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
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