British banks HSBC and Standard Chartered announced that they are closing all branches in Bahrain till further notice.
As the kingdom nation announced a state of emergency, the country’s stock exchange decided to shut down, although it was not under any pressure.
However, the island nation’s sovereign borrowing costs hit a new high on Tuesday and the yield on its international bonds touched 6.84%.
Since November 2010, the country’s borrowing cost surprisingly went up by 2.1%, higher than more heavily indebted Lebanon’s sovereign yields.
The UK banks’ move comes close on the heels of ratings agency Fitch’s decision to cut the country’s creditworthiness by two notches to BBB – from A – , only two notches above from being labeled as ‘junk’.
Bahrain’s total outstanding sovereign debt stands at $7.6 billion; about 40% of the country’s GDP and according to data released by Bloomberg, about $2 billion worth debt is due for repayment this year.
Bahrain is the latest in the Arabian Peninsula to witness mass demonstrations. On Wednesday morning, security forces violently broke up a demonstration held in the financial district.
The stock exchange announced its decision to close “due to the declaration of national safety in the kingdom”, it said in a statement on its website.
However, Standard Chartered and HSBC attributed the closure decision to the safety of their staffs. The banks were operating there automated cash dispensing and other services, they said. The two British banks operate eleven branches between them employs around 834 employees.