March 17 (Reuters) – Gulf banks have so far avoided significant deposit outflows but face domestic funding drain of up to $307 billion if the conflict deepens, according to S&P Global Ratings.
The rating agency’s base case assumes the most intense phase of the war lasts two to four weeks, S&P said in a report on Monday, though it acknowledged that spillovers and intermittent security incidents could extend beyond that window.
S&P said it had found no evidence of major outflows of foreign or local funding so far, but cautioned that a prolonged conflict could trigger a flight to quality between banks within the same systems, as well as broader external and local funding exits.
Under its hypothetical stress scenario, domestic deposit outflows across the six Gulf Cooperation Council banking systems could reach $307 billion based on year-end 2025 figures.
Banks currently hold around $312 billion in cash or at central banks to absorb such outflows, with an additional buffer of roughly $630 billion available after liquidating investment portfolios at a 20% haircut, the ratings agency said.
“Overall, the risk appears manageable,” S&P said, adding that four of the six GCC countries are considered highly supportive of their banking systems and that regional regulators have stepped up supervision since hostilities began.
(Reporting by Hadeel Al Sayegh in Dubai; Editing by Leroy Leo)
Comments