Why Qatari banks are worried about FIFA

Qatar losing the right to host the FIFA World Cup is "within the realm of possibility," Citi bank has said, with Wednesday's arrests "bearish" for the Arab emirate's banks.

Officials at FIFA, soccer's global governing body, were arrested on Wednesday on charges relating to alleged bribes and kickbacks meant to influence the choice of World Cup host countries, including Qatar in 2022. Both U.S. and Swiss legal authorities are involved.

A Qatari official stands near the FIFA World Cup trophy following its arrival in Doha.
Karim Jaafar | AFP | Getty Images

While no country has ever been stripped of the World Cup, Qatar has already faced corruption allegations relating to its hosting of soccer's biggest event. It has also been criticized for its treatment of foreign workers building the World Cup facilities and questioned as to the practicalities of matches being held in temperatures of 40 degrees Celsius (104 degrees Fahrenheit) or higher. Plus, the country lacks history in the sport.

"Could Qatar lose the World Cup? Our sense is that it's unlikely but definitely within the realm of possibility," said Josh Levin, an analyst at Citi, in a research note on Thursday.

Qatar is slated to spend a total of around $200 billion on infrastructure related to the World Cup, according to Levin.

FIFA President Sepp Blatter has said that awarding Qatar the World Cup was a "mistake," despite his previous endorsement, but that the decision would not be revisited.

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"One makes a lot of mistakes in life," he said in a Swiss TV interview.

Levin said the arrests were "bearish for the already lackluster sentiment on Qatari banks" and reiterated Citi's "sell" rating on the country's biggest financial institution, Qatar National Bank (QNB).

"We expect there to be increasing public speculation as to whether or not Qatar will lose the World Cup. Such speculation would take place against an existing backdrop of slowing loan growth and low oil prices which we expect to impact liquidity," he said in the report.

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