Linklaters and Eversheds have advised on the sale of Islamic Banking Window (IBW) Al-Yusr to Bank Bawar, the first deal of its kind to be executed before the regulatory deadline of 31 Dec 2011.

A reversal of the Central Bank of Qatar’s 2005 decision to allow conventional banks to launch Islamic units saw a directive issued on 31 Jan 2011 for all commercial banks to cease operation of their Islamic banking businesses by the end of the year.

Thus far, the sale of Al-Yusr from the Islamic Bank of Qatar to Barwa Bank is the first such Islamic bank window transaction to be completed and is also the first deal of its kind in the region.

Amjad Hussain, Eversheds’ head of Islamic finance, said the deal presented a number of legal, operational and Shariah-based challenges that required management within a very tight timeframe. As the first such transaction under a new directive, the manner by which the recent regulatory change would be interpreted within the confines of existing laws was also an initial challenge that both teams encountered. Eversheds was retained by Bank Bawar and won the mandate following a competitive bidding process.

Linklaters represented the sellers, International Bank of Qatar, on the deal.

Under the terms of the agreement, the sale includes the Al Yusr retail loans and deposit account portfolios; the two branches at Al Sadd and Al Rayyan, and the transfer of Al Yusr employees to Barwa Bank.

Qatar has four dedicated Islamic banks and 14 conventional banks (six domestic, one specialised and seven foreign-owned), all of which come under the scope of the QCB. The Islamic banking sector in Qatar accounts for 20 percent of the total banking industry in Qatar which will itself undergo consolidation once at the end of this year.

Other banks that have announced plans to sell off their Islamic banking arms include Qatar National Bank; Commercial Bank of Qatar; Doha Bank; Ahli Bank and Al-Khaliji Bank. Only one bank – HSBC Amanah – has confirmed that it will shut down its Islamic finance operations in Qatar instead of selling it.

Bank Barwa is the newest bank in Qatar. It is licensed and regulated by Qatar Central Bank and is associated with Barwa Real Estate Co, the second largest real estate conglomerate in Qatar. It fully acquired The First Investor Q.S.C. in 2009, the largest closed shareholding Qatari investment banking firm in Qatar, which notably also advised Barwa Bank, its parent company in the financing aspects of this deal.ALB

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