Qatar banks can survive Gulf, foreign funds withdrawal, S&P says

Deposits and other funding sources from GCC countries represent about 8 percent of total liabilities of Qatari lenders or $20 billion
So far there have been no orders to withdraw money from Qatari banks
By Bloomberg
Sun 11 Jun 2017 04:29 PM

Qatari banks are strong enough to survive the pullout of
all Gulf money and then some, according to S&P Global Ratings.

SPGR ran two hypothetical scenarios of capital flight, and
concluded that Qatar’s lenders could survive the withdrawal of all Gulf
deposits plus a quarter of the remaining foreign funds the banks keep.

Deposits and other funding sources from GCC countries
represent about 8 percent of total liabilities of Qatari lenders or $20
billion, S&P said after examining the 2016 positions of the four biggest
banks in Qatar.

In the worst case, only two unidentified lenders would have to
dip into their investment securities portfolio, it concluded.

“We believe the recent developments might result in an
outflow of external funding for Qatari banks over the next few months,
depending on how the situation evolves,” S&P Global Ratings said.

In both
scenarios, “the results show the rated Qatari banks to be in a decent position,
on a stand-alone basis, to face a significant reduction of external funding.”

Capital flight has been a looming potential danger since
Saudi Arabia and its allies began tightening the noose on Qatar on June 5,
saying it must distance itself from Iran and stop funding Islamist groups.

The
kingdom, along with the UAE, Egypt and Bahrain, cut diplomatic
relations and imposed a land, sea and air blockade. Qatar, the world’s largest
exporter of liquefied natural gas, denies the charges and says the Saudis
aspire to dominate the region.

So far there have been no orders to withdraw money from
Qatari banks, but the Saudi central bank has ordered banks not to increase
their exposure to Qatari clients. It has also told banks licensed in the
kingdom not to process payments denominated in Qatari riyals, people familiar
with the matter said last week.

The UAE’s central bank asked local lenders to do
enhanced customer due diligence for any accounts they hold in six Qatari banks,
state-run WAM news agency reported Sunday.

Despite the resilience that S&P’s tests showed, “the
situation remains very fluid” and could evolve in different directions, in part
depending on how long the spat lasts and whether other countries join the
sanctions, it said.

Qatar banks’ net external debt totalled about $50 billion
at the end of April, the company said. The average tenor of these funds is
“relatively short,” expiring in less than one year, with a “significant portion
coming from Europe and Asia,” it said.

S&P last week lowered Qatar’s long-term rating by one
level to AA-, the fourth-highest investment grade, and put it on negative
watch. Qatari stocks have dropped 5.3 percent since June 5, and the index was
down 2.25 percent as of 11:41 a.m. in Doha.

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