Central banks freeze accounts in bid to stem flow of financing for terrorism
The Central Bank of Bahrain (CBB) has become the second GCC financial regulator to order banks and financial institutions to freeze the accounts and assets of individuals and entities connected to Qatar that have been accused of having terrorism links.
The regulator joins the Central Bank of the UAE, which on 9 June issued similar directives to lenders in the emirates. This followed a move by Saudi Arabia, the UAE, Bahrain and Egypt to designate 59 individuals and 12 entities as terrorists or terrorist organisations.
The central bank issued a directive to all the financial institutions licensed in Bahrain to freeze the accounts, cash, deposits, investments, insurance policies and all the financial transactions of the individuals and entities that were on the terrorism list, state-run Bahrain News Agency reported.
The regulator has also asked financial institutions to provide any information they hold on the members of the list as soon as possible.
There are no statements as yet from Saudi Arabian Monetary Authority (Sama) or Egypts central bank on whether they also plan to replicate the moves by the UAE and Bahrain against Qatar-related individual and entities on the list.
The UAE central bank last week went a step further than Bahrain and singled out six Qatari banks Qatar Islamic Bank, Qatar International Islamic Bank, Barwa, Masraf al-Rayan, Qatar National Bank and Doha Bank that have held accounts for sanctioned individuals and asked UAE lenders to apply enhanced due diligence for any accounts they hold belonging to the six banks.
The central banks action follow growing political tensions within the six-member GCC economic bloc, which accounts for about a third of the worlds proven oil reserves. On 5 June, Saudi Arabia, Egypt, the UAE and Bahrain severed diplomatic links with Qatar. The four countries have accused Qatar of funding terrorism and fuelling instability in the region, allegations the gas-rich peninsular nation has denied.
A blockade has also been imposed, with Saudi Arabia closing Qatars only land border, and the three GCC states involved closing their airspace and cutting direct shipping services. They have also asked Qatari nationals to leave their respective countries.
Businesses, especially in the transportation and finance sectors, have taken a serious hit as the Saudi-led alliance tightens the screw to put further pressure on Qatar. Family-owned corporations with cross holdings in different GCC jurisdictions have also been affected.
It took the GCC members eight months to settle the most recent diplomatic row in 2014, which was far less severe in intensity than the current episode. Although Kuwait is mediating and latest reports indicate Qatar is ready to listen to the concerns of other nations in the Gulf, a quick solution and lifting of the economic blockade looks unlikely. The longer that remains in place the worse it will become for businesses and financial sectors on both sides of the political divide.
There are more risks, however, for Qatari banks and corporations that have been aggressively expanding into the region and beyond for the better part of the past 10 years.
The GCC accounts for 4.5 per cent of the almost QR719.69bn ($197bn) total assets of Qatar National Bank (QNB), Qatars top lender and the largest bank in the Middle East and North Africa by assets. The region also accounts for 2.6 per cent and 3.5 per cent of the banks total deposits of total loans, according to Muscat-based Ubhar Capital (U-Capital).
About 11 per cent of Doha Banks assets are GCC-based, while Gulf entities account for 16.2 per cent of its total loanbook. For Qatar Islamic Bank, the countrys biggest Islamic lender, the GCC share percentages for assets and total loans stand at 6.7 per cent and 5 per cent respectively.
QNB also holds a significant stake in the UAEs Commercial Bank International, while Commercial Bank of Qatar has a shareholding in United Arab Bank. There are no indications as yet from the UAE banking regulator that these holding stakes of Qatari banks in the UAE entities are under any sort of threat.
On the other side, the UAEs Mashreq bank and Saudi Arabias Samba Financial Group have a significant presence in Qatar, but their operations will likely continue unhindered as Doha has not replicated any of the diplomatic or economic moves initiated by its Gulf peers.
On the corporate side, telecoms operator Ooredoo, formerly Qtel, raised 14.7 per cent of its total QR32.5bn in revenues from the GCC markets in 2016. The region also accounted for more than 95 per cent of its pre-tax income and 16 per cent of its assets.
About 35 per cent of the total 2016 revenues of Qatars Mannai Corporation were generated from the GCC, which also accounts for 36.8 per cent of its assets and 32.8 per cent of its net income last year, according to U-Capital.
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