Continued deposit drop from banks adds pressure on Qatar

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Wed, 23 Aug 2017 - 08:53 GMT

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Wed, 23 Aug 2017 - 08:53 GMT

 A man walks on the corniche in Doha, Qatar on June 15- Reuters photo

A man walks on the corniche in Doha, Qatar on June 15- Reuters photo

CAIRO – 23 August 2017: As an impact of the ongoing Arab boycott, the Qatari government is facing more pressures to keep its banking system strong, as foreign deposits keep declining.

Qatar’s foreign deposits continued to fall in July as they fell eight percent to record $43 billion, Qatar Central Bank (QCB) announced on Tuesday.

Total deposits, however, have hiked to QAR 772.5 billion ($212 billion) in July from QAR 770.7 billion, as a result of a $6.9 billion increase in the Qatari public sector's foreign currency deposits, which came after the government pumped $10.9 billion in June.

An estimated value of QAR 50 billion in Saudi, UAE and Bahrani deposits is expected to flow out of Qatari banks over the next few months, Reuters reported on Tuesday.

This will affect the Qatari banking system whose 55 percent of cross-border deposits were from the Gulf Cooperation Council (GCC).

The crisis seemed to have affected overseas investments of Qatari banks. Reuters reported that claims on banks declined to QAR 83.9 billion in July from QAR 93.8 billion in June.

In early August, banking sources told the news agency that a unit of Qatar's Doha Bank is considering selling some of its assets in the UAE.

The Qatar Investment Authority was also reported to have reduced its direct stake in Credit Suisse Group to 4.94 percent, Bloomberg reported earlier this week.

Being heavily dependent on foreign funds, the Qatari banking system was the first sector to be negatively influenced as some Gulf firms and individuals tended to pull their deposits after four Arab states cut their diplomatic ties with Doha on June 5.

A few days after the boycott announcement, GCC countries reportedly ordered their banks to halt transactions with Qatari banks.

Saudi Arabia, UAE and Bahrain were reported to have withdrawn $16 billion of short-term deposits from Qatari banks.

This has led to a sharp drop in deposits from non-residents of Qatar in 18 banks by 7.6 percent to QAR 170.6 billion ($47 billion) in June compared to a month earlier, according to QCB data.

After it was hit by an outflow of money due to sanctions, local deposits in Qatari banks shrank 1.8 percent from the previous month in June, according to official data.

In July, Doha's sovereign wealth fund was reported to have deposited over $10 billion in local banks.

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