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EghtesadOnline: Some banks in Saudi Arabia, the United Arab Emirates and Bahrain are cutting their exposure to Qatar amid concerns of a widening of the blockade on the gas-rich Gulf state, people familiar with the matter said.

Some lenders in these countries have started withdrawing deposits from Qatari banks and stopped trading riyals and bonds, the people said, asking not to be identified because the matter is private. One possibility of the deepening of measures against Qatar could be the imposition of financial sanctions, the people said.

Tensions between Qatar, one of the world’s richest countries and the biggest producer of liquefied natural gas, and its neighbors are escalating after Saudi Arabia, Bahrain, Egypt and the U.A.E. on Monday broke diplomatic relations with their neighbor and closed transport routes. The unprecedented move aimed to punish Qatar for ties with Iran and Islamist groups in the region, Bloomberg reported.

Other banks are monitoring developments between the countries and haven’t liquidated their holdings in Qatar yet, two other people said. These lenders will decide whether to extend or withdraw deposits and other facilities when they mature, they said.

‘Ready For It’

U.A.E. Minister of State for Foreign Affairs Anwar Gargash on Wednesday said he hopes there wouldn’t be a need for further sanctions, but the allies were “ready for it” if necessary. Qatar is in a state of “denial” over its isolation, and will have to change its policies for any mediation effort to be successful, he said in an interview.

“The broadening of financial sanctions could have ramifications as the leading Qatari banks such as Qatar National Bank rely heavily on foreign funding, which could cool down its credit boom,” Arqaam Capital Ltd. analysts Jaap Meijer and Michael Malkoun said in a June 6 report. “However, only 4 percent of QNB’s deposits come from the four countries, excluding QNB Egypt, which is a stand alone operation.”

Residents of the U.A.E. who express support or sympathy for Qatar on social media could face a jail term of up to 15 years, Attorney General Hamad Saif Al Shamsi said in a statement carried by Al Bayan and other local newspapers. The penalties come under the U.A.E.’s strict cybercrime law, introduced in 2012, which stipulates punishments for online acts from defamation to harming national unity.

Central banks in Saudi Arabia, the U.A.E. and Bahrain asked lenders to reveal their exposure to Qatari clients, people familiar with the matter said on Tuesday. Banks have been asked to share information on inflows and outflows, as well as details on equity, bonds, swaps, interbank funds and custody operations.

Qatar crisis Qatar sanctions Persian Gulf banks