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MENA news through June 7

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MENA news through June 7

* Saudi Arabia, Bahrain, Egypt and the United Arab Emirates severed ties with Qatar, accusing their neighbor in the Gulf region of backing terrorist groups and undermining regional stability. The move followed the publication of alleged comments by Qatari Emir Tamim bin Hamad al-Thani expressing support for Iran and Islamist movements, which Qatar said were a result of a hacking incident. News outlets including the Financial Times covered.

* Libya, Yemen, the Maldives and Mauritania followed suit and broke off relations with Qatar, while Jordan said it will downgrade its diplomatic ties with Qatar, Reuters reported.

* Tensions showed no signs of abating after UAE Minister of State for Foreign Affairs Anwar Gargash floated the possibility of an economic embargo on Qatar if necessary and said Doha should commit to change what critics say is a policy on giving financial support to Islamist militants, Reuters wrote.

MIDDLE EAST

* The Saudi Arabian Monetary Authority has instructed banks not to increase their exposure to any Qatari clients and to refrain from processing any payments denominated in Qatari rials, insiders told Bloomberg News. A number of banks in Saudi Arabia, as well as the UAE and Bahrain, have reportedly started taking out deposits from Qatari lenders and ceased from trading rials and bonds as the possibility of financial sanctions on Qatar threatens, the newswire wrote. Some Egyptian lenders, meanwhile, have resumed dealing in Qatari rial after halting trade June 5, while others appeared to continue curbing their transactions with Qatar, Reuters reported.

* As a result of the dispute and its fallout, S&P Global Ratings downgraded Qatar's long-term rating to AA- from AA and placed it on CreditWatch with negative implications. The agency said Qatar's reduced regional trade could slow its economic growth and widen its fiscal and current account deficits, while corporate profitability is also expected to take a hit because of regional demand being cut off, and investment confidence is projected to wane.

* Moody's, meanwhile, warned that the diplomatic row between Qatar and other Gulf Cooperation Council countries could have an impact on Qatar's credit outlook if it results in the disruption of trade and capital flows, Reuters wrote. Senior Moody's analyst Mathias Angonin said the latest tension, which blocks sea, air and land transportation, demonstrates a credit negative escalation for Qatar.

* Qatar National Bank (Q.P.S.C.) and Central Bank of Egypt Governor Tarek Amer have both reassured clients that QNB deposits are safe, and that the bank's Egyptian activities will not be affected by the severance of diplomatic relations between Qatar and other countries, including Egypt, Daily News Egypt reported.

* The Qatar Investment Authority raised its stake in Credit Suisse Group AG to 5.01%. The Qatari sovereign wealth fund holds the stake through Qatar Holding LLC.

* Bahrain-based GFH Financial Group B.S.C. postponed talks with SHUAA Capital PSC regarding the potential acquisition of the Dubai-based lender, as the two parties have yet to agree on the terms for the deal nor received initial regulatory approval.

* Kuwait's Capital Markets Authority has mandated accounting firm Ernst & Young to conduct a valuation of Boursa Kuwait's assets and outline a timetable for a listing, insiders told Reuters. A listing of the stock market has been under consideration for years, but political infighting and entrenched bureaucracy have stalled the process.

* U.S. investment bank Evercore Partners Inc. looks to hire Elias Mouawad to run its new office in Dubai as part of its expansion plans in the Middle East, insiders told Bloomberg News. Mouawad, who is a director for Middle East and North Africa at Bank of America Corp., will join Evercore Partners in September as a managing director responsible for Middle East operations.

* Goldman Sachs Group Inc. has filed an application with Saudi Arabia's Capital Market Authority for an equities trading license as it seeks to further expand in the country, insiders told Reuters. The Wall Street lender has operated in the Middle Eastern nation as an agent and underwriter since 2009, and has been authorized to arrange, advise and manage investment funds and portfolios since 2014.

* National Commercial Bank completed the issuance of 1.3 billion Saudi Arabian riyals in subordinated Additional Tier 1 Islamic bonds through a private placement offer in Saudi Arabia.

* Alizz Islamic Bank SAOG said it is interested in a potential merger with fellow Oman-based lender United Finance Co. SAOG.

* Accounting and consulting firm KPMG said banks in the GCC countries have achieved a 6.5% asset growth last year, owing to increased lending to government and related entities, the Times of Oman wrote. In its report, KPMG said the credit quality of many banks in the region have also deteriorated, with overall impairment charges increasing by about 25% from 2015, but stressed that banks have managed to remained resilient.

* Central Bank of Iran Governor Valiollah Seif said the regulator is ramping up efforts to reform the country's troubled banking system and will continue efforts to bring interest rates closer to inflation, which stood at 9% in the year ended in March, Al-Monitor reported.

* Georges Sayegh, who represents BLOM BANK SAL on the board of the lender's Syrian operation, Bank of Syria & Overseas SA, told Euromoney that he would step down from the board and will seek reelection as an individual instead of as a representative of the Lebanon-based bank. It comes as some Lebanese banks have started retreating from Syria as they become increasingly wary of remaining active in the country amid the ongoing civil war.

NORTH AFRICA

* Egyptian President Abdel Fattah al-Sisi ratified a long-awaited investment law aimed at easing doing business in the country and giving new incentives, such as tax credits, to attract investors, Reuters wrote.

* Egyptian Finance Minister Amr el-Garhy said the next review for the country's three-year, $12 billion extended fund facility program under the IMF will take place in November or December, Reuters reported. El-Garhy added that a $1.25 billion disbursement is expected this month, completing the first tranche of the IMF program.

* Commercial International Bank (Egypt) SAE said the Central Bank of Egypt has approved the appointment of Amr el-Ganainy as CEO of institutional banking, Reuters noted.

* The IMF has recommended that Algeria implement a crisis resolution mechanism for its banking sector to take account of increasing risks posed to bank by oil shocks, El Watan wrote.

* Moroccan mutual insurers Mutuelle Agricole Marocaine D'Assurances and Mutuelle Centrale Marocaine d'Assurances now own more than 10% of Banque Centrale Populaire after they purchased 2.4 billion dirhams of its stock on the Casablanca Stock Exchange, Financial Afrik reported.

Pádraig Belton contributed to this report.

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