DUBAI, June 6 (Reuters) - Many UAE banks have stopped providing new loans to their clients to buy bonds of Qatari companies and state entities, sources familiar with the matter said, as banks turn cautious on Qatari credit in the wake of the growing Gulf rift.
Leverage for corporate bond purchases is a fairly common practice that banks provide to their affluent or high net worth customers.
“Local banks have stopped providing leverage on Qatari bonds,” said a source familiar with the matter.
A second source said the banks had decided to stop the service to cut risk following the decision by some Gulf Arab states and Egypt to sever diplomatic ties with Qatar.
Saudi Arabia, the United Arab Emirates, Bahrain, Yemen and Egypt accused Qatar of supporting terrorism, opening up the worst rift in years among some of the most powerful states in the Arab world.
The cautious approach of the banks could have an impact on secondary market activity for Qatari bonds as high net worth buyers vanish, banking sources said.
The sources declined to be identified because they were not authorised to speak to the media. (Reporting by Saeed Azhar, editing by Louise Heavens)