November 23, 2001	Friday	Ramazan 7, 1422

LONDON, Nov 22: Wealthy Arabs, concerned about increased US scrutiny of their offshore bank accounts, are nervous about dealing with US banks and may seek safer havens if the conflict in Afghanistan spreads, bankers said Thursday.

Asset freezes after September’s attacks on the US and the ensuing turmoil has sent private banking into a fever of speculation about the destiny of billions of dollars of Saudi money, one of the mainstays of the industry.

“The rich Arabs are feeling very insecure. The Saudi princes haven’t moved their money yet but some smaller businessmen are moving,” said Muazzam Ali, chairman of the London-based Institute of Islamic Banking and Insurance.

American banks have been nervously eying the region where they have substantial interests. But despite reports of billions of dollars of Arab money changing hands and Swiss banks hoovering up hundreds of millions of dollars, US bankers say they are holding the line.

“So far we’re managing but if the war continues and spreads, it’s going to hurt our business,” said a senior US banker.

The Arab world, with offshore holdings estimated at well over $1 trillion in money belonging to both Gulf Arab individual investors and governments, is big business for US banks.

For example for Citigroup, the world’s largest financial services company, the Middle East represents the largest business managed out of its Geneva hub for Europe, Middle East and Africa private banking.

In Geneva, banking sources say Arab clients, including a number of Saudi princes, hold some $7 billion with Citigroup, which manages $31 billion in Europe, Africa and the Middle East.

TUG OF WAR FOR ARAB RICHES: Since September 11, bankers say a tussle is going on for the money of nervous Arabs. Swiss private banks are actively seeking to attract these riches by promoting their credentials as non-freezers of assets.

“The day after September 11, we had a number of Arab clients saying they’d been approached by Swiss banks to move assets from American institutions,” said the head of a US private bank.

“We know that some of the Swiss banks in Europe and in Asia were calling our clients, saying ‘get your money out of US banks now’,” the banker said on condition of anonymity.

A spokeswoman at Credit Suisse Private Bank, a unit of second largest Swiss bank Credit Suisse Group, declined an interview request saying the subject was “too sensitive.”

Laurent Chappuis, head of Islamic equities at Swiss private bank Pictet, said Switzerland could emerge a financial winner.

“We’ve had a few clients coming in and wanting specifically to have their assets under Swiss jurisdiction,” he told Reuters. “At times of crises, Switzerland and the Swiss franc has always benefited in the past. This time it should benefit as well.”

“Switzerland has aligned itself with the rest but it’s a question of how aggressive you are,” he said. “Obviously, the US and UK governments have been the most proactive in freezing assets. So Switzerland should benefit to a certain extent.”

Bankers say the wealthiest Arab families have not yet moved large holdings out of US banks into safe haven banks or home.

But they said US banks could become a financial loser if the Afghanistan war continues, fuelling anti-US sentiment in the region.

“I see a concern about being seen to deal with American institutions, but this has not resulted in any significant loss of business yet,” said a senior banker requesting anonymity.

“If the political situation works out differently and we see problems in the Islamic world which lead to difficulties for the wealthy families in the Middle East in dealing with the American environment, that’ll reflect on business. We may pay the price.”

So far, everyone is waiting to see which way the Arabs are going to jump. But there are two unknowns — what is going to happen in Afghanistan and how this will play in the Arab world.

Bankers say Arab capital will be scared if the United States embarks on a wider battle against terrorism and, as some Washington hardliners advocate, attacks Iraq.

“If the Americans start bombarding Iraq, that’ll scare people. You’re going to see large capital outflows from the region and from American banks,” said a senior regional banker.

“Uncertainty is not going away,” added Ali. “The word is the next target will be Iraq, and the one after that will be Syria.”—AFP