34. Airgram From the Embassy in the United Arab Emirates to the Department of State1
SUBJECT
- Bank of Credit and Commerce International S.A. Comes to Town
A–31
T. Marvin Hancock, an employee of the Bank of America who arrived in Abu Dhabi recently to participate in the establishment of the Bank of Credit and Commerce (BCC), has provided the Embassy with the following information about the bank, its background and plans.
Background: Approximately ten months ago, the Bank of America was approached by Mr. Agha Hassain Abedi, President of the United Bank Ltd. Mr. Abedi, who is favorably known to the Bank of America, explained that the United Bank, now the largest bank in Pakistan, had lost more than one hundred branches as a result of the formation of Bangladesh and found itself with a surfeit of trained officers and employees. According to Mr. Abedi, there is also a strong likelihood that private banks in Pakistan will be nationalized and a significant percentage of United Bank personnel have become interested in promoting an international banking institution into which they could transfer. The Bank of America agreed to participate in the proposed venture. Mr. Abedi had reportedly made a similar proposition to American Express, but the effort did not work out.
Nature of the BCC: The Bank of Credit and Commerce International S.A. was incorporated in Luxembourg about one month ago and premises have been selected in that city for an office. Luxembourg was chosen because it offered advantages in incorporation and taxes while at the same time being recognized as maintaining high standards of supervision over financial ventures, a qualification on which Mr. Abedi reportedly insisted. The head office of the Bank will be located nominally in Luxembourg, but the actual operations will be run by the General Manager, Gulf Region who will be based in Abu Dhabi. This position will be filled by Mr. Naqvi, who resigned from the United Bank at the time of the BCC incorporation and is now setting up the Abu Dhabi operation. Mr. Hancock will serve as his deputy in Abu Dhabi.
[Page 108]The BCC is capitalized at $5 million, of which one half is paid in. It is expected that this ratio will be maintained as the capitalization rises to an anticipated $10 million in the next five years. The venture is fully subscribed with Bank of America holding a 25 per cent interest and the remaining 75 per cent being controlled by local investors. Mr. Hancock promised to provide a complete list of the approximately 20 investors but gave the following tentative breakdown: Shaikh Zayid, President of the UAE and Ruler of Abu Dhabi, $1 million; Shaikh Rasid, Vice President of the UAE and Ruler of Dubai, $300,000; and Shaikh Hamdan of the Abu Dhabi ruling family and an unnamed Dubai merchant an undisclosed amount. He added that some private Egyptian money is involved. At present, there is no Pakistani participation, but senior Pakistani officials of the BCC will have options to take over at least a portion of the Abu Dhabi share.
Mr. Abedi plans to leave his position as President of the United Bank in about two months to become President of the BCC. He is a financial and investment advisor to Shaikh Zayid and possesses good local contacts. It is felt that Shaikh Zayid and perhaps other Gulf investors have taken shares to accommodate Mr. Abedi who will become a major shareholder of the bank. Other officials and staff of the United Bank will likewise shift to the BCC, once it is a going concern.
Present Plans: The Regional Office is scheduled to open in Abu Dhabi on or about October 30, 1972. Branches will also be opened in the market place, on one of the main commercial streets (across from the FNCB branch), and at Al Ain in the interior of the Emirate. A branch is under construction in Dubai and should be completed within 30 days, and small, three-man facilities are projected for Sharjah and Umm Al-Qaiwain in the immediate future and for all the Emirates of the UAE within the next year.
Outside of the UAE, negotiations are underway for the opening of branches in Bahrain and Qatar. The BCC plans to function in Muscat but faces some organizational difficulties which are now being worked out. Operations in the Sultanate must be in the hands of a subsidiary which will be capitalized at about $1 million. This subsidiary will be owned 30% by BCC, 20% by Bank of America, and 50% by a local firm, Towel. The Bank of America will decide in the next ten days whether or not to pick up the 20% offered as its share.
The BCC intends to offer a full range of commercial banking services at the outset. Eventually, trust services will be added. Bank of America, through the BCC, is taking extreme care that the new venture not raid the accounts currently held by the United Bank. Mr. Hancock emphasized that when the United Bank personnel change over to the BCC, they will scrupulously avoid bringing accounts with them. In this connection, the Bank of America’s concern is that its association [Page 109] with former United Bank personnel in this new venture might work to the detriment of Bank of America branches in Pakistan. Rather, the new bank will concentrate on garnering the accounts of the Muslim merchants in the Gulf. One exception to the policy vis-à-vis United Bank, however, is that some of the services which that institution has traditionally provided to Shaikh Zayid will be transferred to BCC. For example, a United Bank representative always travels in Shaikh Zayid’s entourage when he leaves the country. This representative serves as banking advisor and carries the party’s bankroll in the form of traveller’s checks. BCC will now provide this service.
Comment: While it has been publicly announced that BCC will be opening in the near future and it is no secret that Mr. Hancock is in town, he provided much of the information contained in this airgram in confidence. In particular, the BCC does not want details of its plans widely known until it can officially inform the shareholders of its opening. Apprised by the Embassy of some interest in the venture expressed by the Pakistani Ambassador to the UAE, Hancock said for the protection of the Pakistani citizens involved, it was thought best not to mention anything about the new bank to Pakistani officials, here, although apparently Mr. Abedi has informed President Bhutto of his plans.
- Source: National Archives, RG 59, Central Files 1970–73, POL6 UAE. Confidential. Drafted on October 10 by W. Nathaniel Howell, Jr., Economic and Commercial Officer, and approved by Philip J. Griffin, Chargé. Passed to Commerce and Treasury. It was repeated to London, Luxembourg, Kuwait, Manama, Muscat, Tehran, Beirut, Karachi, Islamabad, and Dacca.↩