By Keith Mullin, Editor at Large, International Financing Review; the views expressed are his own.

LONDON, Feb 18 (Reuters) – Qatar’s decision to ban conventional banks from offering Islamic banking services with immediate effect and to wind down their Islamic windows by the end of the year is an absurd development.

It is disgracefully anti-competitive, counter-productive and there is every likelihood that the government will come to regret it.

The central bank’s reasons for imposing the ban were put down to a host of supervisory and monetary policy issues that were poorly explained and ultimately made little sense. It said the Qatari financial system has “well established Islamic banks… that fulfil local demand on Islamic products”. This is laughable since the country’s top three Islamic lenders – Qatar National Bank, Commercial Bank of Qatar and Doha Bank – are all conventional banks. (more…)