UAE “Blacklist” Squeezing Liquidity of Qatari Banks

UAE “Blacklist” Squeezing Liquidity of Qatari Banks

UAE “Blacklist” Squeezing Liquidity of Qatari Banks

Qatari banks have around QAR60-B in funding in the form of customer and inter-bank deposits from other GCC states

A move by four Arab states to “Blacklist” dozens of figures with alleged links to Qatar could squeeze liquidity at Qatari banks which get a significant amount of their funding from the region.

Qatari banks have around QAR60-B ($16-B) in funding in the form of customer and inter-bank deposits from other Gulf states, said a banking analyst at SICO Bahrain.

All types of deposits at banks in Qatar totalled QAR753-B at the end of March, according to central bank data.

But the United Arab Emirates (USE) central bank has ordered local banks to stop dealing with the 59 individuals and 12 entities with alleged links to Qatar and to freeze their assets, state news agency WAM reported late Friday.

It has also told them to apply enhanced due diligence for any accounts they hold with six Qatari banks, including Qatar National Bank (QNB) which is the Middle East and Africa’s largest bank, WAM said in its report.

The 6 banks: QNB, Qatar Islamic Bank, Qatar International Islamic Bank, Barwa Bank, Masraf Al Rayan and Doha Bank did not respond to requests for comment.

Saudi Arabia, the UAE, Egypt and Bahrain had earlier branded as terrorists the same individuals, including Muslim Brotherhood spiritual leader Yousef al-Qaradawi, and entities including Qatari-funded charities Qatar Charity and Eid Charity.

The move followed the isolation of Qatar by the 4 states, which have cut all diplomatic and transport links.

This pressure is likely to constrain the funding Qatari banks would be able to raise from Saudi Arabia, the UAE and Bahrain, a banker in the region told Reuters.

All Qatari banks will struggle for liquidity and will have to pay a premium for funding from elsewhere outside these four countries.

Qatari banks, like their Gulf neighbors, have been struggling against a backdrop of lower Crude Oil prices, which has pushed up funding costs and raised non-performing loans.

It is especially challenging now, as they are not very liquid as their loan to deposit ratios are already above 100%.

In recent years several have also expanded outside Qatar’s small domestic market to grow their business, with QNB holding a presence in several countries including Egypt, Turkey, Nigeria and UAE either directly or via affiliates.

UAE banks will  find it relatively easy to comply with the rules as many had invested in improving their compliance systems in recent years and already complied with sanctions against a range of other entities and individuals.

Have a terrific week.

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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