Saudi, UAE banks hold off deals with Qatari Banks

Gulf Arab commercial banks started holding off on business with Qatar deals because of diplomatic ties among the states causing Qatar’s currency under pressure.

Some Saudi Arabian, United Arab Emirates and Bahraini banks were delaying business with Qatari banks, such as letters of credit, after their governments cut diplomatic ties and transport links with Doha on Monday, accusing Qatar of supporting terrorism.

Saudi Arabia’s central bank advised banks in the kingdom not to trade with Qatari banks in Qatari riyals, the sources said. The central bank did not respond to a request for comment.

Qatari banks have been borrowing abroad to fund their activities.

Their foreign liabilities ballooned to 451 billion riyals ($124 billion) in March from 310 billion riyals at the end of 2015, central bank data shows.

Qatar has dismissed the terrorism charge and welcomed a Kuwaiti mediation effort. Doha, the world’s biggest liquefied natural gas exporter, says it has enough reserves to support its banks and its riyal currency, which is pegged to the dollar.

Qatari banks have been borrowing abroad to fund their activities. Their foreign liabilities ballooned to 451 billion riyals ($124 billion) in March from 310 billion riyals at the end of 2015, central bank data shows.

So any extended disruption to their ties with foreign banks could potentially threaten a funding crunch for some Qatari banks. Banks from the UAE, Europe and elsewhere have been lending to Qatari institutions.

Gulf banking sources, who declined to be named because of political sensitivities, said Saudi Arabian, UAE and Bahraini banks were postponing deals until they received guidance from their central banks on how to handle Qatar.

“We will not take action without central bank guidance, but it is wise to evaluate what you give to Qatari clients and hold off until there is further clarity,” said a UAE banker, adding that trade finance had stalled for the time being.

The sources said the UAE and Bahraini central banks had asked banks under their supervision to report their exposure to Qatari banks. The UAE and Bahraini central banks did not reply to requests for comment.

 

Source: Reuters

 

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