S&P Global Ratings has lowered its long-term ratings on Qatar to AA- from AA and placed its ratings on the country on CreditWatch negative, it said.
The agency said that if Qatar had higher withdrawals, bank funding and liquidity profiles could be affected.
“We have a CreditWatch negative on the sovereign and banks ratings in Qatar, which means that the ratings could come under further pressure depending on how the situation would evolve,” said Mohamed Damak, the primary credit analyst with S&P. “Should we see a significant drop in external funding, the ratings on Qatari banks could be downgraded further.”
The agency said it considered two scenarios, a 100 per cent withdrawal of GCC funds and a 100 per cent withdrawal of GCC funds with a 25 per cent withdrawal from other countries.
S&P looked at the impact on the country’s financial system as it comes under pressure amid a deepening rift with its GCC neighbours.
Its report found that the banks’ current liquidity profiles should help them absorb a moderate drop in external funding.
Overall, Qatari banks had net external debt of about US$50 billion at the end of April.
“The two scenarios show that Qatari banks can withstand the withdrawal in our assumptions without resorting to central bank support,” said Mr Damak.
Qatar has a continuing diplomatic rift with its neighbours over links to Islamist groups, which has affected its land, sea and air routes.
S&P has calculated Qatar’s exposure to GCC financial institutions, based on four Qatari banks that made up 85 per cent of the banking system’s assets at the end of last year.
“The geographic breakdown of liabilities [defined as due to banks, customer deposits, debt securities and other borrowing] shows that the GCC represented only around 8 per cent, US$20.6 billion of the total,” stated the S&P report.
“While we understand that this figure includes funds from countries [Kuwait and Oman] that haven’t placed Qatar under sanctions, we take the view that these funds may theoretically also be withdrawn because of the recent events.”
S&P was unable to say how long the country would be able to withstand isolated from its neighbours.
“It depends on many parameters including for how long the sanctions will remain,” said Mr Damak.
“Whether there will be other countries imposing sanctions on Qatar, whether there will be significant withdrawals of funds from expatriates in Qatar.”
ascott@thenational.ae
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