Foreign deposits at Qatar’s banks could fall further after dropping the most in almost two years in June, as some Gulf lenders refuse to roll over holdings, people with knowledge of the matter said.
Some banks based in Saudi Arabia, the United Arab Emirates, Bahrain and Egypt are not extending deposits with Qatari lenders when they mature, the people said, asking not to be identified because the information is private.
These banks are concerned that they could face repercussions from their governments for continuing business relations with Qatar after they cut ties with the country, the people said.
Lenders are also struggling to repatriate funds because their counterparts in Qatar are not swapping riyals into US dollars, two of the people said.
Banks can either roll over their riyal deposits or convert them into dollars in the offshore market, where they get a worse exchange rate than Qatar’s pegged official rate, they said.
Gulf-based banks placed deposits with the 18 lenders in the world’s biggest liquefied natural gas exporting nation earlier this year as its local interbank rate reached the highest in the region. Non-resident deposits in Qatari banks in June posted their biggest decline since November 2015.
Four Gulf states severed diplomatic and transport links with Qatar that month, accusing it of supporting extremist groups, which Qatar denies.
Foreign deposits dropped 7.6 percent to 170.6 billion riyals (US$46.52 billion) from a month earlier, while overall deposits climbed 1.1 percent, helped by a jump in domestic funds, according to central bank data.
The slide in non-resident holdings, which account for 22 percent of overall deposits, comes even after local lenders raised interest rates to try and attract foreigners.
Qatar’s sovereign wealth fund, the Qatar Investment Authority, injected deposits into local banks to shore up liquidity after the crisis started, people familiar with the development said in June.
The Qatar three-month interbank offered rate, a benchmark used to price some loans, on Thursday climbed to 2.49 percent, while a similar rate in Saudi Arabia was at 1.8 percent and 1.53 percent in the UAE, according to data compiled by Bloomberg.
The rift with the Saudi-led bloc has spurred a unit of Doha Bank QSC, Qatar’s fifth-biggest lender, to consider selling some of its assets in the UAE to local banks, Reuters reported, citing two people familiar with the matter.
Doha Bank did not respond to requests from Reuters for comment.
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