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UAE, Bahrain banks to freeze 'terrorist' accounts with alleged Qatar links

The Central Bank of the United Arab Emirates has instructed banks to search for and freeze any accounts, deposits or investments held by 59 individuals and 12 entities that were designated as "terrorists or terrorist organizations" by Saudi Arabia, Egypt, Bahrain and the UAE, which have all severed diplomatic ties with Qatar.

The central bank said the blacklisted individuals and entities have held accounts at six Qatari lenders — Qatar Islamic Bank (Q.P.S.C), Qatar International Islamic Bank (Q.S.C), Barwa Bank Q.S.C., Masraf Al Rayan (Q.P.S.C.), Qatar National Bank (Q.P.S.C.) and Doha Bank Q.S.C. — and asked local lenders to apply stricter due diligence for any accounts held by those banks, state news agency WAM reported June 9, citing statements issued by the regulator.

The Central Bank of Bahrain also instructed local banks to freeze and seize the assets and bank accounts of the individuals and entities cited in the "terror list," and asked them to notify it of any financial information concerning those on the blacklist as soon as possible, the Bahrain News Agency reported June 11.

The blacklist, part of the four countries' coordinated efforts to isolate Qatar, could squeeze liquidity at Qatari lenders, which rely on other Gulf states for a significant amount of their funding, Reuters reported June 10.

Chiradeep Ghosh, a banking analyst at SICO Bahrain, told the newswire that Qatari banks have roughly 60 billion Qatari rials in funding in the form of customer and interbank deposits from other countries in the Gulf.

"All Qatari banks will struggle for liquidity and will have to pay a premium for funding from elsewhere outside these four countries," Ghosh reportedly said. "It is especially challenging as they're not very liquid as their loan-to-deposit ratios are already above 100%."

S&P Global Ratings, meanwhile, said June 9 that Qatari banks are strong enough to cope with the withdrawal of deposits and funding by other Gulf Cooperation Council countries, saying the banks' liquidity profiles will help them absorb a moderate drop in external funding and cited the likelihood of government support in case of need.

The agency stressed, however, that Qatar's diplomatic crisis could exert further pressure on banks' credit quality if it is not resolved relatively quickly.

S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.