Saudi Arabia Tells Banks Not to Increase Qatar Exposure

  • U.A.E., Saudi Arabia among countries cutting links to Qatar
  • SAMA told lenders to stop processing Qatari riyal payments

Qatar Banking System Relies on Foreign Cash for Liquidity

Saudi Arabia’s central bank has ordered lenders in the country not to increase their exposure to any Qatari clients amid the worst crisis in relations among the Gulf Arab monarchies in decades, according to people familiar with the matter.

The Saudi Arabian Monetary Agency also told banks licensed in the country that they should not process any payments denominated in Qatari riyals, the people said, asking not to be identified because the information is private. The order to refrain from increasing exposure to Qatar is being applied to include treasury investments, loans, letters of credit and trade-finance facilities, the people said.

Saudi Arabia is among countries including the United Arab Emirates, Egypt and Bahrain, that have blocked transport routes with Qatar, accusing the country of destabilizing the region through supporting proxies of Shiite Muslim Iran and the Sunni militants of al-Qaeda and Islamic State. Some banks in Saudi Arabia, the U.A.E. and Bahrain have already begun cutting their exposure to Qatar, other people said on Wednesday.

Officials at SAMA, as the Saudi central bank is known, didn’t immediately respond to requests for comment.

Report Exposure

Central banks in Saudi Arabia, the U.A.E., and Bahrain were this week said to have asked lenders to provide details of their exposure to Qatari clients. Banks have also been requested to share information about exposure to Qatar through products including equities, bonds, and interbank funds, other people said. Kuwait’s central bank, which isn’t part of the group of countries that cut ties with Qatar, is said to have asked banks to disclose their exposure to Qatar.

Qatar’s stock exchange has slumped while sovereign bond yields climbed as investors were spooked by the diplomatic spat. The Doha Securities Exchange has dropped almost 8 percent since the measures against Qatar began on Monday morning, while the yield on the government’s 2026 bonds climbed to 3.53 percent, it’s highest since March. The cost of insuring Qatar debt also soared, with five-year credit default swaps for Qatari bonds rising to the highest level since Dec. 2, according to data compiled by Bloomberg.

Kuwaiti ruler Sheikh Sabah Al-Ahmed Al-Sabah has been shuttling among Gulf capitals in an effort to find a solution to a crisis that pits some of the world’s richest nations against each other. Dispelling hopes that a solution to the impasse could be found soon, Anwar Gargash, the U.A.E. minister of state for foreign affairs, said on Wednesday that the alliance is willing to take further measures against Qatar if it doesn’t pledge to overhaul its “subversive” foreign policy.

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