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UAE blacklist may squeeze liquidity of Qatari banks

The move followed the isolation of Qatar by the four states

Tom Arnold & Saeed Azhar | Reuters  |  Dubai 

UAE Central Bank
A man enters the main branch of UAE Central Bank in Abu Dhabi

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

Qatari have around 60 billion riyals ($16 billion) in funding in the form of customer and interbank deposits from other Gulf states, Chiradeep Ghosh, banking analyst at SICO Bahrain, said.

But the United Arab Emirates central bank has ordered local 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 on 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 six — QNB, Qatar Islamic Bank, Qatar Islamic Bank, Barwa Bank,  and — did not respond immediately 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 four states, which have cut all diplomatic and transport links.

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

“All Qatari will struggle for liquidity and will have to pay a premium for funding from elsewhere outside these four countries,” SICO Bahrain’s Ghosh said.

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

“It is especially challenging as they’re not very liquid as their loan to deposit ratios are already above 100 per cent,” Ghosh said.

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

UAE would 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, another banker said.

Meanwhile, US President Donald Trump on Friday accused Qatar of being a “high-level” sponsor of terrorism, potentially hindering the US Department of State’s efforts to ease heightening tensions and a blockade of the Gulf nation by Arab states and

“The nation of Qatar unfortunately has historically been a funder of terrorism at a very high level,” Trump told reporters at the White House.

“So we had a decision to make, do we take the easy road or do we finally take a hard but necessary action. We have to stop the funding of terrorism. I decided... the time had come to call on Qatar to end its funding,” Trump said, adding that he helped plan the Qatar action with Arab leaders after a recent summit in Riyadh, Saudi Arabia.

A senior administration official told Reuters earlier this week that the United States had no indication from the Saudis or Emiratis in Riyadh during Trump’s visit last month that they would sever ties with Qatar.

The crisis is a major diplomatic test for the United States, which is a close ally of countries on both sides. Trump has called key players in the region since they severed ties with Qatar on Monday. The Trump administration has given mixed signals on whether to isolate Qatar or bring it into talks with other Gulf nations.

First Published: Sat, June 10 2017. 20:43 IST
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