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Saudi Arabia, UAE Suspend some Bank Deals with Qatar - ASHARQ AL-AWSAT English Archive 2005 -2017
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Some trade banks in Saudi Arabia and the United Arab Emirates have halted transactions with Qatari banks in wake of the diplomatic row in the region, banking sources told Reuters on Tuesday.

The Qatari currency has since come under pressure.

Bahraini banks were also delaying business with Qatari banks, such as letters of credit, after its government cut diplomatic ties and transport links with Doha on Monday.

Saudi Arabia, the UAE, Bahrain and Egypt all severed ties with Qatar on Monday, accusing it of supporting terrorism. They have imposed a travel and transport ban among other measures that will have an impact on Doha’s economy.

Saudi Arabia’s central bank advised banks in the kingdom not to trade with Qatari banks in Qatari riyals, the sources said.

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.

Credit rating agency Moody’s Investors Service said on Monday that if trade and capital flows were disrupted, the diplomatic dispute could eventually hurt the outlook for Qatar’s debt.

The Qatari riyal fell in the spot market on Tuesday to 3.6470 against the US dollar, its lowest level since June 2016. The currency is pegged by Qatar’s central bank at 3.64 to the dollar.

In the one-year forwards market, where traders bet on rates 12 months from now, the riyal traded as low as 275 points, compared with Monday’s close of 250 points and levels around 180 bps before the diplomatic crisis erupted.

There were signs that Qatar’s financial ties might shrink well beyond the Gulf. Some Sri Lankan banks stopped buying Qatari riyals, saying counterpart banks in Singapore had advised them not to accept the currency.