LONDON: Standard Chartered and HSBC Holdings said they have closed all their branches in Bahrain Wednesday, after Bahraini forces clashed with protesters. Bahrain Tuesday declared martial law to quell worsening sectarian unrest. StanChart has seven branches in Bahrain and HSBC has four branches, making them two of the leading foreign banks in the country. They had each kept two branches open Tuesday. Both banks said their priority was the safety of staff. StanChart has 500 employees and HSBC has 334. All were safe. The banks said other banking operations, such as ATMs, were operating as usual. Meanwhile, Fitch Ratings agency dropped Bahrain's debt rating by two notches to 'BBB' Tuesday due to increased political risk following violence. "The two-notch downgrade reflects further material escalation in political risk in recent days, following significant violent domestic protests, military presence by Gulf nations and the imposition of a state of emergency by the Bahraini royal family," said Purvi Harlalka, director in Fitch's Middle East and Africa Sovereign Ratings Group. "The spectrum of possible political outcomes has widened and downside risks to political stability and sovereign creditworthiness have increased significantly," Harlalka added in a statement. The rating agency also put Bahrain on watch for further downgrades as the political outlook is highly uncertain. "Recent events have underscored both the near-term risks to stability and the deep divisions within Bahraini society," said the ratings agency. Fitch said "the downgrade also reflects the risk that the political instability may harm Bahrain's attractiveness as an international financial and business center, which plays an important role in Bahrain's economic model." Financial services make up 25 percent of Bahraini output, it noted. State television interrupted normal programming Tuesday to announce a three-month state of emergency in the strategic Gulf state, which is home to the US Fifth Fleet and hosts major international banks and financial institutions.
