Qatar's Doha Bank has cut its exposure to the UAE banking system through an asset swap with UAE banks amid strained relations between the two countries, according to the Reuters news agency.

Qatar has been in dispute with Saudi Arabia, the UAE, Bahrain and Egypt since June 2017 when the four accused Qatar of backing terrorism, something Doha has denied.

L/C impacts

The subsequent severing of diplomatic and transport links with Qatar by the Saudi-led bloc has already caused banks in Saudi Arabia, the UAE and Bahrain to reduce their exposure to Qatar and vice versa by taking steps such as delaying L/Cs and other investment deals (DC World News, 7 August 2017).

Banks in Saudi Arabia, the UAE and Bahrain pulled deposits and loans from Qatari banks following the rift, and began avoiding new L/C business.

Bank benefits

Asset swaps by Doha Bank, Qatar's fifth largest lender, are now reportedly continuing and follow some already concluded with First Abu Dhabi Bank, the UAE's largest bank by assets.

The asset swaps are seen as benefitting banks in both Qatar and the UAE.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.