US embassy cable - 05KUWAIT3809

UNCLAS SECTION 01 OF 03 KUWAIT 003809 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EB/ESC/TFS IKRUM, S/CT TKUSHNER, NEA/ARPI 
SWALKER, NEA/ELA SSONTY, NEA/IPA GLOGERFO, EUR/PGI LREASOR, 
IO/PSC BFITZGERALD 
NSC FOR JZARATE 
TREASURY FOR DGLASER, OFAC DIRECTOR RWERNER 
 
E.O. 12958: N/A 
TAGS: EFIN, ETTC, KTFN, PTER, PINR, CVIS, KVPR, KU, Banking 
SUBJECT: NATIONAL BANK OF KUWAIT CEO DISCUSSES REGIONAL 
BANKING, TERRORIST FINANCE AND OTHER REGULATIONS 
 
 
1.  (SBU)  Summary. In a meeting with the Ambassador on 
August 22, Ibrahim Dabdoub, the CEO of the National Bank of 
Kuwait (NBK--largest Kuwaiti bank and third largest in the 
Middle East), made the following key points: (1) NBK has 
outgrown the Kuwaiti market and continues to expand 
worldwide; (2) regional efforts to counter terror finance 
(TF) and money laundering (ML) are improving; (3) NBK cannot 
afford to be complacent against the threat of TF and ML and 
will take necessary precautions; (4) NBK remains highly 
profitable as it recruits and invests in the best talent and 
technologies; (5) Kuwait is ripe for its version of a 
"Securities and Exchange Commission" to oversee the growing 
stock market; and (6) corruption in the government is on the 
rise as a result of the country's booming economy. End Summary 
 
 
NBK's Global Expansion Plans 
---------------------------- 
 
2.  (U)  On August 22, Ambassador met with Ibrahim Dabdoub, 
CEO of the National Bank of Kuwait (NBK), the largest bank in 
Kuwait (47 per cent market share) and the third largest in 
the Middle East.  Dabdoub runs the day-to-day operations of 
the bank and remains a pivotal figure in the continued 
success of the bank since his appointment as CEO in 1983. 
Dabdoub highlighted the NBK's extensive international 
presence in New York, Geneva, London, Singapore, Paris, 
Lebanon and recent acquisitions in Iraq (85 percent share in 
Al-Kubba family bank), Qatar, Bahrain, Jordan, and China 
(described as a "listening post"), and possibly Saudi Arabia 
in the future.  In response to the Ambassador's comment that 
foreign banks were a little slow in entering the Kuwaiti 
market, Dabdoub said that the newcomers, most notably HSBC, 
BNP Paribas, and soon Citibank as well, would face stiff 
competition and would have difficulty competing with NBK's 
dominance of the Kuwaiti market.  They would most likely 
focus on large project financing. 
 
3.  (U) Dabdoub expressed confidence in NBK's international 
reputation and commitment to meeting the highest performance 
standards.  He noted that complacency would put at risk the 
entire NBK operation, and that NBK's success was rooted in 
its ability to recruit the best talent and invest in the best 
technologies.  The bank's solid reputation, according to 
Dabdoub, was key in convincing UK authorities to grant an 
operating license to the NBK London branch which then ran 
NBK's overall operations and ensured the NBK's survival 
during the Iraqi occupation of Kuwait. 
 
 
Terror Finance and Money Laundering 
----------------------------------- 
 
4. (SBU) The Ambassador underscored the United States' 
continued focus on clamping down on terror financing (TF) and 
money laundering (ML).  Dabdoub commented that efforts to 
counter TF/ML were improving in comparison to past regional 
practices.  He described TF/ML as a difficult challenge but 
one that could be addressed with a variety of approaches. 
With regards to the NBK's efforts, Dabdoub underscored the 
bank's commitment to protecting its reputation and avoiding 
complacency at all cost.  He pointed to the bank's investment 
in a million dollar software warning system that detects and 
tracks any suspicious financial activities.  He went on to 
say that terrorists are discouraged from using the NBK for 
their financial needs, and would be more inclined to operate 
out of less sophisticated banks.  He shared the Ambassador's 
concern about charitable organizations and exchange houses 
that are more vulnerable to exploitation. Dabdoub pointed out 
that to avoid even the appearance of possible impropriety NBK 
closed the accounts of a Kuwaiti Islamic charitable 
organization that was making repeated transactions just below 
the level that required mandatory checks.  Dabdoub explained 
that although NBK had no particular reason to question the 
transfers he felt more comfortable not handling the charity's 
business. 
 
 
Kuwait in Need of an SEC 
------------------------ 
 
5.  (SBU)  With regard to the Kuwaiti investment sector, 
Dabdoub praised the efforts of the Kuwaiti Central Bank as 
"the best in the region," but concurred with the Ambassador's 
assessment for the establishment of a Kuwaiti "Securities and 
Exchange Commission" to ensure proper oversight of the 
Kuwaiti stock market.  While noting that "irrational 
exuberance" was more evident in Dubai and Saudi Arabia, 
Dabdoub did express some concern about the pace and scope of 
the booming real estate market in Kuwait.  The Ambassador 
cautioned that the stock market's reliance on and reaction to 
the profitability of one company (Public Warehousing 
Corporation) was indicative of a shallow market.  Dabdoub 
seconded the Ambassador's concern about the threat of 
corruption in Kuwait.  Dabdoub described it as rampant and 
widespread, linking the unprecedented rise in corruption to 
the country's economic boom and the desire by many to copy 
their neighbors by acquiring a "new Mercedes-Benz." 
 
NBK Hiring Practices 
-------------------- 
 
6.  (U)  Dabdoub noted that half of NBK's staff is required 
by law to be Kuwaiti nationals and that 95 percent of the 
branch managers are Kuwaiti.  On the other hand, NBK is also 
comprised of 40 different nationalities, with women 
comprising over half (55 percent) of the bank's staff. 
Dabdoub was quick to point out that the women outperform the 
men, in his opinion, and that one of the bank's five group 
heads is a woman, Sheikha Al-Bahar.  (Note: the Chairman of 
the Bank is Sheikh Mohammad Al-Bahar, from the prominent 
Al-Bahar merchant family.)  Dabdoub explained that senior 
executives are recruited through two U.S. recruiting firms 
(Corn Ferry and Russell Reynolds) whereas mid-level officers 
are recruited primarily through Arab recruiting firms in 
Dubai.  Dabdoub hand picks the bank's future leaders for 
additional training, which includes annual seminars by 
Harvard Business School.  He noted that the bank hires many 
of its entry-level associates from the cadre of MBA graduates 
from the American Universities in Beirut and Cairo, with 
first preference to AUB. 
 
 
Grooming Future NBK Leaders 
--------------------------- 
 
7.  (SBU) In response to the Ambassador's question about 
succession in the bank's senior leadership (Dabdoub has been 
CEO for 23 years), the CEO noted that succession plans are in 
place for himself and each of the other five Group Heads of 
the bank.  He pointed out that his successor as CEO will be 
Issam Al-Sagar, a member of the wealthy and influential 
Al-Sagar merchant family.  (Note: Al-Sagar's older brother is 
Mohammed Jassem Al-Sagar, member of parliament and the head 
of the National Assembly's Foreign Affairs Committee. The 
Al-Sagar family is a founding member of the NBK and holds a 
significant share of the bank's capital stock.)  Dabdoub 
praised his good working relations with the Al-Sagar family 
and the historical role played by merchant families in the 
establishment of the Kuwaiti state, pointing to the families' 
honesty as key factors in their continued financial success. 
 
 
 
Kuwait in the International Arena 
--------------------------------- 
 
8. (U) Dabdoub is planning to attend the annual World 
Bank/IMF meetings this year, and will likely participate in 
the upcoming U.S.-Arab Economic Forum in Houston.  The 
Ambassador underscored the importance of ensuring Kuwaiti 
representation at these and other international economic 
conferences.  Dabdoub agreed and noted that that 
participation of the Kuwaiti Minister of Energy at this 
year's World Economic Forum in Davos, Switzerland was an 
encouraging development.  He informed the Ambassador of plans 
for an upcoming Kuwait Economic Forum with the possibility of 
former Secretary Powell appearing as keynote speaker. 
 
 
Bio Note 
-------- 
 
9. (U) Ibrahim Dabdoub (a Christian) was born in Bethlehem 
and received his primary and secondary education at the 
French School there before enrolling in the Middle East 
Technical Institute (METI) in Ankara, Turkey in 1957.  Many 
of the NBK's senior leadership are METI graduates.  After 
graduation from METI in 1961, Dabdoub decided to seek 
employment in Kuwait rather than pursuing opportunities in 
Saudi Arabia.  He was appointed NBK CEO in 1983 and does not 
plan an early retirement.  His designated successor, Issam 
Al-Sagar, has been with the bank for two decades and appears 
to be in his early 40s.  Al-Sagar is the nephew of Abdulaziz 
Al-Sagar, NBK's first chairman (1960-65) and Kuwait's first 
Speaker of Parliament.  Dabdoub serves on numerous boards, 
including Georgetown University's Center for Contemporary 
Arab Studies and the Council on Foreign Relations.  Although 
Dabdoub retains his interest in selecting and grooming the 
bank's future leaders, he spends a lot of time traveling 
abroad on business. 
LEBARON