly owned
by Qatar.
There is no stamp duty, capital gains tax or sales tax applicable in Qatar (however, unless specifically
exempt under the Qatar tax law, gains of a capital nature are treated as income and taxed at the
same rate as income).
U.S. Foreign Account Tax Compliance Act
Sections 1471 through 1474 of the U.S. Internal Revenue Code of 1986 (‘‘FATCA’’) impose a new
reporting regime and potentially a 30 per cent. withholding tax with respect to certain payments to (i)
any non-U.S. financial institution (a ‘‘foreign financial institution’’, or ‘‘FFI’’ (as defined by FATCA))
that does not become a ‘‘Participating FFI’’ by entering into an agreement with the U.S. Internal
Revenue Service (‘‘IRS’’) to provide the IRS with certain information in respect of its account holders
and investors or is not otherwise exempt from or in deemed compliance with FATCA and (ii) any
investor (unless otherwise exempt from FATCA) that does not provide information sufficient to
determine whether the investor is a U.S. person or should otherwise be treated as holding a ‘‘United
States account’’ of the Issuer (a ‘‘Recalcitrant Holder’’). The Issuer may be classified as an FFI and
the Guarantor is classified as an FFI.
The new withholding regime is now in effect for payments from sources within the United States and
will apply to ‘‘foreign passthru payments’’ (a term not yet defined) no earlier than 1 January 2019.
This withholding would potentially apply to payments in respect of (i) any Notes characterised as
debt (or which are not otherwise characterised as equity and have a fixed term) for U.S. federal tax
purposes that are issued after the ‘‘grandfathering date’’, which is the date that is six months after the
date on which final U.S. Treasury regulations defining the term foreign passthru payment are filed
with the Federal Register, or which are materially modified after the grandfathering date and (ii) any
Notes characterised as equity or which do not have a fixed term for U.S. federal tax purposes,
whenever issued. If Notes are issued on or before the grandfathering date, and additional Notes of
the same series are issued after that date, the additional Notes may not be treated as grandfathered,
which may have negative consequences for the existing Notes, including a negative impact on market
price.
The United States and a number of other jurisdictions have entered into intergovernmental
agreements to facilitate the implementation of FATCA (each, an ‘‘IGA’’). Pursuant to FATCA and
the ‘‘Model 1’’ and ‘‘Model 2’’ IGAs released by the United States, an FFI in an IGA signatory
country could be treated as a ‘‘Reporting FI’’ not subject to withholding under FATCA on any
payments it receives. Further, an FFI in an IGA jurisdiction generally would not be required to
withhold under FATCA or an IGA (or any law implementing an IGA) (any such withholding being
‘‘FATCA Withholding’’) from payments it makes. Under each Model IGA, a Reporting FI would still
be required to report certain information in respect of its account holders and investors to its home
government or to the IRS. The United States has entered into agreements with the Cayman Islands
(the ‘‘U.S.-Cayman Islands IGA’’) and Qatar (the ‘‘U.S.-Qatar IGA’’) based largely on the Model 1
IGA.
If the Issuer and Guarantor are treated as Reporting FIs pursuant to the U.S.-Cayman Islands IGA
and U.S.-Qatar IGA, as applicable, they do not anticipate that they will be obliged to deduct any
137
FATCA Withholding on payments they make. There can be no assurance, however, that the Issuer
and Guarantor will be treated as Reporting FIs, or that they would in the future not be required to
deduct FATCA Withholding from payments they make. Accordingly, the Issuer and financial
institutions through which payments on the Notes are made may be required to withhold FATCA
Withholding if (i) any FFI through or to which payment on such Notes is made is not a
Participating FFI, a Reporting FI, or otherwise exempt from or in deemed compliance with FATCA
or (ii) an investor is a Recalcitrant Holder.
Whilst the Notes are in global form and held within the ICSDs, it is expected that FATCA will not
affect the amount of any payments made under, or in respect of, the Notes by the Issuer, the
Guarantor, any paying agent or the common depositary, given that each of the entities in the
payment chain between the Issuer and the participants in the ICSDs is a major financial institution
whose business is dependent on compliance with FATCA and that any alternative approach
introduced under an IGA will be unlikely to affect the Notes. The documentation expressly
contemplates the possibility that the Notes may go into definitive form and therefore that they may
be taken out of the ICSDs. If this were to happen, then a non- FATCA compliant holder could be
subject to FATCA Withholding. However, definitive Notes will only be printed in remote
circumstances.
FATCA is particularly complex and its application is uncertain at this time. The above description is
based in part on regulations, official guidance and model IGAs, all of which are subject to change or
may be implemented in a materially different form. Prospective investors should consult their tax
advisers on how these rules may apply to the Issuer and to payments they may receive in connection
with the Notes.
138
SUBSCRIPTION AND SALE
The Dealers have, in a dealer agreement dated 9 November 2015 (such dealer agreement as modified
and/or supplemented and/or restated from time to time, the ‘‘Dealer Agreement’’), agreed with the
Issuer and the Guarantor a basis upon which they or any of them may from time to time agree to
purchase Notes. Any such agreement will extend to those matters stated under ‘‘Forms of the Notes’’
and ‘‘Terms and Conditions of the Notes’’. In accordance with the terms of the Dealer Agreement, the
Issuer and the Guarantor have agreed to reimburse the Dealers for certain of their expenses in
connection with the establishment and any future update of the Programme and the issue of Notes
under the Programme and the Issuer and the Guarantor have agreed to indemnify the Dealers against
certain liabilities incurred by them in connection therewith.
United States of America
Neither the Notes nor the Guarantee have been or will be registered under the Securities Act nor any
state
securities laws and may not be offered, sold or delivered, directly or indirectly, in or into the United
States or to, or for the account or benefit of U.S. persons (as defined in Regulation S) except
pursuant to an exemption from, or in a transaction not subject to, the registration requirements of
the Securities Act and in accordance with any applicable securities laws of any state of the United
States. Each Dealer has represented and agreed, and each Dealer appointed under the Programme
will be required to represent and agree, that it has not offered or sold and that it will not offer, sell
or deliver any Notes (a) as part of their distribution at any time or (b) otherwise until 40 days after
the completion of the distribution, as determined and certified by the relevant Dealer or, in the case
of an issue of Notes on a syndicated basis, the relevant lead manager, of all Notes of the Tranche of
which such Notes are a part (the ‘‘distribution compliance period’’), in or into the United States or to,
or for the account or benefit of, U.S. persons. Each Dealer has further agreed, and each further
Dealer appointed under the Programme will be required to agree, that it will send to each dealer to
which it sells any Notes during the distribution compliance period a confirmation or other notice
setting forth the restrictions on offers and sales of the Notes within the United States or to, or for
the account or benefit of, U.S. persons. Accordingly, neither it, its affiliates, nor any persons acting
on its or their behalf has engaged or will engage in any directed selling efforts with respect to any
Notes. Terms used in this paragraph have the meanings given to them by Regulation S.
Until 40 days after the commencement of the offering of any Tranche of Notes, an offer or sale of
such Notes within the United States by any dealer (whether or not participating in the offering) may
violate the registration requirements of the Securities Act if such offer or sale is made otherwise than
in accordance with an available exemption from registration under the Securities Act. Each purchaser
of any Notes and each subsequent purchaser of such Notes in resales prior to the expiration of the
distribution compliance period, by accepting delivery of this Base Prospectus and the Notes will be
deemed to have represented, warranted, agreed and acknowledged that:
1.
It is, or at the time the Notes are purchased will be, the beneficial holder of such Notes and it
has acquired the Notes in an offshore transaction (within the meaning of Regulation S).
2.
It understands that the Notes have not been and will not be registered under the Securities Act
and that, prior to the expiration of the distribution compliance period, it will not offer, sell,
pledge or otherwise transfer such Notes except in an offshore transaction in accordance with
Rule 903 or Rule 904 of Regulation S, in each case in accordance with any applicable securities
laws of any state of the United States.
Bearer Notes having a maturity of more than one year are subject to U.S. tax law requirements and
may not be offered, sold or delivered within the United States or its possessions or to a United States
person, except in certain transactions permitted by U.S. Treasury regulations. Terms used in this
paragraph have the meanings given to them by the U.S. Internal Revenue Code of 1986 and Treasury
regulations promulgated thereunder. The relevant Final Terms will identify whether TEFRA C rules
or TEFRA D rules apply or whether TEFRA is not applicable.
United Kingdom
Each Dealer has represented and agreed, and each further Dealer appointed under the Programme
will be required to represent and agree, that:
139
(a)
in relation to any Notes which have a maturity of less than one year, (i) it is a person whose
ordinary activities involve it in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of its business and (ii) it has not offered or sold and will
not offer or sell any Notes other than to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or as agent) for the
purposes of their businesses or who it is reasonable to expect will acquire, hold, manage or
dispose of investments (as principal or agent) for the purposes of their businesses where the
issue of the Notes would otherwise constitute a contravention of Section 19 of the FSMA by
the Issuer;
(b)
it has only communicated or caused to be communicated and will only communicate or cause to
be communicated an invitation or inducement to engage in investment activity (within the
meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of any
Notes in circumstances in which Section 21(1) of the FSMA does not apply to the Issuer or the
Guarantor; and
(c)
it has complied and will comply with all applicable provisions of the FSMA with respect to
anything done by it in relation to any Notes in, from or otherwise involving the United
Kingdom.
Public Offer Selling Restriction under the Prospectus Directive
In relation to each Member State of the European Economic Area which has implemented the
Prospectus Directive (each, a ‘‘Relevant Member State’’), each Dealer has represented and agreed, and
each further Dealer appointed under the Programme will be required to represent and agree, that
with effect from and including the date on which the Prospectus Directive is implemented in that
Relevant Member State (the ‘‘Relevant Implementation Date’’) it has not made and will not make an
offer of Notes which are the subject of the offering contemplated by this Base Prospectus as
completed by the final terms in relation thereto to the public in that Relevant Member State except
that it may, with effect from and including the Relevant Implementation Date, make an offer of such
Notes to the public in that Relevant Member State:
(a)
at any time to any legal entity which is a qualified investor as defined in the Prospectus
Directive;
(b)
at any time to fewer than 150 natural or legal persons (other than qualified investors as defined
in the Prospectus Directive), subject to obtaining the prior consent of the relevant Dealer or
Dealers nominated by the Issuer for any such offer; or
(c)
at any time in any other circumstances falling within Article 3(2) of the Prospectus Directive,
provided that no such offer of Notes referred to in (a) to (c) above shall require the Issuer or any
Dealer to publish a prospectus pursuant to Article 3 of the Prospectus Directive, or supplement a
prospectus pursuant to Article 16 of the Prospectus Directive.
For the purposes of this provision, the expression an ‘‘offer of Notes to the public’’ in relation to any
Notes in any Relevant Member State means the communication in any form and by any means of
sufficient information on the terms of the offer and the Notes to be offered so as to enable an
investor to decide to purchase or subscribe the Notes, as the same may be varied in that Member
State by any measure implementing the Prospectus Directive in that Member State, the expression
‘‘Prospectus Directive’’ means Directive 2003/71/EC (as amended, including by Directive 2010/73/EU),
and includes any relevant implementing measure in the Relevant Member State.
Qatar (including the Qatar Financial Centre)
Each Dealer has represented and agreed, and each further Dealer appointed under the Programme
will be required to represent and agree, that it has not offered, delivered or sold, and will not offer,
deliver or sell at any time, directly or indirectly, any Notes in the State of Qatar (including the Qatar
Financial Centre), except: (a) in compliance with all applicable laws and regulations of the State of
Qatar (including the Qatar Financial Centre); and (b) through persons or corporate entities authorised
and licensed to provide investment advice and/or engage in brokerage activity and/or trade in respect
of foreign securities in the State of Qatar. This Base Prospectus has not been filed with, reviewed or
approved by the Qatar Central Bank, the Qatar Financial Markets Authority, Qatar Financial Centre
Regulatory Authority or any other relevant Qatar governmental body or securities exchange.
140
Japan
The Notes have not been and will not be registered under the Financial Instruments and Exchange
Act of Japan (Act No. 25 of 1948, as amended; the ‘‘FIEA’’). Accordingly, each Dealer has
represented and agreed, and each further Dealer appointed under the Programme will be required to
represent and agree, that it has not, directly or indirectly, offered or sold Notes, and will not, directly
or indirectly, offer or sell any Notes in Japan or to, or for the benefit of, any resident of Japan (as
defined under Item 5, Paragraph 1, Article 6 of the Foreign Exchange and Foreign Trade Act (Act
No. 228 of 1949, as amended)), or to others for re-offering or resale, directly or indirectly, in Japan
or to, or for the benefit of, any resident of Japan, except pursuant to an exemption from the
registration requirements of, and otherwise in compliance with, the FIEA and any other applicable
laws, regulations and ministerial guidelines of Japan.
Kingdom of Saudi Arabia
No action has or will be taken in Saudi Arabia that would permit a public offering of the Notes.
Any investor in the Kingdom of Saudi Arabia or who is a Saudi person (a ‘‘Saudi Investor’’) who
acquires any Notes pursuant to an offering should note that the offer of Notes is a private placement
under Article 10 or Article 11 of the ‘‘Offer of Securities Regulations’’ as issued by the Board of the
Capital Market Authority resolution number 2-11-2004 dated 4 October 2004 and amended by the
Board of the Capital Market Authority resolution number 1-28-2008 dated 18 August 2008 (the
‘‘KSA Regulations’’) through a person authorised by the Capital Market Authority (the ‘‘CMA’’) to
carry on the securities activity of arranging and following a notification to the CMA under the KSA
regulations. The Notes may thus not be advertised, offered or sold to any person in the Kingdom of
Saudi Arabia other than to ‘‘sophisticated investors’’ under Article 10 of the KSA Regulations or by
way of a limited offer under Article 11 of the KSA Regulations. Each Dealer has represented and
agreed, and each further Dealer appointed under the Programme will be required to represent and
agree, that any offer of Notes to a Saudi Investor will comply with the KSA Regulations.
Each offer of Notes shall not therefore constitute a ‘‘public offer’’ pursuant to the KSA Regulations,
but is subject to the restrictions on secondary market activity under Article 17 of the KSA
Regulations. Any Saudi Investor who has acquired Notes pursuant to a private placement under
Article 10 and Sophisticated Investor/or Article 11 of the KSA Regulations may not offer or sell
those Notes to any person unless the offer or sale is made through an authorised person
appropriately licensed by the Saudi Arabian Capital Market Authority and:
(a)
the Notes are offered or sold to a ‘‘Sophisticated Investor’’;
(b)
the price to be paid for the Notes in any one transaction is equal to or exceeds Saudi Riyal
1 million or an equivalent amount; or
(c)
the offer or sale is otherwise in compliance with Article 17 of the KSA Regulations.
United Arab Emirates (excluding the Dubai International Financial Centre)
Each Dealer has represented and agreed, and each further Dealer appointed under the Programme
will be required to represent and agree, that the Notes to be issued under the Programme have not
been and will not be offered, sold or publicly promoted or advertised by it in the United Arab
Emirates other than in compliance with any laws applicable in the United Arab Emirates governing
the issue, offering and sale of securities.
Dubai International Financial Centre
Each Dealer has represented and agreed, and each further Dealer appointed under the Programme
will be required to represent and agree, that it has not offered and will not offer the Notes to be
issued under the Programme to any person in the Dubai International Financial Centre unless such
offer is:
(a)
an ‘‘Exempt Offer’’ in accordance with the Markets Rules (MKT Module) of the Dubai
Financial Services Authority (the ‘‘DFSA’’); and
(b)
made only to persons who meet the Professional Client criteria set out in Rule 2.3.3 of the
Conduct Business Module of the DFSA Rulebook.
141
Kingdom of Bahrain
Each Dealer has represented and agreed, and each further Dealer appointed under the Programme
will be required to represent and agree, that it has not offered or sold, and will not offer or sell, any
Notes except on a private placement basis to persons in the Kingdom of Bahrain who are ‘‘accredited
investors’’.
For this purpose, an ‘‘accredited investor’’ means:
(a)
an individual holding financial assets (either singly or jointly with a spouse) of U.S.$1,000,000 or
more;
(b)
a company, partnership, trust or other commercial undertaking which has financial assets
available for investment of not less than U.S.$1,000,000; or
(c)
a government, supranational organisation, central bank or other national monetary authority or
a state organisation whose main activity is to invest in financial instruments (such as a state
pension fund).
Cayman Islands
Each Dealer has represented and agreed, and each further Dealer appointed under the Programme
will be required to represent and agree, that it has not made and will not make any offer or
invitation (whether directly or indirectly) to the public in the Cayman Islands to subscribe for any
Notes.
General
Each Dealer has represented and agreed, and each further Dealer appointed under the Programme
will be required to represent and agree, that, to the best of its knowledge and belief, it has complied
and will comply with all applicable laws and regulations in each country or jurisdiction in which it
purchases, offers, sells or delivers Notes or possesses or distributes this Base Prospectus and will
obtain any consent, approval or permission required by it for the purchase, offer, sale or delivery by
it of Notes under the laws and regulations in force in any jurisdiction to which it is subject or in
which it makes such purchases, offers, sales or deliveries and neither the Issuer, the Guarantor nor
any of the other Dealers shall have any responsibility therefor.
None of the Issuer, the Guarantor or any of the Dealers represents that Notes may at any time
lawfully be sold in compliance with any applicable registration or other requirements in any
jurisdiction, or pursuant to any exemption available thereunder, or assumes any responsibility for
facilitating such sale. Persons into whose possession this Base Prospectus or any Notes may come
must inform themselves about, and observe, any applicable restrictions on the distribution of this
Base Prospectus and the offering and sale of Notes.
With regard to each Tranche, the relevant Dealer will be required to comply with any additional
restrictions as the Issuer, the Guarantor and the relevant Dealer shall agree and as shall be set out in
the relevant subscription agreement or dealer confirmation letter (howsoever described), as the case
may be.
142
GENERAL INFORMATION
Authorisation
1.
The establishment of the Programme was authorised by a board resolution dated 28 October
2015 in relation to the Issuer, a board resolution dated 2 November 2015 in relation to the
Guarantor and a shareholders’ resolution dated 21 October 2015 in relation to the Guarantor.
The Issuer and the Guarantor have obtained or will obtain from time to time all necessary
consents, approvals and authorisations in connection with the issue and performance of the
Notes and the giving of the guarantee relating to them.
Listing
2.
Arthur Cox Listing Services Limited is acting solely in its capacity as listing agent for the Issuer
in relation to the Notes, and is not itself seeking admission of Notes issued under the
Programme to the Official List or to trading on the Main Securities Market for the purposes of
the Prospectus Directive.
3.
It is expected that each Tranche of Notes which is to be admitted to the Official List and to
trading on the Main Securities Market will be admitted separately as and when issued, subject
only to the issue of a Global Note or Notes initially representing the Notes of such Tranche.
4.
Application has been made to the Irish Stock Exchange for Notes issued under the Programme
during the 12 months from the date of this Base Prospectus to be admitted to the Official List
and admitted to trading on the Main Securities Market. However, Notes may be issued
pursuant to the Programme which will not be admitted to listing, trading and/or quotation by
the Irish Stock Exchange or any other listing authority, stock exchange and/or quotation system
or which will be admitted to listing, trading and/or quotation by such other or further listing
authorities, stock exchanges and/or quotation systems as the Issuer and the relevant Dealer(s)
may agree.
5.
This Base Prospectus has been approved by the Central Bank of Ireland as competent authority
under the Prospectus Directive. Such approval relates only to the Notes which are to be
admitted to trading on the Main Securities Market or any other MiFID regulated markets or
which are to be offered to the public in any Member State. The Central Bank of Ireland only
approves this Base Prospectus as meeting the requirements imposed under Irish and EU law
pursuant to the Prospectus Directive.
Legal and Arbitration Proceedings
6.
Neither the Issuer nor the Guarantor is or has been involved in any governmental, legal or
arbitration proceedings (including any such proceedings which are pending or threatened of
which the Issuer or the Guarantor is aware) in the 12 months preceding the date of this Base
Prospectus which may have or have in such period had a significant effect on the financial
position or profitability of the Issuer or the Guarantor.
Conditions for determining price
7.
The price and amount of Notes to be issued under the Programme will be determined by the
Issuer, the Guarantor and each relevant Dealer at the time of issue in accordance with
prevailing market conditions.
Significant/Material Change
8.
There has been no significant change in the financial or trading position of the Issuer or
material adverse change in the prospects of the Issuer, in each case, since the date of its
incorporation.
9.
There has been no significant change in the financial or trading position of the Guarantor since
30 June 2015 and there has been no material adverse change in the prospects of the Guarantor
since 31 December 2014.
Auditors
10. The Issuer is not required by Cayman Islands law, and does not intend, to publish audited
financial statements or appoint any auditors. Since the date of its incorporation, no financial
statements of the Issuer have been prepared.
143
11.
The Interim Financial Statements included in this Base Prospectus have been reviewed by
KPMG L.L.C. (QFC No. 00051), independent auditors, as stated in their qualified review report
appearing herein.
12.
The Annual Financial Statements included in this Base Prospectus have been audited without
qualification by KPMG, independent auditors, as stated in their report appearing herein. KPMG
are public accountants registered to practise as auditors with the Ministry of Business & Trade
in Qatar. The registered office of KPMG is 25 C Ring Road, PO Box 4473, Doha, State of
Qatar.
Documents on Display
13. For the 12 months following the date of this Base Prospectus, physical copies of the following
documents (together with English translations, when appropriate) may be inspected during
normal business hours at the registered offices of the Issuer and the Specified Office of the
Fiscal Agent for so long as Notes as listed:
(a)
the memorandum and articles of association of each of the Issuer and the Guarantor;
(b)
the Base Prospectus and any supplements thereto;
(c)
the Financial Statements;
(d)
the Agency Agreement;
(e)
the Deed of Guarantee;
(f)
the Deed of Covenant;
(g)
any relevant Final Terms; and
(h)
the Programme Manual (which contains the forms of the Notes in global and definitive
form).
This Base Prospectus will be available for viewing on the website of the Central Bank of Ireland
(http://www.centralbank.ie).
Clearing of the Notes
14. The Notes have been accepted for clearance through Euroclear and Clearstream, Luxembourg
(which are the entities in charge of keeping the records). The appropriate Common Code and
the International Securities Identification Number in relation to the Notes of each Tranche
allocated by Euroclear and Clearstream, Luxembourg will be specified in the relevant Final
Terms. The relevant Final Terms shall specify any additional or alternative clearing system as
shall have accepted the relevant Notes for clearance together with any further appropriate
information.
The address of Euroclear is Euroclear Bank SA/NV, 1 Boulevard du Roi Albert II, B-1210
Brussels, Belgium and the address of Clearstream, Luxembourg is Clearstream Banking, société
anonyme, 42 Avenue JF Kennedy, L-1855 Luxembourg.
Dealers Transacting with the Issuer and the Guarantor
15. Certain of the Dealers and their affiliates have engaged, and may in the future engage, in
investment banking and/or commercial banking transactions with, and may perform services for
the Issuer, the Guarantor and their respective affiliates in the ordinary course of business for
which they have received, and for which they may in the future receive, fees.
In addition, in the ordinary course of their business activities, the Dealers and their affiliates
may make or hold a broad array of investments and actively trade debt and equity securities (or
related derivative securities) and financial instruments (including bank loans) for their own
account and for the accounts of their customers. Such investments and securities activities may
involve securities and/or instruments of the Issuer, the Guarantor or their respective affiliates.
Certain of the Dealers or their affiliates that have a lending relationship with the Guarantor
routinely hedge their credit exposure to the Guarantor consistent with their customary risk
management policies. Typically, such Dealers and their affiliates would hedge such exposure by
entering into transactions which consist of either the purchase of credit default swaps or the
creation of short positions in securities, including potentially any Notes issued under the
Programme. Any such short positions could adversely affect future trading prices of Notes
issued under the Programme. The Dealers and their affiliates may also make investment
144
recommendations and/or publish or express independent research views in respect of such
securities or financial instruments and may hold, or recommend to clients that they acquire, long
and/or short positions in such securities and instruments.
145
FINANCIAL INFORMATION
Unaudited condensed interim financial statements of the Guarantor as at and for the six
month period ended 30 June 2015...........................................................................................
F-2
Auditors’ review report in respect of the unaudited condensed interim financial statements of
the Guarantor as at and for the six month period ended 30 June 2015 .................................
F-4
Audited financial statements of the Guarantor as at and for the financial year ended
31 December 2014....................................................................................................................
F-18
Auditors’ audit report in respect of the audited financial statements of the Guarantor as at
and for the financial year ended 31 December 2014 ...............................................................
F-20
Audited financial statements of the Guarantor as at and for the financial year ended
31 December 2013....................................................................................................................
F-74
Auditors’ audit report in respect of the audited financial statements of the Guarantor as at
and for the financial year ended 31 December 2013 ...............................................................
F-76
F-1
F-2
F-3
F-4
F-5
F-6
F-7
F-8
F-9
F-10
F-11
F-12
F-13
F-14
F-15
F-16
FINANCIAL STATEMENTS
INTERNATIONAL BANK OF QATAR (Q.S.C.)
FOR THE YEAR ENDED
31 DECEMBER 2014
F-17
F-18
For the year ended 31 December
Notes
2014
2013
753,582
(154,355)
947,599
(255,205)
Net interest income
599,227
692,394
Fee and commission income
Fee and commission expense
154,003
(30,387)
157,704
(30,487)
Interest income
Interest expense
17
18
Net fee and commission income
19
123,616
127,217
Net gain from foreign exchange
Net income from investment securities
20
21
62,062
85,257
66,759
22,882
870,162
909,252
(164,767)
(18,568)
(1,462)
(3,271)
(102,650)
(177,833)
(16,469)
(43,002)
(118,644)
579,444
553,304
5.27
5.03
Net operating income
Staff costs
Depreciation
Net impairment losses on investment securities
Net impairment loss on loans and advances to customers
Other expenses
22
11
10 (b)
9 (c)
23
Profit for the year
Earnings per share
Basic and diluted earnings per share (QAR per share)
F-19
24
Notes
For the year ended 31 December
Profit for the year
2014
2013
579,444
553,304
53,622
(59,685)
104,155
(120)
(6,063)
104,035
Other comprehensive income
Items that are or may be reclassified to income
statement
Available-for-sale investments:
Net change in fair value
Net amount transferred to income statement
16 (d)
16 (d)
Other comprehensive income for the year
573,381
Total comprehensive income for the year
F-20
657,339
Share
Legal
Risk
Fair value
Retained
capital
reserve
reserve
reserve
earnings
Total equity
1,100,000
2,025,884
388,052
(461)
718,278
4,231,753
Total comprehensive income for the year
Profit for the year
Other comprehensive income for the year
-
-
-
104,035
553,304
-
553,304
104,035
Total comprehensive income for the year
-
-
-
104,035
553,304
657,339
-
-
27,355
-
(27,355)
-
-
-
27,355
-
(27,355)
-
-
-
-
-
(440,000)
(440,000)
-
-
-
-
(440,000)
(440,000)
1,100,000
2,025,884
415,407
Notes
Balance as at 1 January 2013
Transfer to risk reserve
16 (c)
Transactions with equity holders, recognised directly in
equity
Contributions by and distributions to equity holders:
Dividends paid
Total contributions by and distributions to equity holders
Balance as at 31 December 2013
16 (e)
F-21
103,574
804,227
4,449,092
Share
Legal
Risk
Fair value
Retained
capital
reserve
reserve
reserve
earnings
Total equity
1,100,000
2,025,884
415,407
103,574
804,227
4,449,092
Total comprehensive income for the year
Profit for the year
Other comprehensive income for the year
-
-
-
(6,063)
579,444
-
579,444
(6,063)
Total comprehensive income for the year
-
-
-
(6,063)
579,444
573,381
-
-
67,546
-
(67,546)
-
-
-
67,546
-
(67,546)
-
-
-
-
-
(480,700)
(480,700)
-
-
-
-
(480,700)
(480,700)
1,100,000
2,025,884
482,953
Notes
Balance as at 1 January 2014
Transfer to risk reserve
16 (c)
Transactions with equity holders, recognised directly in
equity
Contributions by and distributions to equity holders:
Dividends paid
Total contributions by and distributions to equity holders
Balance as at 31 December 2014
16 (e)
97,511
835,425
4,541,773
Cash dividend of QAR 500,500 thousand (2013: QAR 480,700 thousand) has been proposed by the Board of Directors for the year ended 31 December 2014, which
is subject to approval at the Annual General Meeting of the shareholders.
F-22
Notes
For the year ended 31 December
Cash flows from operating activities
Profit for the year
Adjustments for:
Interest income
Interest expense
Net impairment loss on loans and advances to customers
Net impairment loss on investment securities
Provision for staff indemnity
Depreciation
Net amortisation of premium / (discount) on investment
securities
Net gains on disposal of investment securities
Dividend income
(Gain) / Loss on disposal of property and equipment
Change
Change
Change
Change
Change
Change
Change
in
in
in
in
in
in
in
17
18
9 (c)
10 (b)
15 (a)
11
21
21
cash reserve with Qatar Central Bank
due from banks
loans and advances to customers
other assets
due to banks
customer deposits
other liabilities
2014
2013
579,444
553,304
(753,582)
154,355
3,271
1,462
6,597
18,568
(947,599)
255,205
43,002
5,742
16,469
16,291
(84,157)
(1,100)
(2,222)
(61,073)
(12,426)
(19,648)
(3,234)
1,294
(107,891)
141,247
Interest received
Interest paid
Dividends received
Staff indemnity paid
Net cash used in operating activities
15 (a)
Cash flows from investing activities
Acquisition of investment securities
Proceeds from disposal of investment securities
Acquisition of property and equipment
Proceeds from disposal of property and equipment
Net cash from / (used in) investing activities
11
Cash flows from financing activities
Dividends paid
Net cash used in financing activities
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents as at 1 January
Cash and cash equivalents as at 31 December
F-23
16 (e)
26
99,828
(2,849,671)
2,180
2,794,729
(617,038)
(20,631)
(610,257)
716,011
(180,018)
1,100
(3,897)
(77,061)
2,724
2,833,897
9,247
(3,276,296)
(462,307)
(70,806)
(971,604)
905,551
(289,232)
3,234
(3,118)
(355,169)
(5,369,115)
9,956,447
(188,569)
9,739
4,408,502
(10,866,959)
7,948,458
(21,049)
125,099
(2,814,451)
(480,700)
(480,700)
3,850,741
1,657,235
5,507,976
(440,000)
(440,000)
(3,609,620)
5,266,855
1,657,235
1.
REPORTING ENTITY
The International Bank of Qatar (Q.S.C.) (the “Bank”) was established in the State of Qatar on
1
November 1956 as Ottoman Bank. On 31 July 2000, the Bank was incorporated as Grindlays Qatar
Bank under Emiri Decree Number 4 of 2000. The principal shareholders were four Qatari incorporat ed
companies with limited liability (W.L.L.) holding 60% of the Bank’s share capital and Standard Chartered
Grindlays Bank Ltd. holding 40%.
Standard Chartered Grindlays Bank Ltd. sold its shareholding to the Qatari shareholders on 31 May
2003.
On 30 August 2004, National Bank of Kuwait S.A.K (“NBK”) acquired a shareholding in the Bank and
the name of the Bank was changed to International Bank of Qatar (Q.S.C.) effective 1 September 2004.
A sale purchase agreement has been signed for the sale of NBK shareholding (Note 31).
The Bank is engaged in commercial banking activities and operates through its Head Office at Suhaim
Bin Hamad Street, Doha (Postal address P.O. Box 2001, Doha, Qatar) and five branches established
in the State of Qatar.
2. BASIS OF PREPARATION
(a) Statement of compliance
The financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and the applicable
provisions of Qatar Central Bank (“QCB”) regulations.
(b) Basis of measurement
The financial statements have been prepared on the historical cost convention, as modified by the
revaluation of available for sale assets, financial assets and liabilities (including derivatives) at fair value
through profit or loss.
(c) Functional and presentation currency
These financial statements are presented in Qatari Riyals (“QAR”), which is the Bank’s functional and
presentation currency. Except as otherwise indicated, financial information presented in QAR has been
rounded to the nearest thousand.
(d) Use of estimates and judgements
In determining the carrying amounts of certain assets and liabilities, the bank makes assumptions of
the effects of uncertain future events on those assets and liabilities at the financial position date.
Estimates and underlying assumptions are based on historical experience and expectations of future
events and are reviewed periodically. Further information about key assumptions concerning the
future, and other key sources of estimation uncertainty are set out in the relevant disclosure notes
contained within these financial statements (note 5)
F-24
3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently to all periods presented in these
financial statements.
(a) Foreign currency
Transactions and Balances
Foreign currency transactions are translated in to the functional currency using the exchange rates
prevailing at the transaction date. Foreign exchange gains and losses resulting from the settlement of
such transactions and from translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the income statement. Non-monetary assets and
liabilities are translated at the historical exchange rate if held at historical cost, or year-end exchange
rates if held at fair value, and the resulting foreign exchange gains and losses are recognised in either
the income statement or shareholder’s equity depending upon the treatment of the gain or loss on the
asset or liability.
(b) Financial assets and financial liabilities
(i) Recognition and initial measurement
The Bank initially recognises loans and advances to customers, due from / to banks and customer
deposits on the date at which they are originated. All other financial assets and liabilities are initially
recognised on the settlement date at which the Bank becomes a party to the contractual provisions of
the instrument.
A financial asset or financial liability is measured initially at fair value plus, for an item not at fair value
through profit or loss, transaction costs that are directly attributable to its acquisition or issue.
(ii) Classification
Financial assets
At inception a financial asset is classified in one of the following categories:
• loans and receivables
• held-to-maturity
• available-for-sale
• designated as fair value through profit or loss
Financial liabilities
The Bank has classified and measured its financial liabilities at amortised cost.
(iii) Derecognition
The Bank derecognises a financial asset when the contractual rights to the cash flows from the
financial asset expire, or when it transfers the financial asset in a transaction in which substantially all
the risks and rewards of ownership of the financial asset are transferred or in which the Bank neither
transfers nor retains substantially all the risks and rewards of ownership and it does not retain control
of the financial asset. Any interest in transferred financial assets that qualify for derecognition that is
created or retained by the Bank is recognised as a separate asset or liability in the statement of
financial position. On derecognition of a financial asset, the difference between the carrying amount
of the asset (or the carrying amount allocated to the portion of the asset transferred), and
consideration received (including any new asset obtained less any new liability assumed) is
recognised in the income statement.
The Bank derecognises a financial liability when its contractual obligations are discharged or cancelled
or expire.
F-25
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b) Financial assets and financial liabilities (continued)
(iv) Offsetting
Financial assets and liabilities are offset and the net amounts presented in the statement of financial
position when, and only when, the Bank has a legal right to set off the recognised amounts and it
intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.
Income and expenses are presented on a net basis only when permitted under IFRS and when
approved by the QCB, or for gains and losses arising from a group of similar transactions such as in
the Bank’s trading activity.
(v) Measurement principles
• Amortised cost measurement
The amortised cost of a financial asset or liability is the amount at which the financial asset or liability
is measured at initial recognition, minus principal repayments, plus or minus the cumulative
amortisation using the effective interest method of any difference between the initial amount
recognised and the maturity amount, minus any reduction for impairment loss. The calculation of
effective interest rate includes all fees and points paid or received that are an integral part of the
effective interest rate.
• Fair value measurement
‘Fair value’ is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date in the principal or, in its absence,
the most advantageous market to which the Bank has access at that date.
When available, the Bank measures the fair value of an instrument using the quoted price in an active
market for that instrument. A market is regarded as active if transactions for the asset or liability take
place with sufficient frequency and volume to provide pricing information on an ongoing basis.
If there is no quoted price in an active market, then the Bank uses valuation techniques that maximise
the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen
valuation technique incorporates all of the factors that market participants would take into account in
pricing a transaction.
If an asset or a liability measured at fair value has a bid price and an ask price, then the Bank measures
assets and long positions at a bid price and liabilities and short positions at an ask price.
(vi) Identification and measurement of impairment
At each reporting date, the Bank assesses whether there is objective evidence that financial assets
not carried at fair value through profit or loss are impaired. A financial asset or a group of financial
assets is impaired when objective evidence demonstrates that a loss event has occurred after the
initial recognition of the asset(s), and that the loss event has an impact on the future cash flows of the
asset(s) that can be estimated reliably.
Objective evidence that financial assets are impaired can include significant financial difficulty of the
borrower, default or delinquency by a borrower, restructuring of a loan or advance by the Bank on
terms that the Bank would not otherwise consider, indications that a borrower will enter bankruptcy,
the disappearance of an active market for a security, or other observable data relating to a group of
assets such as adverse changes in the payment status of borrowers in the group, or economic
conditions that correlate with defaults in the group of assets.
F-26
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b) Financial assets and financial liabilities (continued)
(vi) Identification and measurement of impairment (continued)
The Bank considers evidence of impairment loss for loans and advances to customers at both a
specific asset and collective level. All individually significant loans and advances to customers and
investment securities are assessed for specific impairment. All individually significant loans and
advances to customers and investment securities found not to be specifically impaired are then
collectively assessed for any impairment that has been incurred but not yet identified. Loans and
advances to customers that are not individually significant are collectively assessed for impairment by
grouping together loans and advances to customers with similar risk characteristics.
Impairment losses on financial assets carried at amortised cost are measured as the differenc e
between the carrying amount of the financial asset and the present value of estimated future cash
flows discounted at the asset’s original effective interest rate. Impairment losses are recognised in
income statement and reflected in an allowance account against financial assets.
The Bank writes off loans and advances to customers and investment securities when it is known not
to be collectible.
For listed investments, a decline in the market value by 20% from cost or more, or for a continuous
period of nine months or more, are considered to be indicators of impairment.
Impairment losses on available-for-sale investment securities are recognised by transferring the
cumulative loss that has been recognised in other comprehensive income to income statement as a
reclassification adjustment. The cumulative loss that is reclassified from other comprehensive income
to income statement is the difference between the acquisition cost, net of any principal repayment and
amortisation, and the current fair value, less any impairment loss previously recognised in the income
statement. Changes in impairment provisions attributable to time value are reflected as a component
of interest income.
While in subsequent periods, the appreciation in fair value of impaired available-for-sale investment
securities is recorded in fair value reserves, debit instruments appreciation in fair value that can be
related to an event occurring after the impairment loss is recognised as part of the income statement.
(c) Cash and cash equivalents
For the purpose of the cash flow statement, cash and cash equivalents comprise cash, on demand
and overnight balances with central banks (unless restricted) and balances with less than three
months’ maturity from the date of acquisition, including treasury bills and other eligible bills, loans and
advances to banks, and short-term government securities.
Cash and cash equivalents are carried at amortised cost in the statement of financial position.
(d) Loans and advances to customers
Loans and advances to customers are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market and that the Bank does not intend to sell immediately
or in the near term.
Loans and advances to customers are initially measured at the transaction price which is the fair value
plus incremental direct transaction costs, and subsequently measured at their amortised cost using
the effective interest method.
F-27
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(e) Investment securities
Subsequent to initial recognition, investment securities are accounted for depending on their
classification, as either ‘held to maturity’ or ‘available-for-sale’.
(i) Held-to-maturity investments
Held-to-maturity investments are non-derivative assets with fixed or determinable payments and fixed
maturity that the Bank has the positive intent and ability to hold to maturity, and which were not
designated at fair value through profit or loss (trading) or available-for-sale. Held-to-maturit y
investments are carried at amortised cost using the effective interest method.
(ii) Available-for-sale investments
Available-for-sale investments are non-derivative investments that are designated as available-f orsale or are not classified as another category of financial assets. Unquoted equity securities are
carried at cost less impairment, and all other available-for-sale investments are carried at fair value.
Other fair value changes are recognised in other comprehensive income until the investment is sold
or impaired, whereupon the cumulative gains and losses previously recognised in other
comprehensive income are reclassified to the income statement.
(f) Derivatives
(i) Derivatives held for trading purposes
The Bank’s derivative trading instruments includes forward foreign exchange contracts and interest
rate swaps. The Bank sells these derivatives to customers in order to enable them to transfer, modify
or reduce current and future risks. These derivative instruments are fair valued as at the reporting
date and the corresponding fair value changes is taken to the income statement.
(ii) Other non-trading derivatives
When a derivative is not held for trading, and is not designated in a qualifying hedge relationship, all
changes in its fair value are recognised immediately in the income statement.
(g) Property and equipment
(i) Recognition and measurement
Items of property and equipment are measured at cost less accumulated depreciation and
accumulated impairment losses.
Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of
self-constructed assets includes the cost of materials and direct labour, any other costs directly
attributable to bringing the assets to a working condition for their intended use, the costs of dismantling
and removing the items and restoring the site on which they are located and capitalised borrowing
costs.
When parts of an item of property or equipment have different useful lives, they are accounted for as
separate items (major components) of property and equipment.
The gain or loss on disposal of an item of property and equipment is determined by comparing the
proceeds from disposal with the carrying amount of the item of property and equipment, and is
recognised in other expenses.
F-28
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(g) Property and equipment (continued)
(ii) Subsequent costs
The cost of replacing a component of an item of property or equipment is recognised in the carrying
amount of the item if it is probable that the future economic benefits embodied within the part will flow
to the Bank and its cost can be measured reliably. The carrying amount of the replaced part is
derecognised. The costs of the day-to-day servicing of property and equipment are recognised in
income statement as incurred.
(iii) Depreciation
Depreciable amount is the cost of property and equipment, or other amount substituted for cost, less
its residual value.
Depreciation is recognised in the income statement on a straight-line basis over the estimated useful
lives of each part of an item of property and equipment since this most closely reflects the expected
pattern of consumption of the future economic benefits embodied in the asset and is based on cost of
the asset less its estimated residual value. Freehold land is not depreciated although it is subject to
impairment testing.
The estimated useful lives for the current and comparative years are as follows:
Leasehold improvements
Computer equipment
Furniture and equipment
Vehicles
5 – 7 years
3 – 5 years
5 – 7 years
5 years
Depreciation methods, useful lives and residual values are reassessed at each reporting date and
adjusted prospectively, if appropriate.
(h) Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for
impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable. An impairment
loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in
use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash flows (cash-generating units). Non-financial assets other than
goodwill that suffered impairment are reviewed for possible reversal of the impairment at each
reporting date.
(i) Provisions
A provision is recognised if, as a result of a past event, the Bank has a present legal or constructive
obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will
be required to settle the obligation. Provisions are determined by discounting the expected future cash
flows that reflects current market assessments of the time value of money and, where appropriat e,
the risks specific to the liability.
(j) Financial guarantees
Financial guarantees are contracts that require the Bank to make specified payments to reimburs e
the holder for a loss it incurs because a specified debtor fails to make payment when due in
accordance with the terms of a debt instrument. Financial guarantee liabilities are recognised initially
at their fair value, and the initial fair value is amortised over the life of the financial guarantee. The
financial guarantee liability is subsequently carried at the higher of this amortised amount and the
present value of any expected payment when a payment under the guarantee has become probable.
F-29
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(k) Contingent liabilities and other commitments
As at the reporting date, contingent liabilities and other commitments do not represent actual liabilities
of the Bank.
(l) Employee benefits
The Bank provides end of service benefits to its expatriate employees. The entitlement to these
benefits is based upon the employees’ final salary and length of service, subject to the completion of
a minimum service period. The expected cost of these benefits is accrued over the period of
employment. The provision for employees’ end of service benefits is disclosed under ‘‘Other
liabilities’’.
With respect to Qatari employees, the Bank makes contributions to the Qatari Pension Fund
calculated as a percentage of the employees’ salaries. The Bank’s obligations are limited to these
contributions.
(m) Dividends to shareholders
Dividends to shareholders are recognised in equity in the period in which they are approved by the
Annual General Meeting (AGM).
(n) Interest income and expense
Interest income and expense are recognised in income statement using the effective interest method.
The effective interest rate is the rate that exactly discounts the estimated future cash payments and
receipts through the expected life of the financial asset or liability to the carrying amount of the financial
asset or liability. When calculating the effective interest rate, the Bank estimates future cash flows
considering all contractual terms of the financial instrument, but not future credit losses.
The calculation of the effective interest rate includes all transaction costs and fees and points paid or
received that are an integral part of the effective interest rate.
Transaction costs include incremental costs that are directly attributable to the acquisition or issue of
a financial asset or liability.
(o) Fees and commission
Fees and commission income and expense that are integral to the effective interest rate on a financial
asset or liability are included in the measurement of the effective interest rate.
Other fees and commission income, including account servicing fees, sales commission and
syndication fees are recognised as the related services are performed. When a loan commitment is
not expected to result in the draw-down of a loan, the related loan commitment fees are recognised
using effective interest rate method over the commitment period.
Other fees and commission expense relate mainly to transaction and service fees, which are
expensed as the services are received.
(p) Income from investment securities
Gains or losses on the sale of investment securities are recognised in the income statement as the
difference between fair value of the consideration received and carrying amount of the investment
securities.
Income from held to maturity investment securities is recognised based on the effective interest rate
method.
F-30
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(q) Dividend on Equity
Dividends on equity instruments are recognised in to income statement within “Net income from
investment securities” when the bank’s right to receive payment is established.
(r) Fiduciary assets
Assets held in a fiduciary capacity are not treated as assets of the Bank in the statement of financial
position.
(s) Repossessed collateral
Repossessed collaterals against settlement of customers’ debts are stated within the statement of
financial position under "Other assets" at their acquisition value net of allowance for impairment.
According to QCB instructions, the Bank should dispose of any land and properties acquired against
settlement of debts within a period not exceeding three years from the date of acquisition although
this period can be extended after obtaining approval from QCB.
(t) Renegotiated loans and advances
Loans whose original terms have been modified including those subject to forbearance strategies are
considered renegotiated loans. If the renegotiations are on terms that are not consistent with those
readily available on the market, this provides objective evidence of impairment and the loan is
assessed accordingly.
(u) New standards, amendments and interpretations effective from 1 January 2014
Except for the changes below, the Bank has consistently applied the accounting policies. The following
amendments and interpretations, became effective as of 1 January 2014, and were adopted by the
Bank in preparation of these financial statements;
• Amendments to IFRS 10, IFRS 12 and IAS 27 “Investment Entities”
The amendments to IFRS 10 define an investment entity and require a reporting entity that meets the
definition of an investment entity not to consolidate its subsidiaries but instead to measure its
subsidiaries at fair value through profit or loss in its consolidated and separate financial statements.
Consequential amendments have been made to IFRS 12 and IAS 27 to introduce new disclosure
requirements for investment entities.
The Bank concluded that it does not meet the definition of an “investment entity” and hence the above
amendments are not applicable to the Bank.
• Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities
The amendments to IAS 32 clarify the requirements relating to the offset of financial assets and
financial liabilities. Specifically, the amendments clarify the meaning of 'currently has a legally
enforceable right of set-off' and 'simultaneous realisation and settlement'. The amendments have
been applied retrospectively.
The adoption of this amendment had no significant impact on the financial statements
• Amendments to IAS 36 Recoverable Amount Disclosures for Non-Financial Assets
The amendments to IAS 36 remove the requirement to disclose the recoverable amount of a
cashgenerating unit (CGU) to which goodwill or other intangible assets with indefinite useful lives had
been allocated when there has been no impairment or reversal of impairment of the related CGU.
Furthermore, the amendments introduce additional disclosure requirements applicable to when the
recoverable amount of an asset or a CGU is measured at fair value less costs of disposal.
F-31
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(u) New standards, amendments and interpretations effective from 1 January 2014
• Amendments to IAS 36 Recoverable Amount Disclosures for Non-Financial Assets
These new disclosures include the fair value hierarchy, key assumptions and valuation techniques
used which are in line with the disclosure required by IFRS 13 Fair Value Measurements.
The application of these amendments at the Bank level had no material impact on the disclosures in
the Bank’s financial statements.
• Amendments to IAS 39 Novation of Derivatives and Continuation of Hedge Accounting
The amendments to IAS 39 provide relief from the requirement to discontinue hedge accounting when
a derivative designated as a hedging instrument is novated under certain circumstances. The
amendments also clarify that any change to the fair value of the derivative designated as a hedging
instrument arising from the novation should be included in the assessment and measurement of hedge
effectiveness. The amendments have been applied retrospectively.The adoption of this amendment
had no significant impact on the financial statements.
(v) New standards and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations are effective for annual
periods beginning on or after 1 January 2015, and have not been applied in preparing these financial
statements. The Bank does not plan to early adopt these standards.
•
IFRS 9 - Financial Instruments
IFRS 9 published in July 2014, replaces the existing IAS 39 Financial Instruments: Recognition and
Measurement. IFRS 9 includes revised guidance on the classification and measurement of financial
instruments, including a new expected credit loss model for calculating impairment on financial
assets, and the new general hedge accounting requirements. It also carries forward the guidance on
recognition and derecognition of financial instruments from IAS 39.
IFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early
adoption permitted.
The Bank is assessing the potential impact on its financial statements resulting from the application
of IFRS 9.
• IFRS 15 – Revenue from Contracts with Customers
IFRS 15 establishes a comprehensive framework for determining whether, how much and when
revenue is recognized. It replaces existing revenue recognition guidance, including IAS 18 Revenue,
IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes.
IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2017, with early
adoption permitted.
The Bank is assessing the potential impact on its financial statements resulting from the application
of IFRS 15.
•
Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and
Amortisation
The amendments to IAS 16 prohibits entities from using a revenue based depreciation method for
items of property, plant and equipment. The amendments to IAS 38 introduce a rebuttable
presumption that revenue is not an appropriate basis for amortisation of an intangible asset. This
presumption can only be rebutted if the intangible asset is expressed as a measure of revenue or
when it can be demonstrated that revenue and consumption of the economic benefits of the
intangible asset are highly correlated.
F-32
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(v) New standards and interpretations not yet adopted
The amendments apply prospectively for annual periods beginning on or after 1 January 2016.
The above amendments does not have any material impact on the financial statements of the Bank.
4. FINANCIAL RISK MANAGEMENT
(a) Risk management framework
Risks are inherent in the Bank’s activities with the material risks being credit risk, concentration risk,
operational risk, liquidity risk, business risk, market risk and, interest rate risk in the banking book. As
part of the Bank’s Internal Capital Adequacy Assessment Process (ICAAP), these risks are managed
through an appropriate governance and infrastructure around identifying, measuring, monitoring and
reporting risks. The Bank considers its risk management and ICAAP framework as indispensable in
meeting its primary objectives of protecting depositors, creditors, shareholders and the financial
system at large.
Governance
Governance provides the basic corporate framework around which the Bank’s businesses and risks
are managed. This includes the establishment of board and management committees with due
segregation of roles, business and risk strategy, risk appetite and policies.
Governance structure
The Board of Directors (BoD) is ultimately responsible for establishing the bank’s strategy, identifying
and controlling risks, and for establishing and disseminating the Bank’s overall risk appetite limits.
The BoD is charged with the responsibility to ensure the overall strategic and organisational objectives
of the the Bank are attained. To accomplish this objective, the Bank has established independent
bodies responsible for managing and monitoring risks. The Bank has five Management Level
committees who report into four Board Level committees.
Board Risk and Compliance Committee (BRCC)
The Board Risk and Compliance Committee (BRCC) oversees the risk and compliance issues arising
from current and future business activities. The BRCC oversees all material risks to which the Bank
is exposed and recommends the most appropriate risk strategy, appetite, policies and limits to the
BoD. The BRCC also oversees the implementation of, and adherence to the approved policies of IBQ
across its business lines to ensure that risk and compliance with these policies and with regulatory
requirements is properly managed, monitored, measured and reported. The BRCC is charged
amongst other things, with encouraging a risk aware culture within IBQ at all levels. In line with the
need to maintain independence, Risk and Compliance functions report to the BRCC.
Board Executive Committee (BEC)
The Board Executive Committee (BEC) oversees the strategic and overall directional issues of the
Bank’s business activities. The BEC ensures that management implements and adheres to the
approved strategic and budgetary requirements of IBQ as established by the BoD and communicated
through the respective and appropriate Board Committees.
Board Remuneration, Nominations & Corporate Governance Committee (BRN&CGC)
The Board Remuneration, Nominations & Corporate Governance Committee (BRN&CGC) has been
established to ensure the smooth management and operation of IBQ’s business, regulatory, financial,
operational and human capital issues and activities. It also oversees the governance of the BoD,
Board Committees and Executive Management and undertakes the development and promotion of
corporate governance procedures and culture throughout the Bank. Its mandate includes adherenc e
to regulatory requirements and public reporting on corporate governance matters. The scope further
encompasses composition and induction of potential appointments as directors.
F-33
4.
FINANCIAL RISK MANAGEMENT (CONTINUED)
(a) Risk management framework (continued)
Board Audit Committee (BAC)
The BoD established the Board Audit Committee (BAC) to assist in fulfilling its oversight
responsibilities through managing and monitoring issues arising from the business’ activities and
through ensuring effective implementation and proper adherence to the bank’s approved policies and
procedures as well as the QCB related requirements.
Risk Management Committee (RMC)
The Risk Management Committee (RMC) oversees the risk issues arising from current and future
business activities. The RMC oversees all material risks to which IBQ is exposed. The RMC also
oversees the implementation and adherence to the approved policies of IBQ across its business lines
to ensure that risk and compliance with these policies and with regulatory requirements is properly
managed, monitored, measured and reported. The RMC is charged amongst other things, with
encouraging a risk aware culture within IBQ at all levels.
Executive Credit Committee (ECC)
A management level Executive Credit Committee (ECC) exercises the power and authority delegated
to it by the BoD and the BEC to review and decide on credit proposals and transactions.
Asset Liability and Investment Committee (ALICO)
The Asset and Liability Committee (ALICO) monitors and manages the financial position of IBQ;
capital, funding, liquidity and the market risk of the trading and non-trading portfolios as well as
developing IBQ’s investment portfolio and assisting the bank to manage investments, optimise returns
and oversee risk.
Management Executive Committee (MEC)
The Management Executive Committee (MEC) exercises the power and authority delegated to it by
the BoD or the BEC to establish operating plans to meet strategic objectives and to monitor and review
progress of actions against budgets and plans.
Human Resources Committee (HRC)
The Human Resources Committee (HRC) reviews HR strategy, evaluates progress and administers
all elements of compensation ensuring IBQ can successfully attract, retain and motivate employees.
HRC also reviews Qatarization initiatives, progress and strategy and develops new and innovat ive
training concepts to ensure that the workforce is operating at optimum levels.
Internal audit
Risk management processes throughout the Bank are audited regularly by the internal audit function,
which examines both the adequacy of the procedures and the Bank’s compliance with the procedures .
Internal Audit discusses the results of all assessments with management and reports its findings and
recommendations to the Audit Committee.
F-34
4.
FINANCIAL RISK MANAGEMENT (CONTINUED)
(a) Risk management framework (continued)
Strategy, policies and infrastructure
The BoD approves the Bank’s long-term strategy defining the primary objectives and targets. The
BoD also lays down the risk strategy setting the constraints within which targets need to be met.
Policies and risk appetite limits are defined by the BoD based on RMC recommendations
complementary to the business and risk strategies.
Risk management processes throughout the Bank are audited regularly by the Internal Audit function,
which examines both the adequacy of the procedures and the Bank’s compliance with the procedures .
Internal Audit discusses the results of all assessments with management and reports its findings and
recommendations to the BAC.
Monitoring and controlling risks is primarily performed based on limits established by the Board.
These limits reflect the business strategy of the Board and the market environment as well as the level
of risk approved by the Board.
Information compiled from all businesses is examined and processed in order to analyse, control and
identify risks in a timely manner. This information is presented and discussed with the BOD, the Risk
Management Committee, and the head of each business division.
As part of its overall risk management, the Bank use, if required, derivatives and other instruments to
manage exposures resulting from changes in interest rates, foreign currencies, equity risks, credit
risks, and exposures arising from forecast transactions. The risk profile is assessed before entering
into hedge transactions, which are authorised by the appropriate level of authority within the Bank.
The effectiveness of all hedging transactions is monitored by the Risk Management on a monthly
basis.
(b) Credit risk
Credit risk is the risk of financial loss to the Bank if a borrower or counterparty in a financial
transaction fails to meet its contractual obligations. It arises from lending, trade finance, treasury
and other activities undertaken by the Bank. The Bank has established appropriate credit
standards, policies and procedures for the management and monitoring of credit risks.
Retail lending procedures comprise adequate controls and close portfolio monitoring to ensure the
portfolio performance remains within the established risk appetite.
For Wholesale banking, the Bank manages its credit risk exposure through careful screening and
assessment of borrower’s and guarantor’s credit and through periodic credit and portfolio reviews. It
also manages the prudent diversification of its lending, investing and financing activities. The Bank
avoids undue concentrations of risks by limiting exposures to individuals or groups of customers in
specific businesses. It also obtains collateral or credit support where appropriate, as a way to
mitigate credit risks. The types of collateral obtained include cash, mortgages over real estate
properties and pledges over equity instruments. Credit support includes personal and/or corporate
guarantees.
The Bank uses the same credit risk assessment procedures when entering into derivative and treasury
transactions that it does for traditional lending products.
Note 9 discloses the distribution of loans and advances to customers by industrial sector. Note 4(b)(ii)
discloses the geographical distribution of the Bank’s assets at the reporting date.
F-35
4. FINANCIAL RISK MANAGEMENT (CONTINUED)
(b) Credit risk (continued)
(i) Maximum exposure to credit risk before collateral held or other credit enhancements
Credit risk exposures relating to assets recorded on the
statement of financial position are as follows:
Balances with Qatar Central Bank
Due from banks
Loans and advances to customers
Investment securities - debt
Other assets
Total as at 31 December
Other credit risk exposures are as follows:
Guarantees
Letters of credit
Unutilised credit facilities
Total as at 31 December
2014
2013
1,652,369
5,799,708
19,856,625
2,826,289
259,366
30,394,357
1,236,834
2,517,948
17,032,854
7,447,332
220,253
28,455,221
4,928,677
743,193
5,191,967
1,006,103
2,662,878
8,334,748
3,542,776
9,740,846
The above table represents a worse-case scenario of credit risk exposure to the Bank, without taking
account of any collateral held or other credit enhancements attached. For financial assets recorded
the exposures set out above are based on net carrying amounts as reported in the statement of
financial position.
F-36
4. FINANCIAL RISK MANAGEMENT (CONTINUED)
(b) Credit risk (continued)
(ii) Concentration of risks of financial assets with credit risk exposure
Geographical sectors
The following table breaks down the Bank’s credit exposure at their carrying amounts (without taking into account any collateral held or other credit support),
as categorised by geographical region. For this table, the Bank has allocated exposures to regions based on the country of domicile of its counterparties.
31 December 2014
Balances with Qatar Central Bank
Due from banks
Loans and advances to customers
Investment securities - debt
Other assets
31 December 2013
Balances with Qatar Central Bank
Due from banks
Loans and advances to customers
Investment securities - debt
Other assets
Qatar
GCC
Countries
Other
Middle East
Rest of
the world
Total
1,652,369
5,746,893
19,390,393
2,698,616
258,392
29,746,663
12,236
466,232
72,618
273
551,359
928
928
39,651
55,055
701
95,407
1,652,369
5,799,708
19,856,625
2,826,289
259,366
30,394,357
Qatar
GCC
Countries
Other
Middle East
Rest of the
world
Total
1,236,834
1,867,763
16,562,007
7,409,544
219,785
27,295,933
24,282
470,847
37,788
459
533,376
1,027
1,027
624,876
9
624,885
1,236,834
2,517,948
17,032,854
7,447,332
220,253
28,455,221
F-37
4. FINANCIAL RISK MANAGEMENT (CONTINUED)
(b) Credit risk (continued)
(ii) Concentration of risks of financial assets with credit risk exposure (continued)
Geographical sectors
31 December 2014
Guarantees
Letters of credit
Unutilised credit facilities
31 December 2013
Guarantees
Letters of credit
Unutilised credit facilities
Qatar
GCC
Countries
Other
Middle East
Rest of the
world
Total
3,079,560
676,875
2,662,878
6,419,313
148,951
148,951
113,720
24,982
138,702
1,586,446
41,336
1,627,782
4,928,677
743,193
2,662,878
8,334,748
Qatar
GCC
Countries
Other Middle
East
Rest of the
world
Total
3,141,485
917,005
3,542,776
7,601,266
275,555
275,555
112,770
112,770
1,662,157
89,098
1,751,255
5,191,967
1,006,103
3,542,776
9,740,846
F-38
4. FINANCIAL RISK MANAGEMENT (CONTINUED)
(b) Credit risk (continued)
(ii) Concentration of risks of financial assets with credit risk exposure (continued)
Industry sectors
The following table, as an illustration, breaks down the Bank’s credit exposure before taking into
account collateral held or other credit enhancements, as categorised by the industry sectors of the
Bank’s counterparties.
Funded and unfunded
Government
Government agencies
Industry
Commercial
Services
Contracting
Real estate
Personal
Others
Contingent liabilities
F-39
Exposure
2014
Exposure
2013
9,738,053
1,921,492
488,522
2,987,480
6,882,077
683,447
3,338,612
4,350,578
4,096
8,334,748
38,729,105
9,190,359
5,422,536
536,183
2,980,154
4,119,574
551,462
2,398,562
3,253,882
2,509
9,740,846
38,196,067
4. FINANCIAL RISK MANAGEMENT (CONTINUED)
(b) Credit risk (continued)
(iii) Credit quality
Loans and advances to
customers
2014
2013
Neither past due nor impaired
Low risk
Special mention
Due from banks
2014
2013
Investment securities debt
2014
2013
Other credit risk exposure
2014
2013
19,046,019
19,046,019
16,338,007
470,035
16,808,042
5,799,708
5,799,708
2,517,948
2,517,948
2,826,289
2,826,289
7,447,332
7,447,332
8,334,748
8,334,748
9,740,846
9,740,846
166,881
465,615
632,496
22,039
22,039
-
-
-
-
-
-
224,854
6,145
166,913
227,392
9,226
155,196
-
-
-
-
-
-
397,912
(216,222)
391,814
(185,461)
-
-
-
-
-
-
(3,580)
178,110
(3,580)
202,773
-
-
-
-
-
-
19,856,625
17,032,854
5,799,708
2,517,948
2,826,289
7,447,332
8,334,748
9,740,846
Past due but not impaired
Low risk
Special mention
Impaired
Substandard
Doubtful
Bad debts
Less: impairment allowance-specific
Less: impairment allowancecollective
Total carrying amount
F-40
4. FINANCIAL RISK MANAGEMENT (CONTINUED)
(b) Credit risk (continued)
(iii) Credit quality (continued)
Impaired loans and advances to customers and investment in debt securities
Individually impaired loans and advances to customers and investment debt securities are exposures
which the Bank determines that there is objective evidence of impairment and it does not expect to
collect all principal and interest due according to the contractual terms of the loan/investment security
agreement(s).
Loans and advances to customers past due but not impaired
Past due but not impaired loans and advances to customers are those for which contractual interest
or principal payments are past due, but the Bank believes that impairment is not appropriate on the
basis of the level of security/collateral available and/or the stage of collection of amounts owed to the
Bank.
Up to 30 days
31 to 60 days
Above 60 days
Gross
2014
2013
105,460
58,246
468,790
632,496
12,903
3,512
5,624
22,039
Rescheduled loans and advances to customers
Restructuring activities include; extended payment arrangements, approved management plans,
modification and deferral of payments. During the year, the Bank has rescheduled loans amounting
QAR 445,365 thousand (2013: QAR 397,938 thousand).
Cash and cash equivalents
The Bank held cash and cash equivalents of QAR 5,507,976 thousand at 31 December 2014 (2013:
QAR 1,657,235 thousand). The cash and cash equivalents held with QCB and financial institution
counterparties that are rated at least A- amounted to QAR 3,902,274 thousand (2013: QAR 1,564,190
thousand).
(iv) Collateral
The Bank holds collateral and other credit enhancements against certain of its credit exposures. The
determination of eligible collateral and the value of collateral are based on QCB regulations and are
assessed by reference to market price or indexes of similar assets.
The Bank has collateral in the forms of blocked deposits, pledge of shares or legal mortgage against
the past due loans and advances to customers.
The aggregate collateral is QAR 31.08 million (2013: QAR 16.47 million) for past due up to 30 days,
QAR Nil (2013: QAR Nil) for past due from 31 to 60 days and QAR Nil (2013: QAR 1.54 million) for
past due from 61 and above days.
(v) Repossessed collateral
During the year, the Bank obtained assets by taking possession of collateral held as security as
follows:
2014
1,901
1,901
Property
2013
1,901
1,901
Repossessed properties are sold as soon as practicable, with the proceeds used to reduce the
outstanding indebtedness. Repossessed property is classified in the statement of financial position
within other assets.
F-41
4. FINANCIAL RISK MANAGEMENT (CONTINUED)
(b) Credit risk (continued)
(vi) Write-off policy
The Bank carries provisions on irregular and non-performing loans in accordance with QCB
regulations. Furthermore, the Bank writes-off a loan, accrued interest, and any related allowances for
impairment losses, or an investment debt security balance, when the Bank determines that the
amounts owed are uncollectible after exhausting all means of collection. The determination to writeoff an exposure is made after evaluating all relevant information, including borrower’s, guarantor’s or
issuer’s financial position, sources of repayment, proceeds from collateral and legal recourse. For
smaller balance standardised loans, write-off decisions generally are based on a product-specific past
due status. The amount written off during the year was QAR 498 thousand (2013: QAR 1,806
thousand).
(c) Liquidity risk
Liquidity risk is the risk that the Bank will be unable to meet its funding requirements. Liquidity risk
arises from fluctuations in cash flows due to market disruptions or credit down grades, which may
cause certain sources of funding to cease immediately.
(i) Management of liquidity risk
The Bank maintains a portfolio of highly marketable and diverse assets that can be easily liquidated
in the event of an unforeseen interruption of cash flow. In addition, the Bank maintains a statutory
deposit with the QCB. The liquidity position is assessed and managed under a variety of scenarios,
giving due consideration to stress factors relating to both the market in general and specifically to the
Bank.
(ii) Exposure to liquidity risk
The key measure used by the Bank for managing liquidity risk is the ratio of net liquid assets to
deposits from customers. For this purpose, net liquid assets are considered as including cash and
cash equivalents and investment grade debt securities for which there is an active and liquid market
less any deposits from banks, debt securities, other borrowings and commitments maturing within the
next month. A similar, but not identical, calculation is used to measure the Bank’s compliance with
the liquidity limit established by the Bank’s regulator, QCB. In addition, during the year, the Bank has
introduced the Liquidity Coverage Ratio and the Net Stable Funding Ratio as part of the Basel III
metrics applied by the QCB. These ratios assess the bank’s ability to meet short term liquidity stress
situations and its availability of long-term / stable funds respectively.
Details of the reported Bank ratio of net liquid assets to deposits from customers at the reporting date
and during the year were as follows:
2014
125.46%
128.74%
At 31 December
Average for the year
F-42
2013
131.69%
128.66%
4. FINANCIAL RISK MANAGEMENT (CONTINUED)
(c) Liquidity risk (continued)
(iii) Maturity analysis
31 December 2014
Cash and balances with Qatar Central Bank
Due from banks
Loans and advances to customers
Investment securities
Property and equipment
Others assets
Total
Due to banks
Customer deposits
Other liabilities
Total
Difference
31 December 2013
Cash and balances with Qatar Central Bank
Due from banks
Loans and advances to customers
Investment securities
Property and equipment
Others assets
Total
Due to banks
Customer deposits
Other liabilities
Total
Difference
Carrying
amount
Less than 1
month
1-3 months
3-12 months
1-5 years
More than
5 years
1,756,698
5,799,708
19,856,625
2,954,936
226,142
287,990
30,882,099
4,332,343
21,209,805
798,178
26,340,326
1,756,698
4,292,182
5,616,529
128,647
4
223,675
12,017,735
3,385,943
16,140,837
370,110
19,896,890
(7,879,155)
415,526
4,040,785
132
51,445
4,507,888
946,400
2,763,425
226,177
3,936,002
571,886
1,092,000
3,206,539
3,294
12,338
4,314,171
2,211,343
147,919
2,359,262
1,954,909
5,103,880
2,763,789
35,789
532
7,903,990
94,200
53,972
148,172
7,755,818
1,888,892
62,500
186,923
2,138,315
2,138,315
Carrying
amount
Less than 1
month
1-3 months
3-12 months
1-5 years
More than
5 years
1,328,964
2,517,948
17,032,854
7,481,927
63,658
252,599
28,677,950
1,537,614
21,826,843
864,401
24,228,858
1,328,964
1,425,948
3,912,194
2,234,577
8
205,605
9,107,296
1,537,614
18,495,571
335,430
20,368,615
3,111,935
2,093,238
197
16,539
5,221,909
2,601,333
203,811
2,805,144
1,021,772
833,706
2,059
1,857,537
658,318
158,609
816,927
1,092,000
5,487,398
2,088,067
39,346
30,455
8,737,266
71,621
126,258
197,879
3,499,555
232,339
22,048
3,753,942
40,293
40,293
(11,261,319)
2,416,765
1,040,610
8,539,387
3,713,649
F-43
4. FINANCIAL RISK MANAGEMENT (CONTINUED)
(c) Liquidity risk (continued)
(iv) Maturity analysis
The table below set out the remaining contractual maturities of the Bank’s financial assets and financial liabilities.
31 December 2014
Non-derivative financial liabilities
Due to banks
Customer deposits
Other liabilities
Total liabilities
Derivative financial instruments
Outflow
Inflow
31 December 2013
Non-derivative financial liabilities
Due to banks
Customer deposits
Other liabilities
Total liabilities
Derivative financial instruments
Outflow
Inflow
Carrying
amount
Gross
nominal
inflow
(outflow)
Less than 1
month
1-3
months
3-12
months
1-5 years
More than
5 years
4,332,343
21,209,805
798,178
26,340,326
4,333,733
21,243,542
798,178
26,375,453
3,387,197
16,151,640
370,110
19,908,947
946,536
2,774,789
226,177
3,947,502
2,221,772
147,919
2,369,691
95,341
53,972
149,313
-
1,608,592
(1,608,592)
26,340,326
1,608,592
(1,613,035)
26,371,010
1,467,649
(1,472,464)
19,904,132
66,798
(66,631)
3,947,669
74,145
(73,940)
2,369,896
149,313
-
Carrying
amount
Gross
nominal
inflow
(outflow)
Less than 1
month
1-3 months
3-12
months
1-5 years
More than
5 years
24,228,858
1,538,364
21,886,188
864,401
24,288,953
1,538,364
18,526,164
335,430
20,399,958
2,623,578
203,811
2,827,389
664,192
158,609
822,801
72,254
126,258
198,512
40,293
40,293
1,672,363
(1,672,363)
24,228,858
1,672,363
(1,671,366)
24,289,950
1,380,701
(1,379,830)
20,400,829
259,318
(258,854)
2,827,853
15,322
(15,759)
822,364
17,022
(16,923)
198,611
40,293
1,537,614
21,826,843
864,401
F-44
4. FINANCIAL RISK MANAGEMENT (CONTINUED)
(d) Market risks
The Bank takes on exposure to market risk, which is the risk that the fair value or future cash flows of
a financial instrument will fluctuate because of changes in market prices. Market risk arises from open
positions in interest rate, currency and equity products, all of which are exposed to general and
specific market movements and changes in the level of volatility of market rates or prices such as
interest rates, credit spreads, foreign exchange rates and equity prices.
(i) Management of market risks
Overall authority for market risk is vested in ALICO. The Bank’s Risk Department is responsible for
the development of detailed risk management policies (subject to review and approval by ALICO and
the Board) and for the day-to-day review of their implementation.
(ii) Exposure to interest rate risk – non-trading portfolios
The principal risk to which non-trading portfolios are exposed is the risk of loss from fluctuations
in the future cash flows or fair values of financial instruments because of a change in market
interest rates. Interest rate risk is managed principally through monitoring interest rate gaps.
ALICO is the monitoring body for these exposures and is assisted by Bank central Treasury in its
day-to-day monitoring activities.
F-45
4. FINANCIAL RISK MANAGEMENT (CONTINUED)
(d) Market risks (continued)
(ii) Exposure to interest rate risk – non-trading portfolios (continued)
A summary of the Bank’s interest rate gap position on non-trading portfolios is as follows:
Repricing in:
2014
Cash and balances in Qatar Central Bank
Due from banks
Loans and advances to customers
Investment securities
Property and equipment
Other assets
Due to banks
Customer deposits
Other liabilities
Equity
Statement of financial position items
Cumulative interest rate sensitivity gap
1-5 years
More than
5 years
Noninterest
sensitive
1,092,000
936,837
2,028,837
45,267
2,757,359
2,802,626
62,500
62,500
1,206,698
43,990
404,770
128,647
226,142
287,990
2,298,237
0.75%
1.17%
3.40%
3.66%
0.00%
0.00%
2,211,343
2,211,343
(182,506)
3,748,616
94,200
94,200
-
0.42%
0.79%
0.00%
0.00%
2,708,426
6,457,042
62,500
6,519,542
66,973
3,410,855
798,178
4,541,773
8,817,779
(6,519,542)
-
Carrying
amount
Less than
3 months
3-12
months
1,756,698
5,799,708
19,856,625
2,954,936
226,142
287,990
30,882,099
550,000
4,663,718
18,469,751
6,430
23,689,899
4,332,343
21,209,805
798,178
4,541,773
30,882,099
4,265,370
15,493,407
19,758,777
3,931,122
3,931,122
F-46
Effective
interest rate
4. FINANCIAL RISK MANAGEMENT (CONTINUED)
(d) Market risks (continued)
(ii) Exposure to interest rate risk – non-trading portfolios (continued)
Repricing in:
2013
Cash and balances in Qatar Central Bank
Due from banks
Loans and advances to customers
Investment securities
Property and equipment
Other assets
Due to banks
Customer deposits
Other liabilities
Equity
Statement of financial position items
Cumulative interest rate sensitivity gap
Carrying
amount
Less than
3 months
3-12
months
1-5 years
More than
5 years
Non-interest
sensitive
1,328,964
2,517,948
17,032,854
1,330,349
15,329,026
1,185,474
1,092,000
90,955
-
1,328,964
95,599
427,399
7,481,927
63,658
252,599
28,677,950
4,303,164
20,962,539
833,706
2,019,180
2,078,123
3,261,078
232,339
232,339
34,595
63,658
252,599
2,202,814
1,537,614
21,826,843
864,401
4,449,092
28,677,950
1,463,640
17,680,037
19,143,677
1,818,862
1,818,862
658,318
658,318
1,360,862
3,179,724
71,621
71,621
3,189,457
6,369,181
232,339
6,601,520
73,974
3,416,867
864,401
4,449,092
8,804,334
(6,601,520)
-
F-47
Effective
interest rate
0.00%
1.53%
3.45%
3.39%
0.00%
0.00%
0.31%
0.90%
0.00%
0.00%
4. FINANCIAL RISK MANAGEMENT (CONTINUED)
(d) Market risks (continued)
(ii) Exposure to interest rate risk – non-trading portfolios (continued)
Sensitivity analysis
The sensitivity of the income statement is the effect of the assumed changes in interest rates on the
net interest income for one year, based on the floating rate non-trading financial assets and financial
liabilities held at the reporting date, including the effect of hedging instruments.
Overall non-trading interest rate risk positions are managed by Bank central Treasury, which uses
investment securities, advances to banks, deposits from banks and derivative instruments to manage
the overall position arising from the Bank’s non-trading activities.
The following table demonstrates the sensitivity to a reasonable possible change in interest rates, with
all other variables held constant, on the Bank’s income statement. There is no impact on the Bank’s
equity. The effect of decreases in basis points is expected to be equal and opposite to the effect of
the increases shown.
Sensitivity of net interest
income
Currency
Increase in basis points
QAR
USD
EUR
GBP
Others
+10
+10
+10
+10
+10
2014
2013
5,832
906
(198)
54
146
6,740
5,670
2,091
(531)
58
(62)
7,226
Interest rate movements affect reported equity in the following ways:
•
•
retained earnings arising from increases or decreases in net interest income and the fair value
changes reported in income statement; and
fair value reserves arising from increases or decreases in fair values of available-for-s aleinvestments is reported directly in other comprehensive income.
Overall non-trading interest rate risk positions are managed by Bank central Treasury, which uses
investment securities, advances to banks, deposits from banks and derivative instruments to manage
the overall position arising from the Bank’s non-trading activities.
(iii) Exposure to other market risks – non-trading portfolios
Foreign currency transactions
Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign
exchange rates. The Bank takes on exposure to the effect of fluctuation in prevailing foreign currency
exchange rate on its financial position. The Bank has set limits on the level of currency exposure and
stop-loss levels, which are monitored daily. The Bank had the following net open long (short) positions
as at 31 December.
2014
2013
(640)
(25,903)
1,110
146,058
(2,770)
(6,947)
(553)
(4,826)
Net foreign currency exposure:
Pounds Sterling
Euro
AED
Other currencies
F-48
4. FINANCIAL RISK MANAGEMENT (CONTINUED)
(d) Market risks (continued)
(iii) Exposure to other market risks – non-trading portfolios (continued)
5% change in currency exchange rate
Pounds Sterling
Euro
AED
Other currencies
2014
2013
(32)
(1,295)
56
7,303
(139)
(347)
(28)
(241)
Equity price risk
Equity price risk is the risk that the fair value of equities decreases as a result of changes in the equity
indices and individual stocks. The non-trading equity price risk exposure arises from equity securities
classified as available-for-s ale.
The Bank is also exposed to equity price risk and the bank uses Value at Risk (VaR) as means of
measuring potential losses from this position. As at 31 December 2014, the VaR on its equity
investments was 8.6% of the fair value at 99% confidence level assuming a 10-days holding period.
The Bank is also exposed to equity price risk and the sensitivity analysis thereof is as follows:
5% change in QE 30 index
Change in other comprehensive income
2014
2013
6,426
1,724
The above analysis has been prepared on the assumption that all other variables such as interest
rate, foreign exchange rate, etc are held constant and is based on historical cross-correlation of the
equity securities.
(e) Operational risks
Operational risk refers to the loss resulting from inadequate or failed internal processes, people and
systems or from external events. The Bank endeavours to minimise operational losses by ensuring
that effective infrastructure, controls, systems and individuals are in place throughout the organisation.
Regulatory, legal and reputation risks are controlled through a set of internal policies and procedures .
Where required, external legal advice is obtained to confirm legal and regulatory requirements.
Other risks to which the Bank is exposed are regulatory risk, legal risk and reputational risk.
Regulatory risk is controlled through a framework of compliance policies and procedures. Legal risk
is managed through the effective use of the Bank’s Legal Department and external legal advisers .
Reputational risk is controlled through the regular examination of issues that are considered to have
reputational repercussions for the Bank, with guidelines and policies being issued as appropriate.
(f) Capital management
Regulatory capital
The primary objectives of the Bank’s capital management are to ensure that the Bank complies with
externally imposed capital requirements and that the Bank maintains healthy capital ratios in order
to support its business and to maximise shareholders value. In order to maintain or adjust the
capital structure, the Bank may adjust the amount of dividend payment to shareholders or issue
additional capital instruments. No changes were made in the objectives, policies and process from
the previous years.
The Bank maintains an actively managed capital base to cover risks inherent in the business. The
adequacy of the Bank’s capital is monitored using, among other measures, the rules and ratios
established by the Basel Committee on Banking Supervision and adopted by QCB in supervising
F-49
4. FINANCIAL RISK MANAGEMENT (CONTINUED)
(f) Capital management (continued)
Regulatory capital (continued)
the Bank. In line with these regulations, Basel III norms have been implemented whereby new
minimum capital requirements have been put in place for different levels of capital.
The Bank’s regulatory capital position under Basel II and QCB regulations at 31 December was as
follows:
Tier 1 capital*
Tier 2 capital
Total regulatory capital
2014
2013
3,460,809
330,283
3,791,092
3,449,411
334,852
3,784,263
*Tier one capital included retained earnings net of proposed dividend amounting to QAR 500,500
thousand (2013: QAR 480,700 thousand).
Tier 1 capital includes share capital, legal reserve and retained earnings.
Tier 2 capital includes risk reserve (up to 1.25% of the risk weighted assets) and fair value reserve
(45% if positive and 100 % if negative).
Risk weighted assets and carrying amounts
2014
Basel II
Risk
weighted
amount
2013
Basel II
Risk
weighted
amount
2014
Carrying
amount
2013
Carrying
amount
Cash and balances with Qatar Central Bank
Due from banks
Loans and advances to customers
Investment securities
Property and equipment
Other assets
Off balance sheet assets
2,899,107
12,674,248
226,142
287,990
3,952,848
1,255,492
14,199,179
63,658
252,599
4,364,156
1,756,698
5,799,708
19,856,625
2,954,936
226,142
287,990
10,327,084
1,328,964
2,517,948
17,032,854
7,481,927
63,658
252,599
11,808,757
Total risk weighted assets for credit risk
Risk weighted assets for market risk
Risk weighted assets for operational risk
20,040,335
1,193,318
1,678,603
22,912,256
20,135,084
1,276,586
1,647,833
23,059,503
41,209,183
41,209,183
40,486,707
40,486,707
2014
2013
22,912,256
3,791,092
16.55%
23,059,503
3,784,263
16.41%
Risk weighted assets
Regulatory capital
Capital Adequacy Ratio
The minimum ratio limit determined by QCB is 10% and the Basel II capital adequacy requirement is
8%.
F-50
5. USE OF ESTIMATES AND JUDGEMENTS
(a) Key sources of estimation uncertainty
The Bank makes estimates and assumptions that affect the reported amounts of assets and liabilities.
Estimates and judgements are continually evaluated and are based on historical experience and other
factors, including expectations of future events that are believed to be reasonable under the
circumstances.
(i) Allowances for credit losses
Assets accounted for at amortised cost are evaluated for impairment on a basis described in
accounting policy.
The specific counterparty component of the total allowances for impairment applies to financial assets
evaluated individually for impairment and is based upon management’s best estimate of the present
value of the cash flows that are expected to be received. In estimating these cash flows, management
makes judgements about counterparty’s financial situation and the net realisable value of any
underlying collateral. Each impaired asset is assessed on its merits and estimate of cash flows
considered recoverable are independently approved by the Credit Risk function. Minimum impairment
on specific counter parties are determined based on the QCB regulations.
Collectively assessed impairment allowances cover credit losses inherent in portfolios of loans and
advances to customers and investment securities measured at amortised cost with similar credit risk
characteristics when there is objective evidence to suggest that they contain impaired financial assets,
but the individual impaired items cannot yet be identified. In assessing the need for collective loss
allowances, management considers factors such as credit quality, portfolio size, concentrations and
economic factors. In order to estimate the required allowance, assumptions are made to define the
way inherent losses are modelled and to determine the required input parameters, based on historical
experience and current economic conditions. The accuracy of the allowances depends on the
estimates of future cash flows for specific counterparty allowances and the model assumptions and
parameters used in determining collective allowances.
(ii) Determining fair values
The determination of fair value for financial assets and liabilities for which there is no observable
market price requires the use of valuation techniques as described in accounting policy. For financial
instruments that trade infrequently and have little price transparency, fair value is less objective, and
requires varying degrees of judgement depending on liquidity, concentration, uncertainty of market
factors, pricing assumptions and other risks affecting the specific instrument.
(b) Critical accounting judgements in applying the Bank’s accounting policies
(i) Valuation of financial instruments
The Bank’ accounting policy on fair value measurements is discussed in the significant accounting
policies section.
The Bank’s measures fair values using the following fair value hierarchy that reflects the significance
of the inputs used in making the measurements.
•
•
•
Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.
Level 2: Valuation techniques based on observable inputs, either directly or indirectly (i.e. derived
from prices).
Level 3: Valuation techniques using significant unobservable inputs. This category includes
instruments that are valued based on quoted prices for similar instruments where significant
unobservable adjustments or assumptions are required to reflect differences between the
instruments.
Fair values of financial assets and financial liabilities that are traded in active markets are based on
quoted market prices or dealer price quotations. For all other financial instruments, the Bank
determines fair values using valuation techniques.
F-51
5. USE OF ESTIMATES AND JUDGEMENTS (CONTINUED)
(b) Critical accounting judgements in applying the Bank’s accounting policies (continued)
(i) Valuation of financial instruments (continued)
Valuation techniques include net present value and discounted cash flow models, comparison to
similar instruments for which market observable prices exist, Black-Scholes and polynomial option
pricing models and other valuation models. Assumptions and inputs used in valuation techniques
include risk-free and benchmark interest rates, credit spreads and other premia used in estimating
discount rates, bond and equity prices, foreign currency exchange rates, equity and equity index
prices and expected price volatilities and correlations. The objective of valuation techniques is to arrive
at a fair value determination that reflects the price of the financial instrument at the reporting date that
would have been determined by market participants acting at arm’s length.
The table below analyses financial instruments measured at fair value at the end of the reporting
period, by the level in the fair value hierarchy into which the fair value measurement is categorised:
Level 1
Level 2
Level 3
Total
1,395,449
1,395,449
17,092
1,559,487
1,576,579
-
17,092
2,954,936
2,972,028
-
12,458
-
12,458
-
12,458
-
12,458
Level 1
Level 2
Level 3
Total
2,160,017
2,160,017
16,539
5,321,910
5,338,449
-
16,539
7,481,927
7,498,466
-
4,421
-
4,421
-
4,421
-
4,421
31 December 2014
Derivative assets
Available-for-sale investments
Derivative liabilities
31 December 2013
Derivative assets
Available-for-sale investments
Derivative liabilities
During the year ended 31 December 2014, there were no transfer between Level 1 and Level 2 fair
value measurements, and no transfers into and out of Level 3 fair value measurements.
(ii) Financial asset and liability classification
The Bank’s accounting policies provide scope for assets and liabilities to be designated at inception
into different accounting categories in certain circumstances:
In classifying financial assets as held-to-maturity, the Bank has determined that it has both the positive
intention and ability to hold the assets until their maturity date as required by accounting policies.
Details of the Bank’s classification of financial assets and liabilities are given in Note 6.
(iii) Impairment of investments in equity and debt securities
Investments in equity and debt securities are evaluated for impairment on the basis described in the
significant accounting policies section.
(iv) Useful lives of property and equipment
The Bank’s management determines the estimated useful life of property and equipment for
calculating depreciation. This estimate is determined after considering the expected usage of the
asset, physical wear and tear, technical or commercial obsolescence.
F-52
6.
FINANCIAL ASSETS AND LIABILITIES
Accounting classifications and fair values
The table below sets out the carrying amounts and fair values of the Bank’s financial assets and financial liabilities:
Fair value
through
profit or
loss
Held-tomaturity
Loans and
receivables
Availablefor-sale
Other
amortised
cost
Total
fair value
Total
carrying
amount
17,092
-
-
1,756,698
5,799,708
19,856,625
-
-
1,756,698
5,799,708
17,092
19,856,625
1,756,698
5,799,708
17,092
19,856,625
17,092
-
27,413,031
2,954,936
2,954,936
-
2,954,936
30,385,059
2,954,936
30,385,059
12,458
12,458
-
-
-
4,332,343
21,209,805
25,542,148
12,458
4,332,343
21,209,805
25,554,606
12,458
4,332,343
21,209,805
25,554,606
31 December 2014
Cash and balances with Qatar Central Bank
Due from banks
Derivative assets
Loans and advances to customers
Investment securities:
Measured at fair value
Derivative liabilities
Due to banks
Customer deposits
-
F-53
6.
FINANCIAL ASSETS AND LIABILITIES (CONTINUED)
Accounting classifications and fair values (continued)
Fair value
through
profit or loss
Held-tomaturity
Loans and
receivables
Availablefor-sale
Other
amortised
cost
Total
fair value
Total
carrying
amount
16,539
-
-
1,328,964
2,517,948
17,032,854
-
-
1,328,964
2,517,948
16,539
17,032,854
1,328,964
2,517,948
16,539
17,032,854
16,539
-
20,879,766
7,481,927
7,481,927
-
7,481,927
28,378,232
7,481,927
28,378,232
4,421
4,421
-
-
-
1,537,614
21,826,843
23,364,457
4,421
1,537,614
21,826,843
23,368,878
4,421
1,537,614
21,826,843
23,368,878
31 December 2013
Cash and balances with Qatar Central Bank
Due from banks
Derivative assets
Loans and advances to customers
Investment securities:
Measured at fair value
Derivative liabilities
Due to banks
Customer deposits
-
F-54
7.
CASH AND BALANCES WITH QATAR CENTRAL BANK
Cash
Cash reserve with QCB*
Other balances with QCB
2014
2013
104,329
956,430
695,939
92,130
1,097,677
139,157
1,756,698
1,328,964
*The cash reserve with QCB is mandatory reserve not available for use in the Bank’s day to day
operations.
8.
DUE FROM BANKS
Current accounts
Placements
2014
2013
43,990
5,755,718
95,599
2,422,349
5,799,708
2,517,948
2014
2013
15,906,831
14,591,700
3,715,171
1,931,821
49,655
270,975
404,770
427,399
20,076,427
17,221,895
9. LOANS AND ADVANCES TO CUSTOMERS
(a) By type
Loans
Overdrafts
Bills discounted
Bankers acceptances
Specific impairment of loans and advances to customers
(216,222)
(3,580)
Collective impairment allowance
Net loans and advances to customers
19,856,625
(185,461)
(3,580)
17,032,854
The aggregate amount of non-performing loans and advances to customers amounted to
QAR
397,912 thousand, which represents 1.98 % of total loans and advances to customers (2013: QAR
391,814 thousand, 2.27% of total loans and advances to customers).
F-55
9. LOANS AND ADVANCES TO CUSTOMERS (CONTINUED)
(b) By industry
At 31 December 2014:
Government
Government agencies
Industry
Commercial
Services
Contracting
Real estate
Personal
Loans
Overdrafts
Bills
discounted
Bankers
acceptances
Total
4,420,667
935,568
-
-
5,356,235
1,921,492
-
-
-
1,921,492
411,672
74,682
-
2,168
488,522
2,160,084
460,947
18,179
285,866
2,925,076
660,048
89,302
-
104,150
853,500
461,113
178,272
31,476
12,586
683,447
3,315,304
25,053
-
-
3,340,357
2,556,451
1,951,347
-
-
4,507,798
15,906,831
3,715,171
49,655
404,770
20,076,427
Less:
Specific impairment of loans and advances to customers
Collective impairment allowance
(216,222)
(3,580)
19,856,625
At 31 December 2013:
Loans
Overdrafts
Bills
discounted
Bankers
acceptances
Total
Government
Government agencies
Industry
Commercial
Services
500,000
-
-
-
500,000
5,422,536
-
-
-
5,422,536
Contracting
Real estate
Personal
459,022
76,956
-
204
536,182
2,205,017
474,425
22,717
247,993
2,950,152
1,077,572
99,012
143,252
157,106
1,476,942
95,869
428,611
4,885
22,096
551,461
2,325,837
74,702
-
-
2,400,539
2,505,847
778,115
100,121
-
3,384,083
14,591,700
1,931,821
270,975
427,399
17,221,895
Less:
Specific impairment of loans and advances to customers
Collective impairment allowance
(185,461)
(3,580)
17,032,854
F-56
9. LOANS AND ADVANCES TO CUSTOMERS (CONTINUED)
(c) Net impairment loss on loans and advances to customers
2014
2013
Corporate
Real
Estate
Balance at 1 January
-
8,043
Charge for the year
Recoveries
Net charges/(recovery) for the year
Amounts written off
Reclassification
Individual impairment
Collective impairment
Allowance for impairment losses
-
796
51,707
52,503
-
50
66,025
66,075
-
(364)
(23,081)
(23,445)
-
(410)
(22,989)
(23,399)
-
432
28,626
29,058
-
(360)
43,036
42,676
Personal
Total
177,418
185,461
Corporate
Real
Estate
Personal
Total
-
8,403
136,743
145,146
-
-
(498)
(498)
-
-
(1,806)
(1,806)
-
-
2,201
2,201
-
-
(555)
(555)
-
8,475
207,747
216,222
-
8,043
177,418
185,461
1,750
-
1,830
3,580
1,750
-
1,830
3,580
1,750
8,475
209,577
219,802
1,750
8,043
179,248
189,041
Interest in suspense of QAR 63,859 thousand as at 31 December 2014 (2013: QAR 37,880 thousand) is included in the above analysis of credit losses for the
purpose of QCB regulation requirements. Movement in interest in suspense during the year amounted to a net charge of QAR 25,787 thousand (2013: net charge
of QAR 18,498 thousand).
During the year, an amount of QAR Nil thousand (2013: QAR 16,994 thousand) was directly charged to impairment loss on loans and advances to customers
under the income statement.
At 31 December 2014, the net carrying amount of impaired loans and advances to customers amounted to QAR 181,690 thousand (2013: QAR 206,353 thousand)
and the value of identifiable collateral held against those loans and advances amounted to QAR 277,050 thousand (2013: QAR 296,130 thousand).
F-57
10. INVESTMENT SECURITIES
2014
Available-for-sale
Total
2,954,936
2,954,936
(a) Available-for-sale
Equities
State of Qatar debt securities
Treasury bills
Other debt securities
Total
2013
7,481,927
7,481,927
2014
2013
Quoted
128,526
1,132,820
134,103
Unquoted
121
1,559,366
-
Total
128,647
2,692,186
134,103
1,395,449
1,559,487
2,954,936
Quoted
34,481
2,059,012
3,392,680
66,524
Unquoted
114
1,929,116
-
Total
34,595
3,988,128
3,392,680
66,524
5,552,697
1,929,230
7,481,927
Fixed rate securities and floating rate securities amounted to QAR 2,819,859 thousand and QAR 6,430 thousand, respectively (2013: QAR 7,437,388
thousand and QAR 9,944, respectively).
(b) Movement in impairment loss on investment securities
Balance as at 1 January
Allowance for impairment during the year
Balance as at 31 December
2014
2013
1,462
-
1,462
-
F-58
11. PROPERTY AND EQUIPMENT
Land
Leasehold
improvements
Computer
equipment
Furniture
and
equipment
Vehicles
Work in
progress
Total
Cost
Balance at 1 January 2013
Acquisitions / Transfers
Disposals
Balance at 31 December 2013
Acquisitions / Transfers
Disposals
49,012
(49,012)
54,628
1,703
(9,965)
96,144
12,632
(6,472)
18,592
3,356
(2,423)
1,618
-
90,922
3,358
(76,418)
310,916
21,049
(144,290)
170,025
-
46,366
1,397
(599)
102,304
18,552
(17,169)
19,525
909
(1,896)
1,618
-
17,862
(2,314)
(7,081)
187,675
188,569
(26,745)
Balance at 31 December 2014
170,025
47,164
103,687
18,538
1,618
8,467
349,499
-
125,445
16,469
(17,897)
Accumulated depreciation
Balance at 1 January 2013
Charged during the year
Disposals
-
29,508
7,137
(9,159)
83,093
6,192
(6,471)
12,219
2,903
(2,267)
625
237
Balance at 31 December 2013
Depreciation for the year
Transfers
Disposals
-
27,486
6,361
(23)
(451)
82,814
9,442
8
(17,086)
12,855
2,548
15
(1,691)
862
217
-
-
124,017
18,568
(19,228)
Balance at 31 December 2014
-
33,373
75,178
13,727
1,079
-
123,357
Carrying amounts
Balance at 1 January 2013
Balance at 31 December 2013
Balance at 31 December 2014
49,012
170,025
25,120
18,880
13,791
13,051
19,490
28,509
993
756
539
90,922
17,862
8,467
185,471
63,658
226,142
F-59
6,373
6,670
4,811
-
12. OTHER ASSETS
Interest receivable
Prepaid expenses and advances
Positive fair value of derivatives (Note 27)
Clearing cheques
Repossesed collateral
Others
2014
2013
227,962
190,391
26,723
30,445
17,092
16,539
10,592
10,814
1,901
1,901
3,720
2,509
287,990
252,599
2014
2013
13. DUE TO BANKS
Current accounts
Placements
66,973
73,974
4,265,370
1,463,640
4,332,343
1,537,614
2014
2013
7,350,146
5,680,760
14. CUSTOMER DEPOSITS
a) By type
Current and call deposits
Saving deposits
Time deposits
b) By sector
Government
Goverment and semi goverment agencies
Individuals
Corporate
F-60
1,028,034
1,171,486
12,831,625
14,974,597
21,209,805
21,826,843
4,071,962
2,970,775
77,995
1,822,179
14,306,039
13,674,509
2,753,809
3,359,380
21,209,805
21,826,843
15. OTHER LIABILITIES
2014
2013
Acceptances
Unearned income
Accrued expenses and payables
Staff indemnity (Note a)
Cash margins
404,770
427,399
154,734
196,112
144,549
117,111
31,410
28,710
21,022
31,851
Interest payable
Negative fair value of derivatives
Others
16,133
41,796
14,634
4,421
10,926
17,001
798,178
864,401
2014
2013
28,710
26,086
6,597
5,742
35,307
31,828
(a) Staff Indemnity
Balance at 1 January
Provisions made during the year
Payments during the year
(3,897)
(3,118)
Balance at 31 December
31,410
28,710
16. CAPITAL AND RESERVES
(a) Share capital
Class A
2014
thousand
Authorised
Shares of QAR 10 each
77,000
Number of shares
Class B
Class A
2014
2013
thousand
thousand
33,000
Share class A
Number
of shares
thousand
QAR’000
84,000
Class B
2013
Thousand
36,000
Share class B
Number
of shares
thousand
QAR’000
Issued and fully paid
At 1 January 2014
77,000
770,000
33,000
330,000
At 31 December 2014
77,000
770,000
33,000
330,000
Share capital comprises class (A) ordinary shares, held by the local shareholders and class (B) shares
held by foreign shareholders. Both class (A) and Class (B) shares carry equal rights and have the
same voting powers.
The shareholders of the Bank at their Extra-ordinary General Assembly meeting held on 7 December
2014 approved a resolution to decrease Authorised Capital by 10,000,000 shares to match the paidup capital.
F-61
16. CAPITAL AND RESERVES (CONTINUED)
(b) Legal reserve
In accordance with Qatar Central Bank’s Law No. 33 of 2006 as amended, 10% of the net profit for
the year is required to be transferred to legal reserve until the legal reserve equals 100% of the paid
up capital. This reserve is not available for distribution except in circumstances specified in the Qatar
Commercial Companies’ Law No. 5 of 2002 and is subject to the approval of QCB.
The legal reserve includes share premium received on issuance of new shares in accordance with
Qatar Commercial Companies’ Law (5) of 2002.
(c) Risk reserve
In accordance with QCB rules and regulations, a risk reserve is made to cover contingencies on loans
and advances to customers, up to 2.5% (2013: 2.5%) of the total direct credit facilities granted, net of
allowance for impairment of loans and advances to customers, cash secured facilities and facilities to
or guaranteed by Ministry of Finance.
(d) Fair value reserve
Available-for-sale investments:
Balance at 1 January 2014
Net change in fair value
Net amount transferred to income statement
Balance at 31 December 2014
103,574
53,622
(59,685)
97,511
Available-for-sale investments:
Balance at 1 January 2013
Net change in fair value
Net amount transferred to income statement
Balance at 31 December 2013
(461)
104,155
(120)
103,574
Negative fair value reserve as of 31 December 2014 amounted to QAR 10,279 thousand (2013:
16,157 thousand)
QAR
(e) Proposed dividend
A cash dividend of QAR 500,500 thousand has been proposed by the Board of Directors for the year
ended 31 December 2014 which is subject to approval at the annual general meeting of the
shareholders (2013: QAR 480,700 thousand).
During the year, the Bank has paid an amount of QAR 480,700 thousand (2013: QAR 440,000
thousand) as cash dividends for the year 2013.
F-62
17. INTEREST INCOME
Loans and advances to customers
Debt securities
Amounts deposited with banks
Amounts deposited with Qatar Central Bank
2014
2013
580,545
668,844
121,118
217,374
47,255
56,725
4,664
4,656
753,582
947,599
2014
2013
146,914
242,860
7,441
12,345
154,355
255,205
2014
2013
59,788
71,385
45,182
40,722
49,033
45,597
154,003
157,704
(30,387)
(30,487)
123,616
127,217
2014
2013
59,604
66,632
2,458
127
62,062
66,759
2014
2013
84,157
19,648
1,100
3,234
85,257
22,882
18. INTEREST EXPENSE
Customer deposits
Amount deposited by banks
19. NET FEE AND COMMISSION INCOME
Credit related fees
Commission on unfunded facilities
Others
Total fee and commission income
Fee and commission expense
Net fee and commission income
20. NET GAIN FROM FOREIGN EXCHANGE
Dealing in foreign currencies
Revaluation of derivatives securities
21. NET INCOME FROM INVESTMENT SECURITIES
Net gains on disposal of investment securities
Dividend income
F-63
22. STAFF COSTS
Basic salaries and allowances
Staff indemnity (Note 15)
Staff pension fund
Others
2014
2013
149,921
6,597
1,340
6,909
164,270
5,742
1,387
6,434
164,767
177,833
2014
2013
35,828
13,539
12,368
8,063
7,520
6,050
5,000
3,925
10,357
102,650
36,406
15,304
10,066
8,087
3,606
15,476
4,500
5,589
19,610
118,644
23. OTHER EXPENSES
Occupancy and rent
Marketing
Computer
Communication
Strategic initiative
Legal and professional fees
Directors’ remuneration
Management fees
Others
24. EARNINGS PER SHARE
Earning per share of the Bank is calculated by dividing profit for the year by the weighted average
number of ordinary shares in issue during the year:
2014
2013
579,444
553,304
110,000,000
110,000,000
5.27
5.03
2014
2013
110,000,000
110,000,000
110,000,000
110,000,000
Profit for the year – QAR’000
Weighted average number of shares
Earnings per share (QAR)
The weighted average number of shares has been calculated as follows:
Weighted average number of shares at 1 January
Weighted average number of shares at 31 December
There were no potentially dilutive shares outstanding at any time during the year, and therefore, the
dilutive earnings per share are equal to the basic earnings per share.
F-64
25. CONTINGENT LIABILITIES AND OTHER COMMITMENTS
2014
2013
(a) Contingent liabilities
Guarantees
Letters of credit
4,928,677
5,191,967
743,193
1,006,103
Unused credit facilities
2,662,878
3,542,776
8,334,748
9,740,846
1,608,592
1,672,363
47,649
142,427
1,656,241
1,814,790
(b) Other commitments
Forward foreign exchange contracts
Options
Total
Unused credit facilities
Commitments to extend credit represent contractual commitments to make loans and revolving
credits. Commitments generally have fixed expiry dates or other termination clauses. Since
commitments may expire without being drawn upon, the total contractual amounts do not necessarily
represent future cash requirements.
Guarantees and letters of credit
Guarantees and letters of credit commit the Bank to make payments on behalf of customers in the
event of a specific event. Guarantees and standby letters of credit carry the same credit risk as loans.
Options
Options are contractual agreement under which the seller (writer) grants the purchaser (holder) the
right, to exercise an interest rate based on certain indices with a predetermined cap and a floor at the
end of the option life. These options are entered into to hedge the bank commitments to specific
customer deposits. Related risks and rewards are fully passed onto the customers.
Lease commitments
Non-cancellable operating lease rentals are payable as follows:
Less than one year
Between one and five years
More than five years
2014
2013
24,884
71,881
5,781
29,960
102,959
10,065
102,546
142,984
The Bank leases a number of branches and office premises under operating leases.
26. CASH AND CASH EQUIVALENTS
Cash
Other balances with QCB
Due from banks maturing within three months or less
2014
2013
104,329
695,939
4,707,708
5,507,976
92,130
139,157
1,425,948
1,657,235
*Cash and balances with QCB do not include the mandatory cash reserve.
F-65
27. DERIVATIVES
The table below shows the positive and negative fair values of derivative financial instruments, together with the notional amounts analysed by the term to maturity.
The notional amounts, which provide an indication of the volumes of the transactions outstanding at the year end, do not necessarily reflect the amounts of future
cash flows involved. These notional amounts, therefore, are not indicative of the Bank’s exposure to credit risk, which is generally limited to the positive fair value
of the derivatives.
Notional / Expected amount by term to maturity
Positive
fair value
Negative
fair value
Total
notional
amount
Within 3
months
3-12
months
1-5
years
More
than 5
years
Held for trading
Forward foreign exchange contracts
14,916
12,458
1,608,592
1,534,447
74,145
-
-
Designated as fair value through
profit and loss
Purchased options
2,176
-
47,649
-
3,449
44,200
-
17,092
12,458
1,656,241
1,534,447
77,594
44,200
-
31 December 2014
(a)
(b)
Total
Notional / Expected amount by term to maturity
Positive
fair value
Negative
fair value
Total
notional
amount
Within 3
months
3-12
months
1-5
years
More
than 5
years
4,548
4,421
1,672,363
1,640,019
15,322
17,022
-
Designated as fair value through
profit and loss
Purchased options
11,991
-
142,427
-
73,800
68,627
-
Total
16,539
4,421
1,814,790
1,640,019
89,122
85,649
-
31 December 2013
(a)
(b)
Held for trading
Forward foreign exchange contracts
The derivative transactions under the designated as fair value through profit and loss category are on a back to back basis.
F-66
28. RELATED PARTIES
Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial
and operating decisions. Related parties include entities over which the Bank exercises significant influence, major shareholders, directors and key management
personnel of the Bank.
The Bank enters into transactions with major shareholders, directors and key management personnel of the Bank. All the loans, advances and financing activities
to related parties are given at market rates and these are performing and free of any allowance for possible credit losses.
The related party transactions and balances included in these financial statements are as follows:
2014
Board of
Directors
2013
Shareholders
Others
Board of
Directors
Shareholders
Others
Assets
Loans and advances to customers
Due from banks
1,933,400
-
578
2,221
618,687
-
717,027
-
291,682
71,816
619,115
-
Liabilities
Customer deposits
Due to banks
2,302,241
-
196,390
56,014
4,241,045
-
367,145
-
866,887
1,047,068
3,322,456
-
9,005
367,943
244,883
10,142
375,434
276,619
51,407
2,246
9,123
1,552
31,828
32,252
38,179
3,721
9,739
11,645
41,976
29,392
Contingent liabilities and other commitments
Letters of guarantee, letters of credit,
expected commitments and indirect
credit facilities
Income statement
Interest and commission income
Interest and commission expense
A portion of the above loans and advances to customers is secured against tangible collateral or personal guarantees.
Apart from the above, the transactions during the year with related parties include the management fee paid to National Bank of Kuwait (SAK) amounting to QAR
3,925 thousand (2013: QAR 5,589 thousand) as per the terms of the Management Services Agreement. An amount of QAR 18,608. thousand (2013: QAR
15,917 thousand) represents rental expense paid for the use of premises belonging to a related party.
Board of Directors remuneration amounted to QAR 5,000 thousand (2013: QAR 5,000 thousand).During the year, there was a purchase of land amounting to
170.025 million (2013:Nil) from a related party.
F-67
28. RELATED PARTIES (CONTINUED)
Transactions with key management personnel
Key management personnel and their immediate relatives have transacted with the Bank during the
year as follows:
Loans and advances
Salaries and other benefits
Staff indemnity
2014
2013
1,932
1,023
2014
2013
28,916
820
27,926
757
29,736
28,683
29. FIDUCIARY ASSETS
The Bank provides custody services to customers. Those assets that are held in a fiduciary capacity
are excluded from these financial statements and amounted to QAR 2,912 thousand at 31 December
2014 (2013: QAR 2,912 thousand).
30. COMPARATIVES
The comparative figures presented for 2013 have been reclassified where necessary to preserve
consistency with the 2014 figures. However, such reclassifications did not have any effect on the net
profit, other comprehensive income or the total equity for the comparative year.
31. POST FINANCIAL POSITION EVENT
During the year a sale and purchase agreement was signed by National Bank of Kuwait (S.A.K.)
“NBK” and certain Qatari investors by which NBK has agreed to sell its 30% shareholding in IBQ. As
at the date of issuing the financial statements the sale transaction, which was approved by the Qatar
Central Bank and the IBQ shareholders unanimously, has not concluded pending completion of
certain conditions precedent. The sale transaction is not expected to have any impact on the Bank’s
statement of financial position or income statement.
F-68
F-69
F-70
FINANCIAL STATEMENTS
INTERNATIONAL BANK OF QATAR (Q.S.C.)
FOR THE YEAR ENDED
31 DECEMBER 2013
F-71
F-72
INTERNATIONAL BANK OF QATAR (Q.S.C.)
INCOME STATEMENT
QAR ‘000s
For the year ended 31 December
Notes
Interest income
Interest expense
17
18
2013
2012
947,599
(255,205)
928,486
(274,912)
Net interest income
692,394
653,574
Fee and commission income
Fee and commission expense
157,704
(30,487)
142,589
(32,047)
Net fee and commission income
19
127,217
110,542
Net gain from foreign exchange
Net income from investment securities
20
21
66,759
22,882
81,938
44,931
909,252
890,985
(177,833)
(16,469)
(43,002)
(118,644)
(207,664)
(19,907)
(14,056)
(124,740)
553,304
524,618
5.03
4.77
Net operating income
Staff costs
Depreciation
Net impairment loss on loans and advances to customers
Other expenses
22
11
9 (c)
23
Profit for the year
Earnings per share
Basic and diluted earnings per share (QAR per share)
24
The attached notes 1 to 30 form an integral part of these financial statements.
2
F-73
INTERNATIONAL BANK OF QATAR (Q.S.C.)
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December
QAR ‘000s
Notes
Profit for the year
2013
553,304
2012
524,618
Other comprehensive income
Items that are or may be reclassified to income
statement
Available-for-sale investments:
Net change in fair value
Net amount transferred to income statement
16 (d)
16 (d)
104,155
(120)
(494)
349
Other comprehensive income for the year
104,035
(145)
Total comprehensive income for the year
657,339
The attached notes 1 to 30 form an integral part of these financial statements.
F-74
524,473
3
INTERNATIONAL BANK OF QATAR (Q.S.C.)
STATEMENT OF CHANGES IN EQUITY
QAR ‘000s
Share
Legal
Risk
Fair value
Retained
capital
reserve
reserve
reserve
earnings
Total equity
1,100,000
2,025,884
326,362
(316)
695,350
4,147,280
Total comprehensive income for the year
Profit for the year
Other comprehensive income for the year
-
-
-
(145)
524,618
-
524,618
(145)
Total comprehensive income for the year
-
-
-
(145)
524,618
524,473
-
-
61,690
-
(61,690)
-
-
-
61,690
-
(61,690)
-
-
-
-
-
(440,000)
(440,000)
-
-
-
-
(440,000)
(440,000)
1,100,000
2,025,884
388,052
Notes
Balance as at 1 January 2012
Transfer to risk reserve
Transactions with equity holders, recognised directly in
equity
Contributions by and distributions to equity holders:
Dividends paid
Total contributions by and distributions to equity holders
Balance as at 31 December 2012
16 (c)
16 (e)
(461)
718,278
4,231,753
The attached notes 1 to 30 form an integral part of these financial statements.
F-75
4
INTERNATIONAL BANK OF QATAR (Q.S.C.)
STATEMENT OF CHANGES IN EQUITY (CONTINUED)
QAR ‘000s
Share
Legal
Risk
Fair value
Retained
capital
reserve
reserve
reserve
earnings
Total equity
1,100,000
2,025,884
388,052
(461)
718,278
4,231,753
Total comprehensive income for the year
Profit for the year
Other comprehensive income for the year
-
-
-
104,035
553,304
-
553,304
104,035
Total comprehensive income for the year
-
-
-
104,035
553,304
657,339
-
-
27,355
-
(27,355)
-
-
-
27,355
-
(27,355)
-
-
-
-
-
(440,000)
(440,000)
-
-
-
-
(440,000)
(440,000)
1,100,000
2,025,884
415,407
Notes
Balance as at 1 January 2013
Transfer to risk reserve
Transactions with equity holders, recognised directly in
equity
Contributions by and distributions to equity holders:
Dividends paid
Total contributions by and distributions to equity holders
Balance as at 31 December 2013
16 (c)
16 (e)
103,574
804,227
4,449,092
Cash dividend of QAR 480,700 thousand (2012: QAR 440,000 thousand) has been proposed by the Board of Directors for the year ended 31 December 2013, which
is subject to approval at the Annual General Meeting of the shareholders.
The attached notes 1 to 30 form an integral part of these financial statements.
F-76
5
INTERNATIONAL BANK OF QATAR (Q.S.C.)
STATEMENT OF CASH FLOWS
QAR ‘000s
For the year ended 31 December
Notes
Cash flows from operating activities
Profit for the year
Adjustments for:
Interest income
Interest expense
Net impairment loss on loans and advances to customers
Provision for staff indemnity
Depreciation
Net amortisation of premium / (discount) on investment
securities
Net gains on disposal of investment securities
Dividend income
Loss / (gain) on disposal of property and equipment
17
18
9 (c)
15 (a)
11
2013
2012
553,304
524,618
(947,599)
255,205
43,002
5,742
16,469
(928,486)
274,912
14,056
6,324
19,907
(12,426)
(19,648)
(3,234)
1,294
(5,688)
(39,593)
(5,338)
(122)
21
21
(107,891)
Change in cash reserve with Qatar Central Bank
Change in due from banks
Change in loans and advances to customers
Change in other assets
Change in due to banks
Change in customer deposits
Change in other liabilities
99,828
Interest received
Interest paid
Dividends received
Staff indemnity paid
Net cash (used in) / generated from operating activities
Cash flows from investing activities
Acquisition of investment securities
Proceeds from disposal of investment securities
Acquisition of property and equipment
Proceeds from disposal of property and equipment
Net cash used in investing activities
15 (a)
11
Cash flows from financing activities
Dividends paid
Net cash used in financing activities
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents as at 1 January
Cash and cash equivalents as at 31 December
16 (e)
26
2,724
2,833,897
9,247
(3,276,296)
(462,307)
(70,806)
(971,604)
905,551
(289,232)
3,234
(3,118)
(355,169)
(10,866,959)
7,948,458
(21,049)
125,099
(2,814,451)
(139,410)
(238,506)
(894,524)
(2,765,158)
(143,936)
1,487,779
2,862,716
302,371
471,332
880,057
(183,707)
5,338
(5,623)
1,167,397
(3,992,910)
3,860,951
(40,422)
299
(172,082)
(440,000)
(440,000)
(440,000)
(3,609,620)
5,266,855
1,657,235
(440,000)
555,315
4,711,540
5,266,855
The attached notes 1 to 30 form an integral part of these financial statements.
F-77
6
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
1. REPORTING ENTITY
The International Bank of Qatar (Q.S.C.) (the “Bank”) was established in the State of Qatar on
1 November 1956 as Ottoman Bank. On 31 July 2000, the Bank was incorporated as Grindlays Qatar
Bank under Emiri Decree Number 4 of 2000. The principal shareholders were four Qatari
incorporated companies with limited liability (W.L.L.) holding 60% of the Bank’s share capital and
Standard Chartered Grindlays Bank Ltd. holding 40%.
Standard Chartered Grindlays Bank Ltd. sold its shareholding to the Qatari shareholders on 31 May
2003.
On 30 August 2004, National Bank of Kuwait S.A.K (“NBK”) acquired 20% of the shareholding in the
Bank and the name of the Bank was changed to International Bank of Qatar (Q.S.C.) effective
1 September 2004. Subsequently, the shareholding of NBK was increased to 30% effective 1 August
2007. The Bank also entered into a Management Service Agreement with NBK which was renewed in
the year 2009 for a period of ten years.
The Bank is engaged in commercial banking activities and operates through its Head Office at
Suhaim Bin Hamad Street, Doha (Postal address P.O. Box 2001, Doha, Qatar) and seven branches
established in the State of Qatar.
2. BASIS OF PREPARATION
(a) Statement of compliance
The financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and the
applicable provisions of Qatar Central Bank (“QCB”) regulations.
(b) Basis of measurement
The financial statements have been prepared on the historical cost basis except for the following
items which are measured at fair value:
Derivative financial instruments
Available-for-sale investments
(c) Functional and presentation currency
These financial statements are presented in Qatari Riyals (“QAR”), which is the Bank’s functional and
presentation currency. Except as otherwise indicated, financial information presented in QAR has
been rounded to the nearest thousand.
(d) Use of estimates and judgments
The preparation of the financial statements in conformity with IFRS requires management to make
judgements, estimates and assumptions that affect the application of accounting policies and the
reported amounts of assets, liabilities, income and expenses. Actual results may differ from these
estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised and in any future periods
affected.
Information about significant areas of estimation uncertainty and critical judgements in applying
accounting policies that have the most significant effect on the amounts recognised in the financial
statements are described in Note 5.
F-78
7
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently to all periods presented in
these financial statements.
(a) Foreign currency
Foreign currency transactions are transactions denominated, or that require settlement in a foreign
currency are translated into the respective functional currencies of the operations at the spot
exchange rates at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated
into the functional currency at the spot exchange rate at that date. Non-monetary assets and
liabilities denominated in foreign currencies that are measured at fair value are retranslated into the
functional currency at the spot exchange rate at the date that the fair value was determined. Nonmonetary assets and liabilities that are measured in terms of historical cost in a foreign currency are
translated using the exchange rate at the date of the transaction.
Foreign currency differences resulting from the settlement of foreign currency transactions and
arising on translation at period end exchange rates of monetary assets and liabilities denominated in
foreign currencies are recognised in the income statement.
(b) Financial assets and financial liabilities
(i) Recognition and initial measurement
The Bank initially recognises loans and advances to customers, due from / to banks and customer
deposits on the date at which they are originated. All other financial assets and liabilities are initially
recognised on the settlement date at which the Bank becomes a party to the contractual provisions
of the instrument.
A financial asset or financial liability is measured initially at fair value plus, for an item not at fair
value through profit or loss, transaction costs that are directly attributable to its acquisition or issue.
(ii) Classification
Financial assets
At inception a financial asset is classified in one of the following categories:
loans and receivables
held-to-maturity
available-for-sale
designated as fair value through profit or loss
Financial liabilities
The Bank has classified and measured its financial liabilities at amortised cost.
(iii) Derecognition
The Bank derecognises a financial asset when the contractual rights to the cash flows from the
financial asset expire, or when it transfers the financial asset in a transaction in which substantially
all the risks and rewards of ownership of the financial asset are transferred or in which the Bank
neither transfers nor retains substantially all the risks and rewards of ownership and it does not
retain control of the financial asset. Any interest in transferred financial assets that qualify for
derecognition that is created or retained by the Bank is recognised as a separate asset or liability in
the statement of financial position. On derecognition of a financial asset, the difference between the
carrying amount of the asset (or the carrying amount allocated to the portion of the asset
transferred), and consideration received (including any new asset obtained less any new liability
assumed) is recognised in the income statement.
The Bank derecognises a financial liability when its contractual obligations are discharged or
cancelled or expire.
F-79
8
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b) Financial assets and financial liabilities (continued)
(iv) Offsetting
Financial assets and liabilities are offset and the net amounts presented in the statement of financial
position when, and only when, the Bank has a legal right to set off the recognised amounts and it
intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.
Income and expenses are presented on a net basis only when permitted under IFRS and when
approved by the QCB, or for gains and losses arising from a group of similar transactions such as in
the Bank’s trading activity.
(v) Measurement principles
Amortised cost measurement
The amortised cost of a financial asset or liability is the amount at which the financial asset or
liability is measured at initial recognition, minus principal repayments, plus or minus the cumulative
amortisation using the effective interest method of any difference between the initial amount
recognised and the maturity amount, minus any reduction for impairment loss. The calculation of
effective interest rate includes all fees and points paid or received that are an integral part of the
effective interest rate.
Fair value measurement
‘Fair value’ is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date in the principal or, in its
absence, the most advantageous market to which the Bank has access at that date.
When available, the Bank measures the fair value of an instrument using the quoted price in an
active market for that instrument. A market is regarded as active if transactions for the asset or
liability take place with sufficient frequency and volume to provide pricing information on an ongoing
basis.
If there is no quoted price in an active market, then the Bank uses valuation techniques that
maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The
chosen valuation technique incorporates all of the factors that market participants would take into
account in pricing a transaction.
If an asset or a liability measured at fair value has a bid price and an ask price, then the Bank
measures assets and long positions at a bid price and liabilities and short positions at an ask price.
(vi) Identification and measurement of impairment
At each reporting date, the Bank assesses whether there is objective evidence that financial assets
not carried at fair value through profit or loss are impaired. A financial asset or a group of financial
assets is impaired when objective evidence demonstrates that a loss event has occurred after the
initial recognition of the asset(s), and that the loss event has an impact on the future cash flows of
the asset(s) that can be estimated reliably.
Objective evidence that financial assets are impaired can include significant financial difficulty of the
borrower, default or delinquency by a borrower, restructuring of a loan or advance by the Bank on
terms that the Bank would not otherwise consider, indications that a borrower will enter bankruptcy,
the disappearance of an active market for a security, or other observable data relating to a group of
assets such as adverse changes in the payment status of borrowers in the group, or economic
conditions that correlate with defaults in the group of assets.
F-80
9
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b) Financial assets and financial liabilities (continued)
(vi) Identification and measurement of impairment (continued)
The Bank considers evidence of impairment loss for loans and advances to customers at both a
specific asset and collective level. All individually significant loans and advances to customers and
investment securities are assessed for specific impairment. All individually significant loans and
advances to customers and investment securities found not to be specifically impaired are then
collectively assessed for any impairment that has been incurred but not yet identified. Loans and
advances to customers that are not individually significant are collectively assessed for impairment
by grouping together loans and advances to customers with similar risk characteristics.
Impairment losses on financial assets carried at amortised cost are measured as the difference
between the carrying amount of the financial asset and the present value of estimated future cash
flows discounted at the asset’s original effective interest rate. Impairment losses are recognised in
income statement and reflected in an allowance account against financial assets.
The Bank writes off loans and advances to customers and investment securities when it is known
not to be collectible.
For listed investments, a decline in the market value by 20% from cost or more, or for a continuous
period of nine months or more, are considered to be indicators of impairment.
Impairment losses on available-for-sale investment securities are recognised by transferring the
cumulative loss that has been recognised in other comprehensive income to income statement as a
reclassification adjustment. The cumulative loss that is reclassified from other comprehensive
income to income statement is the difference between the acquisition cost, net of any principal
repayment and amortisation, and the current fair value, less any impairment loss previously
recognised in the income statement. Changes in impairment provisions attributable to time value are
reflected as a component of interest income.
While in subsequent periods, the appreciation in fair value of impaired available-for-sale investment
securities is recorded in fair value reserves, debit instruments appreciation in fair value that can be
related to an event occurring after the impairment loss is recognised as part of the income
statement.
(c) Cash and cash equivalents
Cash and cash equivalents include notes and coins on hand, unrestricted balances held with central
banks and highly liquid financial assets with maturities of three months or less from the acquisition
date that are subject to an insignificant risk of changes in their fair value, and are used by the Bank
in the management of its short-term commitments.
Cash and cash equivalents are carried at amortised cost in the statement of financial position.
(d) Loans and advances to customers
Loans and advances to customers are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market and that the Bank does not intend to sell
immediately or in the near term.
Loans and advances to customers are initially measured at the transaction price which is the fair
value plus incremental direct transaction costs, and subsequently measured at their amortised cost
using the effective interest method.
F-81
10
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(e) Investment securities
Subsequent to initial recognition, investment securities are accounted for depending on their
classification, as either ‘held to maturity’ or ‘available-for-sale’.
(i) Held-to-maturity investments
Held-to-maturity investments are non-derivative assets with fixed or determinable payments and
fixed maturity that the Bank has the positive intent and ability to hold to maturity, and which were not
designated at fair value through profit or loss (trading) or available-for-sale. Held-to-maturity
investments are carried at amortised cost using the effective interest method.
(ii) Available-for-sale investments
Available-for-sale investments are non-derivative investments that are designated as available-forsale or are not classified as another category of financial assets. Unquoted equity securities are
carried at cost less impairment, and all other available-for-sale investments are carried at fair value.
Other fair value changes are recognised in other comprehensive income until the investment is sold
or impaired, whereupon the cumulative gains and losses previously recognised in other
comprehensive income are reclassified to the income statement.
(f) Derivatives
(i) Derivatives held for trading purposes
The Bank’s derivative trading instruments includes forward foreign exchange contracts and interest
rate swaps. The Bank sells these derivatives to customers in order to enable them to transfer,
modify or reduce current and future risks. These derivative instruments are fair valued as at the
reporting date and the corresponding fair value changes is taken to the income statement.
(ii) Other non-trading derivatives
When a derivative is not held for trading, and is not designated in a qualifying hedge relationship, all
changes in its fair value are recognised immediately in the income statement.
(g) Property and equipment
(i) Recognition and measurement
Items of property and equipment are measured at cost less accumulated depreciation and
accumulated impairment losses.
Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of
self-constructed assets includes the cost of materials and direct labour, any other costs directly
attributable to bringing the assets to a working condition for their intended use, the costs of
dismantling and removing the items and restoring the site on which they are located and capitalised
borrowing costs.
When parts of an item of property or equipment have different useful lives, they are accounted for as
separate items (major components) of property and equipment.
The gain or loss on disposal of an item of property and equipment is determined by comparing the
proceeds from disposal with the carrying amount of the item of property and equipment, and is
recognised in other expenses.
F-82
11
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(g) Property and equipment (continued)
(ii) Subsequent costs
The cost of replacing a component of an item of property or equipment is recognised in the carrying
amount of the item if it is probable that the future economic benefits embodied within the part will
flow to the Bank and its cost can be measured reliably. The carrying amount of the replaced part is
derecognised. The costs of the day-to-day servicing of property and equipment are recognised in
income statement as incurred.
(iii) Depreciation
Depreciable amount is the cost of property and equipment, or other amount substituted for cost, less
its residual value.
Depreciation is recognised in the income statement on a straight-line basis over the estimated
useful lives of each part of an item of property and equipment since this most closely reflects the
expected pattern of consumption of the future economic benefits embodied in the asset and is
based on cost of the asset less its estimated residual value. Land is not depreciated.
The estimated useful lives for the current and comparative years are as follows:
Leasehold improvements
Computer equipment
Furniture and equipment
Vehicles
5 – 7 years
3 – 5 years
5 – 7 years
5 years
Depreciation methods, useful lives and residual values are reassessed at each reporting date and
adjusted prospectively, if appropriate.
(h) Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for
impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable. An impairment
loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in
use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash flows (cash-generating units). Non-financial assets other than
goodwill that suffered impairment are reviewed for possible reversal of the impairment at each
reporting date.
(i) Provisions
A provision is recognised if, as a result of a past event, the Bank has a present legal or constructive
obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will
be required to settle the obligation. Provisions are determined by discounting the expected future
cash flows that reflects current market assessments of the time value of money and, where
appropriate, the risks specific to the liability.
(j) Financial guarantees
Financial guarantees are contracts that require the Bank to make specified payments to reimburse
the holder for a loss it incurs because a specified debtor fails to make payment when due in
accordance with the terms of a debt instrument. Financial guarantee liabilities are recognised initially
at their fair value, and the initial fair value is amortised over the life of the financial guarantee. The
financial guarantee liability is subsequently carried at the higher of this amortised amount and the
present value of any expected payment when a payment under the guarantee has become
probable.
F-83
12
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(k) Contingent liabilities and other commitments
As at the reporting date, contingent liabilities and other commitments do not represent actual
liabilities of the Bank.
(l) Employee benefits
The Bank provides end of service benefits to its expatriate employees. The entitlement to these
benefits is based upon the employees’ final salary and length of service, subject to the completion of
a minimum service period. The expected cost of these benefits is accrued over the period of
employment. The provision for employees’ end of service benefits is disclosed under ‘‘Other
liabilities’’.
With respect to Qatari employees, the Bank makes contributions to the Qatari Pension Fund
calculated as a percentage of the employees’ salaries. The Bank’s obligations are limited to these
contributions.
(m) Dividends on ordinary shares
Dividends on ordinary shares are recognised in equity in the period in which they are approved by
the Bank’s shareholders.
(n) Interest income and expense
Interest income and expense are recognised in income statement using the effective interest
method. The effective interest rate is the rate that exactly discounts the estimated future cash
payments and receipts through the expected life of the financial asset or liability to the carrying
amount of the financial asset or liability. When calculating the effective interest rate, the Bank
estimates future cash flows considering all contractual terms of the financial instrument, but not
future credit losses.
The calculation of the effective interest rate includes all transaction costs and fees and points paid
or received that are an integral part of the effective interest rate.
Transaction costs include incremental costs that are directly attributable to the acquisition or issue of
a financial asset or liability.
(o) Fees and commission income and expense
Fees and commission income and expense that are integral to the effective interest rate on a
financial asset or liability are included in the measurement of the effective interest rate.
Other fees and commission income, including account servicing fees, sales commission and
syndication fees are recognised as the related services are performed. When a loan commitment is
not expected to result in the draw-down of a loan, the related loan commitment fees are recognised
using effective interest rate method over the commitment period.
Other fees and commission expense relate mainly to transaction and service fees, which are
expensed as the services are received.
(p) Income from investment securities
Gains or losses on the sale of investment securities are recognised in the income statement as the
difference between fair value of the consideration received and carrying amount of the investment
securities.
Income from held to maturity investment securities is recognised based on the effective interest rate
method.
F-84
13
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(q) Dividend income
Dividend income is recognised when the right to receive income is established. Dividend income is
recognised under “Net income from investment securities”.
(r) Fiduciary assets
Assets held in a fiduciary capacity are not treated as assets of the Bank in the statement of financial
position.
(s) Repossessed collateral
Repossessed collaterals against settlement of customers’ debts are stated within the statement of
financial position under "Other assets" at their acquisition value net of allowance for impairment.
According to QCB instructions, the Bank should dispose of any land and properties acquired against
settlement of debts within a period not exceeding three years from the date of acquisition although
this period can be extended after obtaining approval from QCB.
(t) New standards, amendments and interpretations effective from 1 January 2013
Except for the changes below, the Bank has consistently applied the accounting policies. The
following amendments and interpretations, became effective as of 1 January 2013, and were
adopted by the Bank in preparation of these financial statements;
IAS 1 (amendment) - Presentation of items of other comprehensive income
The amendments to IAS 1 require that an entity present separately the items of other
comprehensive income that would be reclassified to profit or loss in the future if certain conditions
are met from those that would never be reclassified to profit or loss. The adoption of this
amendment has resulted in the Bank modifying the presentation of items of OCI in its statement of
profit or loss and OCI, to present separately items that would be reclassified to the income
statement from those that would never be. Comparative information has been re-presented on the
same basis
IFRS 7 (amendment) on offsetting financial assets and financial liabilities (2011 )
The amendments to IFRS 7 introduces new disclosures requirement about the impact of netting
arrangements on Bank’s financial position. Based on the new disclosure requirements, the Bank has
to provide information about what amounts have been offset in the statement of financial position
and the nature and extent of rights of set off under master netting arrangements or similar
arrangements.
IFRS 13 - Fair value measurement
IFRS 13 provides a single source of guidance on how fair value is measured, and replaces the fair
value measurement guidance that is currently dispersed throughout IFRS. It unifies the definition of
fair value as the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date.
Notwithstanding the above, the change had no significant impact on the measurements of the
Bank’s assets and liabilities.
F-85
14
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(u) New standards and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations are effective for annual
periods beginning on or after 1 January 2014, and have not been applied in preparing these
financial statements. The Bank does not plan to early adopt these standards.
IFRS 9 - Financial Instruments
IFRS 9 (2009) introduces new requirements for the classification and measurement of financial
assets. IFRS 9 (2010) introduces additions to the standard relating to financial liabilities. The IASB
currently has an active project to make limited amendments to the classification and measurement
requirements of IFRS 9 and add new requirements to address the impairment of financial assets
and hedge accounting.
The IFRS 9 (2009) requirements represent a significant change from the existing requirements in
IAS 39 in respect of financial assets. The standard contains two primary measurement categories
for financial assets: amortised cost and fair value. A financial asset would be measured at amortised
cost if it is held within a business model whose objective is to hold assets in order to collect
contractual cash flows, and the asset’s contractual terms give rise on specified dates to cash flows
that are solely payments of principal and interest on the principal outstanding. All other financial
assets would be measured at fair value through income statement. The standard eliminates the
existing IAS 39 categories of held to maturity, available-for-sale and loans and receivables.
The standard requires that derivatives embedded in contracts with a host that is a financial asset
within the scope of the standard are not separated; instead the hybrid financial instrument is
assessed in its entirety as to whether it should be measured at amortised cost or fair value.
IFRS 9 (2010) introduces a new requirement in respect of financial liabilities designated under the
fair value option to generally present fair value changes that are attributable to the liability’s credit
risk in other comprehensive income rather than in profit or loss. Apart from this change, IFRS 9
(2010) largely carries forward without substantive amendment the guidance on classification and
measurement of financial liabilities from IAS 39.
Amendments to IAS 32 on offsetting financial assets and financial liabilities
Offsetting Financial Assets and Financial Liabilities (amendments to IAS 32) clarify the offsetting
criteria IAS 32 by explaining when an entity currently has a legally enforceable right to set off and
when gross settlement is equivalent to net settlement. The amendments are effective for annual
periods beginning on or after 1 January 2014 and interim periods within those annual periods.
Amendments to IAS 36 on recoverable amount disclosures for non-financial assets
Recoverable Amount Disclosures for Non-Financial Assets (Amendments to IAS 36) have expanded
disclosures of recoverable amounts when the amounts are based on fair value less costs of
disposals and impairment is recognized. The amendments are effective for annual periods
beginning on or after 1 January 2014. An entity shall not apply those amendments in periods
(including comparative periods) in which it does not also apply IFRS 13.
The Bank is not expecting a significant impact from the adoption of these amendments.
F-86
15
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
4. FINANCIAL RISK MANAGEMENT
(a) Risk management framework
Risk is inherent in the Bank’s activities. It is managed through a rigorious process of risk
identification, measurement, monitoring and reporting, subject to prudent limits and other controls.
This process of risk management is critical to the Bank’s financial soundness and quality of
earnings. Every individual within the Bank is accountable for the risk exposures relating to his or her
responsibilities. The Bank is exposed to credit risk, liquidity risk, compliance risk, operational risk
and market risk, which include trading and non-trading risks.
Business risks such as changes in the environment, technology and industry are monitored through
the Bank’s strategic planning process.
Risk management structure
The Board of Directors is ultimately responsible for identifying and controlling risks, and for
establishing and disseminating the Bank’s overall risk appetite limits. To accomplish this objective,
the Bank has established separate independent bodies responsible for managing and monitoring
risks. The Bank has three Management Level committees who report into the three Board Level
committees.
Board Risk and Compliance Committee
The Board Risk and Compliance Committee is responsible for overall risk management. It ensures
compliance with regulations; that risk issues are properly identified, managed, monitored and
reported; that policies and procedures are in place; and that risk is maintained at levels within the
approved risk appetite and limits established by the Board. The committee is charged with
promoting a risk and compliance culture across the organisation.
Board Executive Committee (BEC)
The Board Executive Committee (BEC) oversees the strategic and overall directional issues of the
Bank’s business activities. The BEC ensures that management implements and adheres to the
approved strategic and budgetary requirements of IBQ as established by the Board of Directors
(BOD) and communicated through the respective and appropriate Board Committees.
Board Audit Committee
The Board Audit Committee is responsible for reviewing the quality, adequacy and integrity of
internal controls surrounding the Bank’s operations, the performance and coverage of internal and
external audits, and the accuracy of all financial reporting practices.
Risk Management Committee (RMC)
At the managerial level, the RMC has been established to oversee risk and compliance issues
arising from business activities. The RMC oversees market, credit, operational, information security,
legal, reputational and enterprise risks of the Bank. The RMC monitors implementation and
adherence to approved policies of the Bank across business lines to ensure that risk and
compliance with these policies and with regulatory requirements are properly managed, monitored,
measured and reported. The RMC is also charged with, promoting a risk aware culture within the
Bank at all levels.
Executive Credit Committee (ECC)
A management level Executive Credit Committee (ECC) is responsible for exercising the power and
authority delegated to it by the Board of Directors and the Board Executive Committee. It is
entrusted to ensure that the quality of the Bank’s credit portfolio remains within prudent risk appetite
and limits. The committee is mandated to oversee the strategic and overall direction of the Bank’s
credit risk portfolio in terms of both qualitative and quantitative parameters and credit policies
approved by the BOD.
F-87
16
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
4. FINANCIAL RISK MANAGEMENT (CONTINUED)
(a) Risk management framework (continued)
Asset Liability and Investment Committee (ALICO)
An Asset Liability and Investment Committee (ALICO) is responsible for monitoring and managing
specific elements of the statement of financial position; capital structure, funding and liquidity
requirements, interest rate risk, market and regulatory aspects of the trading and non-trading
portfolios as well as developing the Bank’s investment portfolio thereby assisting the Bank to
manage investments, optimise returns and oversee risk.
Internal audit
Risk management processes throughout the Bank are audited regularly by the internal audit
function, which examines both the adequacy of the procedures and the Bank’s compliance with the
procedures. Internal Audit discusses the results of all assessments with management and reports its
findings and recommendations to the Audit Committee.
Risk measurement and reporting systems
Monitoring and controlling risks is primarily performed based on limits established by the Board.
These limits reflect the business strategy of the Board and the market environment as well as the
level of risk approved by the Board, with additional emphasis on selected industries.
Information compiled from all businesses is examined and processed in order to analyse, control
and identify risks in a timely manner. This information is presented and discussed with the BOD, the
Risk Management Committee, and the head of each business division.
Risk mitigation
As part of its overall risk management, the Bank uses derivatives and other instruments to manage
exposures resulting from changes in interest rates, foreign currencies, equity risks, credit risks, and
exposures arising from forecast transactions. The risk profile is assessed before entering into hedge
transactions, which are authorised by the appropriate level of authority within the Bank. The
effectiveness of all hedging transactions is monitored by the Risk Management on a monthly basis.
(b) Credit risk
Credit risk is the risk of financial loss to the Bank if a borrower or counterparty in a financial
transaction fails to meet its contractual obligations. It arises from lending, trade finance, treasury
and other activities undertaken by the Bank. The Bank has established appropriate credit standards,
policies and procedures for the management and monitoring of credit risks.
Retail lending procedures comprise adequate controls and close portfolio monitoring to ensure the
portfolio performance remains within the established risk appetite.
For the Wholesale banking, the Bank manages its credit risk exposure through careful screening
and assessment of borrower’s and guarantor’s credit and through periodic credit and portfolio
reviews. It also manages the prudent diversification of its lending, investing and financing activities.
The Bank avoids undue concentrations of risks by limiting exposures to individuals or groups of
customers in specific businesses. It also obtains collateral or credit support where appropriate, as a
way to mitigate credit risks. The types of collateral obtained include cash, mortgages over real
estate properties and pledges over equity instruments. Credit support includes personal and/or
corporate guarantees.
The Bank uses the same credit risk assessment procedures when entering into derivative and
treasury transactions that it does for traditional lending products.
Note 9 discloses the distribution of loans and advances to customers by industrial sector. Note
4(b)(ii) discloses the geographical distribution of the Bank’s assets at the reporting date.
F-88
17
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
4. FINANCIAL RISK MANAGEMENT (CONTINUED)
(b) Credit risk (continued)
(i) Maximum exposure to credit risk before collateral held or other credit enhancements
Credit risk exposures relating to assets recorded on the
statement of financial position are as follows:
Balances with Qatar Central Bank
Due from banks
Loans and advances to customers
Investment securities - debt
Other assets
Total as at 31 December
Other credit risk exposures are as follows:
Guarantees
Letters of credit
Unutilised credit facilities
Total as at 31 December
2013
2012
1,236,834
2,517,948
17,032,854
7,447,332
220,253
28,455,221
2,426,974
5,047,836
19,799,262
4,337,144
183,531
31,794,747
5,191,967
1,006,103
5,434,904
892,942
4,066,479
10,394,325
3,542,776
9,740,846
The above table represents a worse-case scenario of credit risk exposure to the Bank, without
taking account of any collateral held or other credit enhancements attached. For financial assets
recorded the exposures set out above are based on net carrying amounts as reported in the
statement of financial position.
F-89
18
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
4. FINANCIAL RISK MANAGEMENT (CONTINUED)
(b) Credit risk (continued)
(ii) Concentration of risks of financial assets with credit risk exposure
Geographical sectors
The following table breaks down the Bank’s credit exposure at their carrying amounts (without taking into account any collateral held or other credit
support), as categorised by geographical region. For this table, the Bank has allocated exposures to regions based on the country of domicile of its
counterparties.
31 December 2013
Balances with Qatar Central Bank
Due from banks
Loans and advances to customers
Investment securities - debt
Other assets
31 December 2012
Balances with Qatar Central Bank
Due from banks
Loans and advances to customers
Investment securities - debt
Other assets
Qatar
GCC
Countries
Other
Middle East
Rest of
the world
Total
1,236,834
1,867,763
16,562,007
7,409,544
219,785
27,295,933
24,282
470,847
37,788
459
533,376
1,027
1,027
624,876
9
624,885
1,236,834
2,517,948
17,032,854
7,447,332
220,253
28,455,221
Qatar
GCC
Countries
Other
Middle East
Rest of the
world
Total
2,426,974
4,967,863
18,282,602
4,231,947
182,253
30,091,639
4,956
1,516,660
105,197
1,257
1,628,070
906
906
74,111
21
74,132
2,426,974
5,047,836
19,799,262
4,337,144
183,531
31,794,747
F-90
19
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
4. FINANCIAL RISK MANAGEMENT (CONTINUED)
(b) Credit risk (continued)
(ii) Concentration of risks of financial assets with credit risk exposure (continued)
Geographical sectors
31 December 2013
Guarantees
Letters of credit
Unutilised credit facilities
31 December 2012
Guarantees
Letters of credit
Unutilised credit facilities
Qatar
GCC
Countries
Other
Middle East
Rest of the
world
Total
3,141,485
917,005
3,542,776
7,601,266
275,555
275,555
112,770
112,770
1,662,157
89,098
1,751,255
5,191,967
1,006,103
3,542,776
9,740,846
Qatar
GCC
Countries
Other
Middle East
Rest of the
world
Total
3,352,737
892,942
4,066,479
8,312,158
252,382
252,382
130,614
130,614
1,699,171
1,699,171
5,434,904
892,942
4,066,479
10,394,325
F-91
20
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
4. FINANCIAL RISK MANAGEMENT (CONTINUED)
(b) Credit risk (continued)
(ii) Concentration of risks of financial assets with credit risk exposure (continued)
Industry sectors
The following table, as an illustration, breaks down the Bank’s credit exposure at carrying amounts
before taking into account collateral held or other credit enhancements, as categorised by the
industry sectors of the Bank’s counterparties.
Funded and unfunded
Government
Government agencies
Industry
Commercial
Services
Contracting
Real estate
Personal
Others
Contingent liabilities
F-92
Gross
exposure
2013
Gross
exposure
2012
9,190,359
5,422,536
536,183
2,980,154
4,119,574
551,462
2,398,562
3,253,882
2,509
9,740,846
38,196,067
6,504,188
5,478,192
817,423
3,440,210
7,940,833
383,405
4,409,194
2,815,272
6,030
10,394,325
42,189,072
21
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
4. FINANCIAL RISK MANAGEMENT (CONTINUED)
(b) Credit risk (continued)
(iii) Credit quality
Neither past due nor impaired
Low risk
Special mention
Past due but not impaired
Low risk
Special mention
Impaired
Substandard
Doubtful
Bad debts
Less: impairment allowance-specific
Less: impairment allowancecollective
Total carrying amount
Loans and advances to
customers
2013
2012
Due from banks
2013
2012
Investment securities debt
2013
2012
Other credit risk exposure
2013
2012
16,338,007
470,035
16,808,042
18,789,475
889,811
19,679,286
2,517,948
2,517,948
5,047,836
5,047,836
7,447,332
7,447,332
4,337,144
4,337,144
9,740,846
-
10,394,325
-
9,740,846
10,394,325
22,039
-
20,831
84,771
-
-
-
-
22,039
105,602
-
-
-
-
-
-
227,392
9,226
155,196
8,811
19,043
133,416
-
-
-
-
-
-
391,814
(185,461)
161,270
(145,146)
-
-
-
-
-
-
(3,580)
202,773
(1,750)
14,374
-
-
-
-
-
-
2,517,948
5,047,836
7,447,332
4,337,144
9,740,846
10,394,325
17,032,854
19,799,262
F-93
22
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
4. FINANCIAL RISK MANAGEMENT (CONTINUED)
(b) Credit risk (continued)
(iii) Credit quality (continued)
Impaired loans and advances to customers and investment in debt securities
Individually impaired loans and advances to customers and investment debt securities are
exposures which the Bank determines that there is objective evidence of impairment and it does not
expect to collect all principal and interest due according to the contractual terms of the
loan/investment security agreement(s).
Loans and advances to customers past due but not impaired
Past due but not impaired loans and advances to customers are those for which contractual interest
or principal payments are past due, but the Bank believes that impairment is not appropriate on the
basis of the level of security/collateral available and/or the stage of collection of amounts owed to
the Bank.
Up to 30 days
31 to 60 days
61 – 90 days
Gross
2013
2012
12,903
3,512
5,624
22,039
9,173
91,143
5,286
105,602
Rescheduled loans and advances to customers
Restructuring activities include; extended payment arrangements, approved management plans,
modification and deferral of payments. During the year, the Bank has rescheduled loans amounting
QAR 397,938 thousand (2012: QAR 582,582 thousand).
Cash and cash equivalents
The Bank held cash and cash equivalents of QAR 1,657,235 thousand at 31 December 2013 (2012:
QAR 5,266,855 thousand). The cash and cash equivalents held with QCB and financial institution
counterparties that are rated at least A- amounted to QAR 1,564,190 thousand (2012: QAR
5,145,603 thousand).
(iv) Collateral
The Bank holds collateral and other credit enhancements against certain of its credit exposures. The
determination of eligible collateral and the value of collateral are based on QCB regulations and are
assessed by reference to market price or indexes of similar assets.
The Bank has collateral in the form of blocked deposits, pledge of shares or legal mortgage against
the past dues loans and advances to customers.
The aggregate collateral is QAR 16.47 million (2012: QAR 6.07 million) for past due up to 30 days,
QAR Nil (2012: QAR 1.48 million) for past due from 31 to 60 days and QAR 1.54 million (2012: QAR
Nil) for past due from 61 and above days.
(v) Repossessed collateral
During the year, the Bank obtained assets by taking possession of collateral held as security as
follows:
Property
2013
1,901
2012
1,901
1,901
1,901
Repossessed properties are sold as soon as practicable, with the proceeds used to reduce the
outstanding indebtedness. Repossessed property is classified in the statement of financial position
within other assets.
F-94
23
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
4. FINANCIAL RISK MANAGEMENT (CONTINUED)
(b) Credit risk (continued)
(vi) Write-off policy
In accordance with QCB guidelines, the Bank writes-off a loan, accrued interest, and any related
allowances for impairment losses, or an investment debt security balance, when the Bank
determines that the amounts owed are uncollectible after exhausting all means of collection. The
determination to write-off an exposure is made after evaluating all relevant information, including
borrower’s, guarantor’s or issuer’s financial position, sources of repayment, proceeds from collateral
and legal recourse. For smaller balance standardised loans, write-off decisions generally are based
on a product-specific past due status. The amount written off during the year was QAR 1,806
thousand (2012: QAR 1,409 thousand).
(c) Liquidity risk
Liquidity risk is the risk that the Bank will be unable to meet its funding requirements. Liquidity risk
arises from fluctuations in cash flows due to market disruptions or credit down grades, which may
cause certain sources of funding to cease immediately.
(i) Management of liquidity risk
The Bank maintains a portfolio of highly marketable and diverse assets that can be easily liquidated
in the event of an unforeseen interruption of cash flow. In addition, the Bank maintains a statutory
deposit with the QCB. The liquidity position is assessed and managed under a variety of scenarios,
giving due consideration to stress factors relating to both the market in general and specifically to
the Bank.
(ii) Exposure to liquidity risk
The key measure used by the Bank for managing liquidity risk is the ratio of net liquid assets to
deposits from customers. For this purpose, net liquid assets are considered as including cash and
cash equivalents and investment grade debt securities for which there is an active and liquid market
less any deposits from banks, debt securities, other borrowings and commitments maturing within
the next month. A similar, but not identical, calculation is used to measure the Bank’s compliance
with the liquidity limit established by the Bank’s regulator, QCB.
Details of the reported Bank ratio of net liquid assets to deposits from customers at the reporting
date and during the year were as follows:
2013
131.69%
128.66%
At 31 December
Average for the year
F-95
2012
116.47%
125.90%
24
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
4. FINANCIAL RISK MANAGEMENT (CONTINUED)
(c) Liquidity risk (continued)
(iii) Maturity analysis
31 December 2013
Cash and balances with Qatar Central Bank
Due from banks
Loans and advances to customers
Investment securities
Others assets
Total
Due to banks
Customer deposits
Other liabilities
Total
Difference
31 December 2012
Cash and balances with Qatar Central Bank
Due from banks
Loans and advances to customers
Investment securities
Others assets
Total
Due to banks
Customer deposits
Other liabilities
Total
Difference
Carrying
amount
1,328,964
2,517,948
17,032,854
7,481,927
252,599
28,614,292
1,537,614
21,826,843
864,401
24,228,858
Less than 1
month
1-3 months
3-12
months
1-5 years
More than
5 years
1,328,964
1,425,948
3,912,194
2,234,577
205,605
9,107,288
1,537,614
18,495,571
335,430
20,368,615
(11,261,327)
3,111,935
2,093,238
16,539
5,221,712
2,601,333
203,811
2,805,144
2,416,568
1,021,772
833,706
1,855,478
658,318
158,609
816,927
1,038,551
1,092,000
5,487,398
2,088,067
30,455
8,697,920
71,621
126,258
197,879
8,500,041
3,499,555
232,339
3,731,894
40,293
40,293
3,691,601
Carrying
amount
Less than 1
month
1-3 months
3-12
months
1-5 years
More than
5 years
2,511,248
5,047,836
19,799,262
4,427,317
219,798
32,005,461
4,813,910
22,289,150
856,119
27,959,179
2,511,248
3,939,373
3,474,838
167,596
10,093,055
13,739
3,077,728
576,176
17,836
3,685,479
2,724
2,041,492
312,456
2,356,672
1,092,000
6,224,417
1,928,386
34,366
9,279,169
4,980,787
1,610,299
6,591,086
4,704,710
16,349,806
412,736
21,467,252
(11,374,197)
109,200
2,556,018
159,129
2,824,347
861,132
3,278,426
111,464
3,389,890
(1,033,218)
104,900
115,924
220,824
9,058,345
56,866
56,866
6,534,220
F-96
25
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
4. FINANCIAL RISK MANAGEMENT (CONTINUED)
(c) Liquidity risk (continued)
(iv) Maturity analysis
The table below set out the remaining contractual maturities of the Bank’s financial assets and financial liabilities.
31 December 2013
Non-derivative financial liabilities
Due to banks
Customer deposits
Other liabilities
Total liabilities
Derivative financial instruments
Outflow
Inflow
31 December 2012
Non-derivative financial liabilities
Due to banks
Customer deposits
Other liabilities
Total liabilities
Derivative financial instruments
Outflow
Inflow
Carrying
amount
Gross
nominal
inflow
(outflow)
Less than 1
month
1-3
months
3-12
months
1-5 years
More than
5 years
1,537,614
21,826,843
864,401
24,228,858
1,538,364
21,886,188
864,401
24,288,953
1,538,364
18,526,164
335,430
20,399,958
2,623,578
203,811
2,827,389
664,192
158,609
822,801
72,254
126,258
198,512
40,293
40,293
1,672,363
(1,672,363)
24,228,858
1,672,363
(1,671,366)
24,289,950
Gross
nominal
inflow
(outflow)
1,380,701
(1,379,830)
20,400,829
259,318
(258,854)
2,827,853
15,322
(15,759)
822,364
17,022
(16,923)
198,611
Less than 1
month
1-3 months
3-12
months
1-5 years
More than
5 years
4,814,309
22,341,045
856,119
28,011,473
4,704,989
16,356,354
412,736
21,474,079
109,320
2,566,610
159,129
2,835,059
3,313,181
111,464
3,424,645
104,900
115,924
220,824
56,866
56,866
-
Carrying
amount
4,813,910
22,289,150
856,119
27,959,179
3,017,235
2,998,857
2,457,478
297,784
205,624
37,971
(3,017,235)
27,959,179
(3,004,901)
28,005,429
(2,463,016)
21,468,541
(297,934)
2,834,909
(205,763)
3,424,506
(38,188)
220,607
F-97
40,293
56,866
26
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
4. FINANCIAL RISK MANAGEMENT (CONTINUED)
(d) Market risks
The Bank takes on exposure to market risks, which is the risk that the fair value or future cash flows
of a financial instrument will fluctuate because of changes in market prices. Market risks arise from
open positions in interest rate, currency and equity products, all of which are exposed to general
and specific market movements and changes in the level of volatility of market rates or prices such
as interest rates, credit spreads, foreign exchange rates and equity prices.
(i) Management of market risks
Overall authority for market risk is vested in ALICO. The Bank’s Risk Department is responsible for
the development of detailed risk management policies (subject to review and approval by ALICO)
and for the day-to-day review of their implementation.
(ii) Exposure to interest rate risk – non-trading portfolios
The principal risk to which non-trading portfolios are exposed is the risk of loss from fluctuations
in the future cash flows or fair values of financial instruments because of a change in market
interest rates. Interest rate risk is managed principally through monitoring interest rate gaps and
by having pre-approved limits for repricing bands. ALICO is the monitoring body for compliance
with these limits and is assisted by Bank central Treasury in its day-to-day monitoring activities.
F-98
27
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
4. FINANCIAL RISK MANAGEMENT (CONTINUED)
(d) Market risks (continued)
(ii) Exposure to interest rate risk – non-trading portfolios (continued)
A summary of the Bank’s interest rate gap position on non-trading portfolios is as follows:
Repricing in:
2013
Cash and balances in Qatar Central Bank
Due from banks
Loans and advances to customers
Investment securities
Property and equipment
Other assets
Due to banks
Customer deposits
Other liabilities
Equity
Statement of financial position items
Interest rate sensitivity gap
Cumulative interest rate sensitivity gap
Carrying
amount
Less than
3 months
3-12
months
1,328,964
2,517,948
1,330,349
17,032,854
7,481,927
63,658
252,599
28,677,950
8,948,145
4,303,164
14,581,658
2,872,740
1,537,614
21,826,843
864,401
4,449,092
28,677,950
833,706
3,706,446
1-5 years
1,092,000
2,817,822
2,078,123
5,987,945
1,967,571
232,339
2,199,910
1,328,964
95,599
73,974
3,416,867
864,401
4,449,092
8,804,334
1,463,640
17,680,037
19,143,677
658,318
658,318
71,621
71,621
-
(4,562,019)
(4,562,019)
(4,562,019)
3,048,128
3,048,128
(1,513,891)
5,916,324
5,916,324
4,402,433
2,199,910
2,199,910
6,602,343
F-99
Noninterest
sensitive
More than
5 years
426,576
34,595
63,658
252,599
2,201,991
Effective
interest rate
0.00%
1.53%
3.45%
3.39%
0.00%
0.00%
0.31%
0.90%
0.00%
0.00%
(6,602,343)
(6,602,343)
-
28
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
4. FINANCIAL RISK MANAGEMENT (CONTINUED)
(d) Market risks (continued)
(ii) Exposure to interest rate risk – non-trading portfolios (continued)
Repricing in:
2012
Cash and balances in Qatar Central Bank
Due from banks
Loans and advances to customers
Investment securities
Property and equipment
Other assets
Due to banks
Customer deposits
Other liabilities
Equity
Statement of financial position items
Off statement of financial position items
Interest rate sensitivity gap
Cumulative interest rate sensitivity gap
Carrying
amount
Less than 3
months
3-12
months
2,511,248
5,047,836
1,190,000
3,921,781
19,799,262
4,427,317
185,471
219,798
32,190,932
10,486,955
499,562
16,098,298
8,995,399
4,813,910
22,289,150
856,119
4,231,753
32,190,932
298,897
9,294,296
1-5 years
More than
5 years
Non-interest
sensitive
1,092,000
1,928,386
3,020,386
1,610,299
1,610,299
1,321,248
34,055
95,069
6,396,372
856,119
4,231,753
11,579,313
4,718,841
12,509,452
17,228,293
3,278,426
3,278,426
104,900
104,900
-
(1,129,995)
12,334
6,015,870
(12,334)
6,003,536
4,885,875
2,915,486
2,915,486
7,801,361
1,610,299
1,610,299
9,411,660
(1,117,661)
(1,117,661)
F-100
316,908
90,173
185,471
219,798
2,167,653
Effective
interest rate
0.36%
1.17%
3.63%
4.47%
0.00%
0.00%
0.36%
1.16%
0.00%
0.00%
(9,411,660)
(9,411,660)
-
29
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
4. FINANCIAL RISK MANAGEMENT (CONTINUED)
(d) Market risks (continued)
(ii) Exposure to interest rate risk – non-trading portfolios (continued)
Sensitivity analysis
The sensitivity of the income statement is the effect of the assumed changes in interest rates on the
net interest income for one year, based on the floating rate non-trading financial assets and financial
liabilities held at the reporting date, including the effect of hedging instruments.
The following table demonstrates the sensitivity to a reasonable possible change in interest rates,
with all other variables held constant, on the Bank’s income statement. There is no impact on the
Bank’s equity. The effect of decreases in basis points is expected to be equal and opposite to the
effect of the increases shown.
Currency
Sensitivity of net interest
income
Increase in basis points
QAR
USD
EUR
GBP
Others
+10
+10
+10
+10
+10
2013
2012
5,670
2,091
(531)
58
(62)
7,226
7,368
3,147
(646)
(260)
67
9,676
Interest rate movements affect reported equity in the following ways:
retained earnings arising from increases or decreases in net interest income and the fair value
changes reported in income statement; and
fair value reserves arising from increases or decreases in fair values of available-for-saleinvestments is reported directly in other comprehensive income.
Overall non-trading interest rate risk positions are managed by Bank central Treasury, which uses
investment securities, advances to banks, deposits from banks and derivative instruments to
manage the overall position arising from the Bank’s non-trading activities.
(iii) Exposure to other market risks – non-trading portfolios
Foreign currency transactions
Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in
foreign exchange rates. The Bank takes on exposure to the effect of fluctuation in prevailing foreign
currency exchange rate on its financial position. The Bank has set limits on the level of currency
exposure, which are monitored daily. The Bank had the following net open long (short) positions as
of 31 December.
2013
2012
(2,770)
(6,947)
(553)
(4,826)
(2,770)
5,681
(18,736)
2,689
Net foreign currency exposure:
Pounds Sterling
Euro
AED
Other currencies
F-101
30
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
4. FINANCIAL RISK MANAGEMENT (CONTINUED)
(d) Market risks (continued)
(iii) Exposure to other market risks – non-trading portfolios (continued)
5% change in currency exchange rate
Pounds Sterling
Euro
AED
Other currencies
2013
2012
(139)
(347)
(28)
(241)
(139)
284
(937)
134
Equity price risk
Equity price risk is the risk that the fair value of equities decreases as a result of changes in the
equity indices and individual stocks. The non-trading equity price risk exposure arises from equity
securities classified as available-for- sale.
The Bank is also exposed to equity price risk and the sensitivity analysis thereof is as follows:
5% change in QE 30 index
Change in other comprehensive income
2013
2012
1,724
3,824
The above analysis has been prepared on the assumption that all other variables such as interest
rate, foreign exchange rate, etc are held constant and is based on historical correlation of the equity
securities to the relevant index.
(e) Operational risks
Operational risk refers to the loss resulting from inadequate or failed internal processes, people and
systems or from external events. The Bank endeavours to minimise operational losses by ensuring
that effective infrastructure, controls, systems and individuals are in place throughout the
organisation. Regulatory, legal and reputation risks are controlled through a set of internal policies
and procedures. Where required, external legal advice is obtained to confirm legal and regulatory
requirements.
Other risks to which the Bank is exposed are regulatory risk, legal risk and reputational risk.
Regulatory risk is controlled through a framework of compliance policies and procedures. Legal risk
is managed through the effective use of the Bank’s Legal Department and external legal advisers.
Reputational risk is controlled through the regular examination of issues that are considered to have
reputational repercussions for the Bank, with guidelines and policies being issued as appropriate.
(f) Capital management
Regulatory capital
The primary objectives of the Bank’s capital management are to ensure that the Bank complies with
externally imposed capital requirements and that the Bank maintains healthy capital ratios in order
to support its business and to maximise shareholders value. In order to maintain or adjust the capital
structure, the Bank may adjust the amount of dividend payment to shareholders or issue additional
capital instruments. No changes were made in the objectives, policies and process from the
previous years.
The Bank maintains an actively managed capital base to cover risks inherent in the business. The
adequacy of the Bank’s capital is monitored using, among other measures, the rules and ratios
established by the Basel Committee on Banking Supervision and adopted by QCB in supervising
the Bank.
F-102
31
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
4. FINANCIAL RISK MANAGEMENT (CONTINUED)
(f) Capital management (continued)
Regulatory capital (continued)
The Bank’s regulatory capital position under Basel II and QCB regulations at 31 December was as
follows:
Tier 1 capital*
Tier 2 capital
Total regulatory capital
2013
2012
3,449,411
334,852
3,784,263
3,404,162
323,198
3,727,360
*Tier one capital included retained earnings net of proposed dividend amounting to QAR 480,700
thousand (2012: QAR 440,000 thousand).
Tier 1 capital includes share capital, legal reserve and retained earnings.
Tier 2 capital includes risk reserve (up to 1.25% of the risk weighted assets) and fair value reserve
(45% if positive and 100 % if negative).
Risk weighted assets and carrying amounts
Cash and balances with Qatar Central Bank
Due from banks
Loans and advances to customers
Investment securities
Property and equipment
Other assets
Off balance sheet assets
Total risk weighted assets for credit risk
Risk weighted assets for market risk
Risk weighted assets for operational risk
2013
Basel II
Risk
weighted
amount
2012
Basel II
Risk
weighted
amount
2013
Carrying
amount
2012
Carrying
amount
1,255,492
14,199,179
63,658
252,599
4,364,156
20,135,084
1,276,586
1,647,833
23,059,503
2,539,883
17,013,708
148,683
185,471
219,798
3,484,187
23,591,730
754,346
1,546,667
25,892,743
1,328,964
2,517,948
17,032,854
7,481,927
63,658
252,599
11,808,757
40,486,707
40,486,707
2,511,248
5,047,836
19,799,262
4,427,317
185,471
219,798
13,710,384
45,901,316
45,901,316
2013
2012
23,059,503
3,784,263
16.41%
25,892,743
3,727,360
14.40%
Risk weighted assets
Regulatory capital
Risk weighted assets as a percentage of regulatory capital (Capital ratio)
The minimum ratio limit determined by QCB is 10% and the Basel II capital adequacy requirement is
8%.
F-103
32
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
5. USE OF ESTIMATES AND JUDGEMENTS
(a) Key sources of estimation uncertainty
The Bank makes estimates and assumptions that affect the reported amounts of assets and
liabilities. Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are believed to be
reasonable under the circumstances.
(i) Allowances for credit losses
Assets accounted for at amortised cost are evaluated for impairment on a basis described in
accounting policy.
The specific counterparty component of the total allowances for impairment applies to financial
assets evaluated individually for impairment and is based upon management’s best estimate of the
present value of the cash flows that are expected to be received. In estimating these cash flows,
management makes judgements about counterparty’s financial situation and the net realisable value
of any underlying collateral. Each impaired asset is assessed on its merits and estimate of cash
flows considered recoverable are independently approved by the Credit Risk function. Minimum
impairment on specific counter parties are determined based on the QCB regulations.
Collectively assessed impairment allowances cover credit losses inherent in portfolios of loans and
advances to customers and investment securities measured at amortised cost with similar credit risk
characteristics when there is objective evidence to suggest that they contain impaired financial
assets, but the individual impaired items cannot yet be identified. In assessing the need for
collective loss allowances, management considers factors such as credit quality, portfolio size,
concentrations and economic factors. In order to estimate the required allowance, assumptions are
made to define the way inherent losses are modelled and to determine the required input
parameters, based on historical experience and current economic conditions. The accuracy of the
allowances depends on the estimates of future cash flows for specific counterparty allowances and
the model assumptions and parameters used in determining collective allowances.
(ii) Determining fair values
The determination of fair value for financial assets and liabilities for which there is no observable
market price requires the use of valuation techniques as described in accounting policy. For
financial instruments that trade infrequently and have little price transparency, fair value is less
objective, and requires varying degrees of judgement depending on liquidity, concentration,
uncertainty of market factors, pricing assumptions and other risks affecting the specific instrument.
(b) Critical accounting judgements in applying the Bank’s accounting policies
(i) Valuation of financial instruments
The Bank’ accounting policy on fair value measurements is discussed in the significant accounting
policies section.
The Bank’s measures fair values using the following fair value hierarchy that reflects the significance
of the inputs used in making the measurements.
Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.
Level 2: Valuation techniques based on observable inputs, either directly or indirectly (i.e.
derived from prices).
Level 3: Valuation techniques using significant unobservable inputs. This category includes
instruments that are valued based on quoted prices for similar instruments where significant
unobservable adjustments or assumptions are required to reflect differences between the
instruments.
Fair values of financial assets and financial liabilities that are traded in active markets are based on
quoted market prices or dealer price quotations. For all other financial instruments, the Bank
determines fair values using valuation techniques.
F-104
33
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
5. USE OF ESTIMATES AND JUDGEMENTS (CONTINUED)
(b) Critical accounting judgements in applying the Bank’s accounting policies (continued)
(i) Valuation of financial instruments (continued)
Valuation techniques include net present value and discounted cash flow models, comparison to
similar instruments for which market observable prices exist, Black-Scholes and polynomial option
pricing models and other valuation models. Assumptions and inputs used in valuation techniques
include risk-free and benchmark interest rates, credit spreads and other premia used in estimating
discount rates, bond and equity prices, foreign currency exchange rates, equity and equity index
prices and expected price volatilities and correlations. The objective of valuation techniques is to
arrive at a fair value determination that reflects the price of the financial instrument at the reporting
date that would have been determined by market participants acting at arm’s length.
The table below analyses financial instruments measured at fair value at the end of the reporting
period, by the level in the fair value hierarchy into which the fair value measurement is categorised:
Level 1
Level 2
Level 3
Total
2,160,017
2,160,017
16,539
5,321,910
5,338,449
-
16,539
7,481,927
7,498,466
-
4,421
-
4,421
-
4,421
-
4,421
31 December 2013
Derivative assets
Available-for-sale investments
Derivative liabilities
31 December 2012
Derivative assets
Available-for-sale investments
-
17,594
-
17,594
1,160,975
1,160,975
348,000
365,594
-
1,508,975
1,526,569
-
13,183
-
13,183
-
13,183
-
13,183
Derivative liabilities
During the year ended 31 December 2013, there were no transfer between Level 1 and Level 2 fair
value measurements, and no transfers into and out of Level 3 fair value measurements.
(ii) Financial asset and liability classification
The Bank’s accounting policies provide scope for assets and liabilities to be designated at inception
into different accounting categories in certain circumstances:
In classifying financial assets as held-to-maturity, the Bank has determined that it has both the
positive intention and ability to hold the assets until their maturity date as required by accounting
policies.
Details of the Bank’s classification of financial assets and liabilities are given in Note 6.
(iii) Impairment of investments in equity and debt securities
Investments in equity and debt securities are evaluated for impairment on the basis described in the
significant accounting policies section.
(iv) Useful lives of property and equipment
The Bank’s management determines the estimated useful life of property and equipment for
calculating depreciation. This estimate is determined after considering the expected usage of the
asset, physical wear and tear, technical or commercial obsolescence.
F-105
34
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
6. FINANCIAL ASSETS AND LIABILITIES
Accounting classifications and fair values
The table below sets out the carrying amounts and fair values of the Bank’s financial assets and financial liabilities:
Fair value
through
profit or
loss
Held-tomaturity
Loans and
receivables
Availablefor-sale
Other
amortised
cost
Total
fair value
Total
carrying
amount
-
1,328,964
2,517,948
17,032,854
-
-
1,328,964
2,517,948
16,539
17,032,854
1,328,964
2,517,948
16,539
17,032,854
16,539
-
20,879,766
7,481,927
7,481,927
-
7,481,927
28,378,232
7,481,927
28,378,232
4,421
4,421
-
-
-
1,537,614
21,826,843
23,364,457
4,421
1,537,614
21,826,843
23,368,878
4,421
1,537,614
21,826,843
23,368,878
31 December 2013
Cash and balances with Qatar Central Bank
Due from banks
Derivative assets
Loans and advances to customers
Investment securities:
Measured at fair value
Derivative liabilities
Due to banks
Customer deposits
16,539
-
F-106
35
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
6. FINANCIAL ASSETS AND LIABILITIES (CONTINUED)
Accounting classifications and fair values (continued)
Fair value
through
profit or loss
Held-tomaturity
Loans and
receivables
Availablefor-sale
Other
amortised
cost
Total
fair value
Total
carrying
amount
-
2,511,248
5,047,836
-
-
-
2,511,248
5,047,836
17,594
2,511,248
5,047,836
17,594
-
19,799,262
-
-
19,799,262
19,799,262
17,594
3,107,074
3,107,074
27,358,346
1,522,534
1,522,534
-
1,522,534
3,107,074
32,005,548
1,522,534
2,904,783
31,803,257
13,183
13,183
-
-
-
4,813,910
22,289,150
27,103,060
13,183
4,813,910
22,289,150
27,116,243
13,183
4,813,910
22,289,150
27,116,243
31 December 2012
Cash and balances with Qatar Central Bank
Due from banks
Derivative assets
Loans and advances to customers
Investment securities:
Measured at fair value
Measured at amortised cost
Derivative liabilities
Due to banks
Customer deposits
17,594
-
F-107
36
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
7. CASH AND BALANCES WITH QATAR CENTRAL BANK
Cash
Cash reserve with QCB*
Other balances with QCB
2013
2012
92,130
1,097,677
84,274
1,197,505
139,157
1,229,469
1,328,964
2,511,248
*The cash reserve with QCB is mandatory reserve not available for use in the Bank’s day to day
operations.
8. DUE FROM BANKS
Current accounts
Placements
Loans to banks
2013
2012
95,599
2,422,349
-
34,055
4,997,318
16,463
2,517,948
5,047,836
2013
2012
14,591,700
18,026,638
1,931,821
1,463,807
270,975
138,805
9. LOANS AND ADVANCES TO CUSTOMERS
(a) By type
Loans
Overdrafts
Bills discounted
Bankers acceptances
Specific impairment of loans and advances to customers
Collective impairment allowance
Net loans and advances to customers
427,399
316,908
17,221,895
19,946,158
(185,461)
(145,146)
(3,580)
(1,750)
17,032,854
19,799,262
The aggregate amount of non-performing loans and advances to customers amounted to
QAR 391,814 thousand, which represents 2.27% of total loans and advances to customers (2012:
QAR 161,270 thousand, 0.81% of total loans and advances to customers).
F-108
37
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
9. LOANS AND ADVANCES TO CUSTOMERS (CONTINUED)
(b) By industry
At 31 December 2013:
Government
Government agencies
Industry
Commercial
Services
Contracting
Real estate
Personal
Loans
Overdrafts
Bills
discounted
Bankers
acceptances
500,000
-
-
-
500,000
5,422,536
-
-
-
5,422,536
Total
459,022
76,956
-
204
536,182
2,205,017
474,425
22,717
247,993
2,950,152
1,077,572
99,012
143,252
157,106
1,476,942
95,869
428,611
4,885
22,096
551,461
2,325,837
74,702
-
-
2,400,539
2,505,847
778,115
100,121
-
3,384,083
14,591,700
1,931,821
270,975
427,399
17,221,895
Less:
Specific impairment of loans and advances to customers
Collective impairment allowance
(185,461)
(3,580)
17,032,854
At 31 December 2012:
Government
Government agencies
Industry
Commercial
Services
Contracting
Real estate
Personal
Loans
Overdrafts
Bills
discounted
Bankers
acceptances
-
29,279
-
-
29,279
5,478,176
16
-
-
5,478,192
Total
726,444
82,406
7,378
1,196
817,424
2,746,475
399,971
54,671
138,165
3,339,282
2,246,010
214,037
71,908
165,577
2,697,532
79,377
287,210
4,848
11,970
383,405
4,245,802
24,829
-
-
4,270,631
2,504,354
426,059
-
-
2,930,413
18,026,638
1,463,807
138,805
316,908
19,946,158
Less:
Specific impairment of loans and advances to customers
Collective impairment allowance
(145,146)
(1,750)
19,799,262
F-109
38
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
9. LOANS AND ADVANCES TO CUSTOMERS (CONTINUED)
(c) Net impairment loss on loans and advances to customers
2013
2012
Real
Corporate
Balance at 1 January
Charge for the year
Recoveries
Net charges/(recovery) for the year
Amounts written off
QCB Reclassification
Individual impairment
Collective impairment
Allowance for impairment losses
Real
Personal
Total
Estate
Personal
Total
-
8,403
136,743
145,146
9,332
112,114
121,446
-
50
66,025
66,075
2,767
47,260
50,027
-
(410)
(22,989)
(23,399)
(3,696)
(24,536)
(28,232)
-
(360)
-
43,036
42,676
22,724
21,795
(1,806)
(1,806)
(555)
(555)
(1,409)
3,314
(1,409)
3,314
-
Estate
-
-
(929)
-
-
8,043
177,418
185,461
8,403
136,743
145,146
1,750
-
1,830
3,580
-
1,750
1,750
1,750
8,043
179,248
189,041
8,403
138,493
146,896
Interest in suspense of QAR 37,880 thousand as at 31 December 2013 (2012: QAR 20,607 thousand) is included in the above analysis of credit losses for the
purpose of QCB regulation requirements. Movement in interest in suspense during the year amounted to a net charge of QAR 18,498 thousand (2012: net
charge of QAR 7,739 thousand).
During the year, an amount of QAR 16,994 thousand was directly charged to impairment loss on loans and advances to customers under the income statement.
At 31 December 2013, the net carrying amount of impaired loans and advances to customers amounted to QAR 206,353 thousand (2012: QAR 16,124
thousand) and the value of identifiable collateral held against those loans and advances amounted to QAR 296,130 thousand (2012: QAR 26,184 thousand).
F-110
39
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
10. INVESTMENT SECURITIES
2013
Available-for-sale
Held to maturity
Total
7,481,927
7,481,927
(a) Available-for-sale
Equities
State of Qatar debt securities
Treasury bills
Other debt securities
Mutual funds
Total
2012
1,522,534
2,904,783
4,427,317
Quoted
2013
Unquoted
Total
Quoted
2012
Unquoted
Total
34,481
2,059,012
3,392,680
66,524
-
114
1,929,116
-
34,595
3,988,128
3,392,680
66,524
-
76,614
56,977
798,459
228,925
-
348,000
13,559
76,614
404,977
798,459
228,925
13,559
5,552,697
1,929,230
7,481,927
1,160,975
361,559
1,522,534
Fixed rate securities and floating rate securities amounted to QAR 7,437,388 thousand and QAR 9,944 thousand, respectively (2012: QAR 1,432,361
thousand and QAR Nil, respectively).
(b) Held to maturity
-By issuer
State of Qatar debt securities
Other debt securities
Total
Quoted
2013
Unquoted
Total
-
-
-
-
-
-
Quoted
2012
Unquoted
Total
141,903
2,762,880
-
2,762,880
141,903
141,903
2,762,880
2,904,783
Total
2013
-By interest rate
Fixed rate securities
Floating rate securities
Total
Quoted
-
Unquoted
-
Total
-
Quoted
2012
Unquoted
141,903
2,762,880
-
2,762,880
141,903
-
-
-
141,903
2,762,880
2,904,783
The fair value of the held to maturity investments as of 31 December 2013 was Nil (2012: QAR 3,107,074 thousand).
F-111
40
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
10. INVESTMENT SECURITIES (CONTINUED)
(b) Held to maturity (continued)
The reclassifications were made at the fair value of the investments as at reclassification date. The
table below sets out the investment securities reclassified:
On the date of transfer
Held to maturity investments
reclassified into Available-for-sale
Amount
reclassified
Carrying Value
Fair Value
Unrealised
gain
2,802,849
2,802,849
2,974,033
171,184
2,802,849
2,802,849
2,974,033
171,184
F-112
41
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
11. PROPERTY AND EQUIPMENT
Cost
Balance at 1 January 2012
Acquisitions / Transfers
Disposals
Balance at 31 December 2012
Acquisitions / Transfers
Disposals
Land
Leasehold
improvements
Computer
equipment
Furniture
and
equipment
Vehicles
Work in
progress
Total
49,012
-
45,250
9,378
-
85,329
10,855
(40)
17,107
1,494
(9)
1,371
1,085
(838)
73,312
17,610
-
271,381
40,422
(887)
49,012
(49,012)
54,628
1,703
(9,965)
96,144
12,632
(6,472)
18,592
3,356
(2,423)
1,618
-
90,922
3,358
(76,418)
310,916
21,049
(144,290)
19,525
1,618
17,862
187,675
Balance at 31 December 2013
-
46,366
Accumulated depreciation
Balance at 1 January 2012
Charged during the year
Disposals
-
21,890
7,618
-
73,755
9,376
(38)
9,594
2,630
(5)
1,009
283
(667)
-
106,248
19,907
(710)
Balance at 31 December 2012
Depreciation for the year
Disposals
-
29,508
7,137
(9,159)
83,093
6,192
(6,471)
12,219
2,903
(2,267)
625
237
-
-
125,445
16,469
(17,897)
Balance at 31 December 2013
-
27,486
82,814
12,855
862
-
124,017
Carrying amounts
Balance at 1 January 2012
Balance at 31 December 2012
Balance at 31 December 2013
49,012
49,012
-
23,360
25,120
18,880
11,574
13,051
19,490
362
993
756
73,312
90,922
17,862
165,133
185,471
63,658
F-113
102,304
7,513
6,373
6,670
42
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
12. OTHER ASSETS
Interest receivable
Prepaid expenses and advances
Positive fair value of derivatives (Note 27)
Clearing cheques
Repossesed collateral
Fair valuation of hedged items
Others
2013
2012
190,391
148,343
30,445
34,366
16,539
17,594
10,814
14,628
1,901
1,901
-
242
2,509
2,724
252,599
219,798
2013
2012
73,974
95,069
1,463,640
4,718,841
1,537,614
4,813,910
2013
2012
5,680,760
7,621,574
1,171,486
1,480,658
14,974,597
13,186,918
21,826,843
22,289,150
2,970,775
1,330,254
13. DUE TO BANKS
Current accounts
Placements
14. CUSTOMER DEPOSITS
a) By type
Current and call deposits
Saving deposits
Time deposits
b) By sector
Government
Goverment and semi goverment agencies
Individuals
Corporate
F-114
1,822,179
2,007,784
13,674,509
15,108,916
3,359,380
3,842,196
21,826,843
22,289,150
43
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
15. OTHER LIABILITIES
Acceptances
Unearned income
Accrued expenses and payables
Interest payable
Cash margins
Staff Indemnity (Note a)
Negative fair value of derivatives (Note 27)
Others
2013
2012
427,399
316,908
196,112
205,824
117,111
189,236
41,796
75,823
31,851
18,059
28,710
26,086
4,421
13,183
17,001
11,000
864,401
856,119
2013
2012
26,086
25,385
5,742
6,324
31,828
31,709
(a) Staff Indemnity
Balance at 1 January
Provisions made during the year
Payments during the year
Balance at 31 December
(3,118)
(5,623)
28,710
26,086
16. CAPITAL AND RESERVES
(a) Share capital
Class A
2013
thousand
Authorised
Shares of QAR 10 each
84,000
Number of shares
Class B
Class A
2013
2012
thousand
thousand
36,000
Share class A
Number
of shares
thousand
QAR’000
84,000
Class B
2012
Thousand
36,000
Share class B
Number
of shares
thousand
QAR’000
Issued and fully paid
At 1 January 2013
77,000
770,000
33,000
330,000
At 31 December 2013
77,000
770,000
33,000
330,000
Share capital comprises class (A) ordinary shares, held by the local shareholders and class (B)
shares held by foreign shareholders. Both class (A) and Class (B) shares carry equal rights and
have the same voting powers.
F-115
44
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
16. CAPITAL AND RESERVES (CONTINUED)
(b) Legal reserve
In accordance with Qatar Central Bank’s Law No. 33 of 2006 as amended, 10% of the net profit for
the year is required to be transferred to legal reserve until the legal reserve equals 100% of the paid
up capital. This reserve is not available for distribution except in circumstances specified in the
Qatar Commercial Companies’ Law No. 5 of 2002 and is subject to the approval of QCB.
The legal reserve includes share premium received on issuance of new shares in accordance with
Qatar Commercial Companies’ Law (5) of 2002.
(c) Risk reserve
In accordance with QCB rules and regulations, a risk reserve is made to cover contingencies on
loans and advances to customers, up to 2.5% (2012: 2%) of the total direct credit facilities granted,
net of allowance for impairment of loans and advances to customers, cash secured facilities and
facilities to or guaranteed by Ministry of Finance.
(d) Fair value reserve
Available-for-sale investments:
Balance at 1 January 2013
Net change in fair value
Net amount transferred to income statement
Balance at 31 December 2013
(461)
104,155
(120)
103,574
Available-for-sale investments:
Balance at 1 January 2012
Net change in fair value
Net amount transferred to income statement
Balance at 31 December 2012
(316)
(494)
349
(461)
Negative fair value reserve as of 31 December 2013 amounted to QAR 16,157 thousand (2012:
QAR 2,716 thousand)
(e) Proposed dividend
A cash dividend of QAR 480,700 thousand has been proposed by the Board of Directors for the
year ended 31 December 2013 which is subject to approval at the annual general meeting of the
shareholders (2012: QAR 440,000 thousand).
During the year, the Bank has paid an amount of QAR 440,000 thousand (2012: QAR 440,000
thousand) as cash dividends for the year 2012.
F-116
45
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
17. INTEREST INCOME
Loans and advances to customers
Debt securities
Amounts deposited with banks
Amounts deposited with Qatar Central Bank
2013
2012
668,844
697,437
217,374
183,848
56,725
42,835
4,656
4,366
947,599
928,486
2013
2012
242,860
258,041
12,345
16,871
255,205
274,912
2013
2012
71,385
56,503
40,722
39,746
45,597
46,340
157,704
142,589
18. INTEREST EXPENSE
Customer deposits
Amount deposited by banks
19. NET FEE AND COMMISSION INCOME
Credit related fees
Commission on unfunded facilities
Others
Total fee and commission income
Fee and commission expense
Net fee and commission income
(30,487)
(32,047)
127,217
110,542
2013
2012
66,632
81,593
127
345
66,759
81,938
2013
2012
19,648
39,593
3,234
5,338
22,882
44,931
20. NET GAIN FROM FOREIGN EXCHANGE
Dealing in foreign currencies
Revaluation of derivatives securities
21. NET INCOME FROM INVESTMENT SECURITIES
Net gains on disposal of investment securities
Dividend income
F-117
46
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
22. STAFF COSTS
Basic salaries and allowances
Staff indemnity (Note 15)
Staff pension fund
Others
2013
2012
164,270
5,742
1,387
6,434
191,968
6,324
1,271
8,101
177,833
207,664
2013
2012
36,406
15,476
15,304
10,066
8,087
5,589
4,500
3,606
19,610
37,064
9,136
19,494
11,937
7,428
5,299
4,829
15,821
13,732
118,644
124,740
23. OTHER EXPENSES
Occupancy and rent
Legal and professional fees
Marketing
Computer
Communication
Management fees
Directors’ remuneration
Strategic initiative
Others
24. EARNINGS PER SHARE
Earning per share of the Bank is calculated by dividing profit for the year by the weighted average
number of ordinary shares in issue during the year:
Profit for the year – QAR’000
Weighted average number of shares
2013
2012
553,304
524,618
110,000,000
110,000,000
5.03
4.77
2013
2012
110,000,000
110,000,000
110,000,000
110,000,000
Earnings per share (QAR)
The weighted average number of shares has been calculated as follows:
Weighted average number of shares at 1 January
Weighted average number of shares at 31 December
There were no potentially dilutive shares outstanding at any time during the year, and therefore, the
dilutive earnings per share are equal to the basic earnings per share.
F-118
47
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
25. CONTINGENT LIABILITIES AND OTHER COMMITMENTS
(a) Contingent liabilities
Guarantees
Letters of credit
Unused credit facilities
(b) Other commitments
Forward foreign exchange contracts
Interest rate swaps
Options
Total
2013
2012
5,191,967
5,434,904
1,006,103
892,942
3,542,776
4,066,479
9,740,846
10,394,325
1,672,363
3,004,901
-
12,334
142,427
116,910
1,814,790
3,134,145
Unused credit facilities
Commitments to extend credit represent contractual commitments to make loans and revolving
credits. Commitments generally have fixed expiry dates or other termination clauses. Since
commitments may expire without being drawn upon, the total contractual amounts do not
necessarily represent future cash requirements.
Guarantees and letters of credit
Guarantees and letters of credit commit the Bank to make payments on behalf of customers in the
event of a specific event. Guarantees and standby letters of credit carry the same credit risk as
loans.
Options
Options are contractual agreement under which the seller (writer) grants the purchaser (holder) the
right, to exercise an interest rate based on certain indices with a predetermined cap and a floor at
the end of the option life. These options are entered into to hedge the bank commitments to specific
customer deposits. Related risks and rewards are fully passed onto the customers.
Lease commitments
Non-cancellable operating lease rentals are payable as follows:
Less than one year
Between one and five years
More than five years
2013
2012
29,960
102,959
10,065
28,227
39,151
14,536
142,984
81,914
The Bank leases a number of branches and office premises under operating leases.
26. CASH AND CASH EQUIVALENTS
Cash
Other balances with QCB
Due from banks maturing within three months or less
2013
2012
92,130
139,157
1,425,948
1,657,235
84,274
1,229,469
3,953,112
5,266,855
*Cash and balances with QCB do not include the mandatory cash reserve.
F-119
48
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
27. DERIVATIVES
The table below shows the positive and negative fair values of derivative financial instruments, together with the notional amounts analysed by the term to
maturity. The notional amounts, which provide an indication of the volumes of the transactions outstanding at the year end, do not necessarily reflect the
amounts of future cash flows involved. These notional amounts, therefore, are not indicative of the Bank’s exposure to credit risk, which is generally limited to the
positive fair value of the derivatives.
Notional / Expected amount by term to maturity
31 December 2013
Positive
fair value
Negative
fair value
Total
notional
amount
Within 3
months
3-12
months
1-5
years
More
than 5
years
(a)
Held for trading
Forward foreign exchange contracts
4,548
4,421
1,672,363
1,640,019
15,322
17,022
-
(b)
Designated as fair value through
profit and loss
Purchased options
11,991
-
142,427
-
73,800
68,627
-
Total
16,539
4,421
1,814,790
1,640,019
89,122
85,649
-
Notional / Expected amount by term to maturity
31 December 2012
(a)
Held for trading
Forward foreign exchange contracts
(b)
Designated as fair value through
profit and loss
Interest rate swaps
Purchased options
Total
Positive
fair value
Negative
fair value
Total
notional
amount
Within 3
months
3-12
months
1-5
years
More
than 5
years
13,286
12,941
3,004,901
2,760,949
205,760
38,192
-
4,308
4,308
242
242
12,334
116,908
129,242
6,167
6,167
6,167
15,000
21,167
101,908
101,908
-
17,594
13,183
3,134,143
2,767,116
226,927
140,100
-
The derivative transactions under the designated as fair value through profit and loss category are on a back to back basis.
F-120
49
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
28. RELATED PARTIES
Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial
and operating decisions. Related parties include entities over which the Bank exercises significant influence, major shareholders, directors and key
management personnel of the Bank.
The Bank enters into transactions with major shareholders, directors and key management personnel of the Bank. All the loans, advances and financing
activities to related parties are given at market rates and these are performing and free of any allowance for possible credit losses.
The related party transactions and balances included in these financial statements are as follows:
2013
Assets
Loans and advances to customers
Due from banks
Board of
Directors
Shareholders
Others
2012
Board of
Directors
Shareholders
Others
717,027
-
482
71,816
910,315
-
523,288
-
12,838
647,930
-
367,145
-
815,008
1,047,068
3,374,334
-
413,459
-
873,308
2,551,508
1,356,495
-
Letters of guarantee, letters of credit,
expected commitments and indirect
credit facilities
10,142
375,434
276,619
46,958
216,383
181,667
Income statement
Interest and commission income
Interest and commission expense
38,179
3,721
402
11,596
51,313
29,441
15,179
10,038
3,518
17,511
32,913
20,552
Liabilities
Customer deposits
Due to banks
Contingent liabilities and other commitments
A portion of the above loans and advances to customers is secured against tangible collateral or personal guarantees.
Apart from the above, the transactions during the year with related parties include the management fee payable to National Bank of Kuwait (SAK) amounting to
QAR 5,589 thousand (2012: QAR 5,299 thousand) as per the terms of the Management Services Agreement. An amount of QAR 15,917 thousand (2012: QAR
20,705 thousand) represents rental expense paid for the use of premises belonging to a related party.
Board of Directors remuneration amounted to QAR 5,004 thousand (2012: QAR 4,829 thousand).
F-121
50
INTERNATIONAL BANK OF QATAR (Q.S.C.)
NOTES TO THE FINANCIAL STATEMENTS
As at and for the year ended 31 December 2013
QAR ‘000s
28. RELATED PARTIES (CONTINUED)
Transactions with key management personnel
Key management personnel and their immediate relatives have transacted with the Bank during the
year as follows:
Loans and advances
Salaries and othere benefits
Staff indemnity
2013
2012
1,023
2,056
2013
2012
27,926
757
27,549
585
28,683
28,134
29. FIDUCIARY ASSETS
The Bank provides custody services to customers. Those assets that are held in a fiduciary capacity
are excluded from these financial statements and amounted to QAR 2,912 thousand at
31 December 2013 (2012: QAR 5,096 thousand).
30. COMPARATIVES
The comparative figures presented for 2012 have been reclassified where necessary to preserve
consistency with the 2013 figures. However, such reclassifications did not have any effect on the net
profit, other comprehensive income or the total equity for the comparative year.
F-122
51
F-123
F-124
THE ISSUER
IBQ Finance Limited
PO Box 309
Ugland House
Grand Cayman
KY1-1104
Cayman Islands
THE GUARANTOR
International Bank of Qatar (Q.S.C.)
Suhaim Bin Hamad Street
Doha
P.O. Box 2001
Qatar
ARRANGER
Citigroup Global Markets Limited
Citigroup Centre
Canada Square
Canary Wharf
London E14 5LB
United Kingdom
DEALERS
Citigroup Global Markets Limited
Citigroup Centre
Canada Square
Canary Wharf
London E14 5LB
United Kingdom
QNB Capital LLC
Level 14
QNB Al Mathaf Tower
P.O. Box 1000
Doha
State of Qatar
Standard Chartered Bank
P.O. Box 999
Dubai
United Arab Emirates
LEGAL ADVISERS
To the Issuer and the Guarantor as to English law
To the Issuer and the Guarantor as to Qatari law
Allen & Overy LLP
Allen & Overy LLP
11th Floor, Burj Daman Building
Level 23
Al Sa’ada Street
Tornado Tower, Al Funduq Street
Dubai International Financial Centre
P.O. Box 24205
P.O. Box 506678
West Bay, Doha
Dubai
State of Qatar
United Arab Emirates
To the Arranger and the Dealers as to English law
White & Case LLP
P.O. Box 9705
8th Floor, Office No. 801
Capricorn Tower
Sheikh Zayed Road, Dubai
United Arab Emirates
To the Arranger and the Dealers as to Qatari law
Arab Law Bureau LLP
9th Floor
Salam Tower,
West Bay, Doha
P.O. Box 23301
Qatar
To the Issuer and the Guarantor as to Cayman Islands law
Maples and Calder
Gate Precinct 5, Level 5
Dubai International Financial Centre
PO Box 119980, Dubai
United Arab Emirates
AUDITORS
KPMG L.L.C.
(QFC No. 00051)
25 C Ring Road
PO Box 4473, Doha
State of Qatar
FISCAL AGENT AND PAYING AGENT
Citibank N.A., London Branch
Citigroup Centre
Canada Square
Canary Wharf
London, E14 5LB
United Kingdom
REGISTRAR AND TRANSFER AGENT
Citigroup Global Markets Deutschland AG
Reuterweg 16
D-60323 Frankfurt am Main
Germany
LISTING AGENT
Arthur Cox Listing Services Limited
Arthur Cox
Earlsfort Centre
Earlsfort Terrace
Dublin 2
Ireland
Black&Callow — c111524