The first note requested banks to freeze all business dealings with the UAE bank. The second, sent on 24 April, contained a more diluted message. It said bank-to-bank credit lines could be reopened, but also asked all Saudi banks to examine their records of the last five years and satisfy themselves that all customers that acted with Mashreqbank via them had been bona fide.

'The second note is clearly a step back from the first bombshell, and it puts the focus on us rather than on Mashreqbank,' says a senior Saudi banker. 'The situation is fluid but it seems to be cooling.'

Neither note spelled out reasons for SAMA's instructions. 'The assumption is that the move might be related to money-laundering concerns,' says the banker. It is the first cross-border action of this nature within the GCC.

'This is an extraordinary move by SAMA,' says a senior UAE banker. 'If, and I repeat if, it is related to money laundering, this is an issue for the Central Bank of the UAE to address.' The initial burden of responsibility for reporting irregularities would normally fall on the bank concerned he says, but after that its home regulator is responsible. 'It is impossible to see how protocol has been followed here as there has been no word from the UAE central bank.'

The move has also caused some surprise among Saudi bankers. 'It all seems very strange,' says another Saudi banker. 'With one hand they start awarding licences to Dubai banks and then they do this.' In early February, SAMA issued a banking licence to Dubai-based Emirates Bank International (MEED 15:2:02).