Qatar raised $3 billion in sovereign bonds after its quarterly budget deficit more than doubled. Strong investor demand allowed it to tighten pricing on both tranches, showing continued access to international funding despite fiscal strain.

Palestinian banks face a different pressure. Their $5.3 billion in public-sector exposure accounts for 42% of lending, linking banking stability to strained government finances. In the UAE, the central bank barred Bank Melli Iran’s branches from handling transactions to and from Iran, including trade finance and fund transfers.

Read more on the week’s key developments:

1. Qatar raises $3 billion through dual-tranche bond issuance

Qatar’s Ministry of Finance completed a $3 billion dual-tranche US dollar sovereign bond issuance on 27 September, comprising a $1 billion five-year tranche and a $2 billion 10-year tranche. The five-year bonds were priced at 55 basis points over US Treasuries and the 10-year tranche at 65 basis points. Investor orders peaked at $7.7 billion, equivalent to about 2.5 times the issuance, allowing Qatar to tighten pricing by 30 basis points on both tranches. Goldman Sachs International, HSBC, JP Morgan, QNB Capital and Standard Chartered Bank acted as joint global coordinators.

Strong demand from investors across Asia, Europe, the Middle East and the US indicates continued international appetite for Qatar’s sovereign debt despite uncertainty in global and regional markets. The sale followed a second-quarter budget deficit of QAR 21.2 billion ($5.8 billion), more than double the QAR 10.3 billion ($2.8 billion) recorded in the first quarter.

2. Palestinian banks’ public-sector exposure reaches $5.3 billion

Palestinian banks’ exposure to the public sector reached $5.3 billion, equivalent to 42% of total lending, UN Trade and Development (UNCTAD) reported on 24 September. The agency said fiscal pressures, restrictions on economic activity and disruptions to financial flows have increased strains on the Palestinian economy and banking system. Correspondent-banking constraints and restrictions affecting the repatriation of shekel cash have added pressure on payment and financial channels.

The concentration of bank lending to the public sector increases the connection between government finances and banking-sector stability. Continued fiscal stress could constrain banks’ capacity to extend credit to households and businesses, while disruption to correspondent relationships and payment channels could affect the financing of imports and cross-border transactions. The evolution of public-sector exposure and continuity of correspondent-banking arrangements will therefore be important indicators of financial-system stability.

3. UAE restricts Bank Melli Iran branches over regulatory breaches

The Central Bank of the UAE imposed sanctions on Bank Melli Iran’s UAE branches on 23 September following examinations that identified non-compliance with UAE regulations and supervisory requirements. The regulator prohibited the branches from conducting financial transactions to and from Iran, including trade finance and fund transfers.

The restrictions directly affect the branches’ ability to intermediate Iran-related trade and payment flows rather than imposing a financial penalty. The action also signals heightened supervisory scrutiny of transactions involving Iran and comes as the regulator strengthens enforcement of anti-money-laundering, counter-terrorist-financing and proliferation-financing requirements.

4. National Bank of Egypt moves to acquire Banque Misr’s UAE branches

National Bank of Egypt (NBE) and Banque Misr announced on 22 September that they had agreed in principle to reorganise their UAE operations, with NBE seeking to acquire Banque Misr’s branches in the country. The Central Bank of the UAE granted preliminary approval to NBE’s request. The banks said the transfer would be completed in coordination with UAE authorities while maintaining customer services and safeguarding customer rights.

The transaction would consolidate the UAE operations of Egypt’s two largest state-owned banks under NBE rather than add new capacity to the market. The banks framed the move as a response to changes in foreign banking markets and regulatory requirements. The commercial measure to watch is how the transfer affects NBE’s UAE balance sheet, customer base and regional business once final approvals and integration are completed.

5. Lesha Bank agrees to acquire 33-aircraft portfolio from Avolon

Qatar-based Lesha Bank agreed to acquire a portfolio of 33 aircraft leased to 25 airlines globally from aviation finance company Avolon on 28 September. Following completion, the portfolio will be managed by Lesha Aviation Services, bringing the bank’s total managed fleet to more than 75 aircraft.

On completion, the transaction would materially expand Lesha Bank’s aviation investment business and increase its exposure to income-generating real assets backed by a diversified portfolio of airline leases. The portfolio structure spreads exposure across multiple carriers, although aviation assets remain sensitive to airline credit quality and aircraft valuations. The acquisition also demonstrates how Gulf financial institutions are expanding alternative investment platforms beyond conventional banking assets.

6. Kuwait launches national wage payment system

The Central Bank of Kuwait (CBK) launched the Kuwait Wage Payment System (KWPS) on 28 September as the third system delivered under phase two of the Kuwait National Payment System. The ISO 20022-based platform processes and monitors private-sector salary transfers through local banks, while the Public Authority for Manpower oversees employer compliance. KWPS follows the Kuwait Automated Clearing House launched in January and the Kuwait Dispute Management System introduced in February.

The system brings wage monitoring onto central payment infrastructure used by employers and banks. Real-time supervision should make non-compliance easier to identify while improving payment data available to regulators. For banks, the platform standardises another recurring payment flow and could increase the use of accounts and electronic payments among private-sector workers.

7. Kuwait advances real estate financing framework

Kuwait’s Cabinet approved a draft decree-law on 22 September establishing a real estate financing framework for citizens eligible for housing welfare and referred it to the Amir. The proposed legislation covers financing for the purchase of housing units from developers and construction on government-allocated plots. It provides for supported and non-supported financing and allows beneficiaries to combine the two in accordance with Central Bank of Kuwait rules.

The framework could create a new source of longer-duration retail assets for Kuwaiti banks while increasing private-sector participation in housing finance. The draft allows repayment periods of up to 25 years and gives the central bank a role in setting rules governing financing and restructuring. The eventual impact on banks will depend on implementation, borrower uptake and the allocation of credit and interest-rate risks between the state, lenders and beneficiaries.

8. PhonePe receives initial approval to enter UAE payments market

India-based PhonePe received in-principle approval from the Central Bank of the UAE on 22 September for Retail Payment Services and Card Schemes and Stored Value Facilities licences. The approvals establish PhonePe’s first international regulatory footprint and remain subject to completion of regulatory requirements before commercial operations begin.

PhonePe enters a UAE payments market where banks and non-bank providers increasingly operate across cards, stored value and instant-payment infrastructure. Its experience at scale in India could support merchant and consumer acquisition, but the initial approvals do not yet indicate commercial volumes or market share. Final licensing, product rollout and potential integration with domestic infrastructure such as Aani and Jaywan will determine the significance of its entry.

9. Syria expects more than $1 billion in foreign capital for new banks

Syria expects foreign capital for the establishment of new banks to exceed $1 billion, Central Bank Governor Mohammad Safwat Raslan said on 27 September. New conventional and Islamic banks will be subject to licensing requirements covering experience, reputation and financial solvency, while applicants will need a strategic banking partner holding at least a 10% stake. Foreign investors will be permitted to retain up to 60% of paid-in capital in foreign currency.

The licensing terms are intended to attract foreign banks and capital as Syria seeks to rebuild its banking sector and reconnect with international financial networks. Jordanian banks have submitted applications to invest in the market, while existing Jordanian-backed banks are seeking to increase their investments. The $1 billion figure remains an expectation, not committed capital. Progress on licensing, correspondent banking relationships, SWIFT connectivity and compliance with international financial standards will determine whether foreign interest translates into actual investment.

10. Hormuz disruption increases regional borrowing-cost risks

The World Bank said on 28 September that ongoing disruption to oil shipments through the Strait of Hormuz had renewed pressure on energy prices, inflation and borrowing costs. While the global economy has remained relatively resilient, the institution warned that continued geopolitical disruption could transmit through energy markets and financial conditions, with higher long-term yields increasing borrowing costs for emerging and developing economies.

For Middle East financial institutions, prolonged disruption could raise funding and operating costs. Higher global yields could feed into sovereign and bank funding conditions, while weaker trade flows and greater risk aversion could weigh on corporate borrowing and capital-market activity. The banking impact will depend on the duration of the disruption and whether the shock results in a sustained tightening of global financial conditions.

What to watch

The EU-GCC Summit in Saudi Arabia (24 October), the Saudi Central Bank’s September banking and monetary statistics release (29 October), and the Central Bank of Egypt Monetary Policy Committee meeting (29 October).