Citi, UBS among most ex­posed to rich Saudis

Ex­po­sure brings le­gal and rep­u­ta­tional risks in the wake of anti-cor­rup­tion probe

The Daily Star (Lebanon) - - BUSINESS -

Cit­i­group Inc. and UBS Group AG are among in­ter­na­tional banks man­ag­ing the largest share of as­sets for wealthy Saudis, some of whom are be­ing in­ves­ti­gated as part of a gov­ern­ment probe into al­leged cor­rup­tion, ac­cord­ing to peo­ple fa­mil­iar with the mat­ter.

JPMor­gan Chase & Co. and Credit Suisse Group AG also man­age bil­lions of dol­lars for some of the kingdom’s rich­est in­di­vid­u­als, the peo­ple said, ask­ing not to be iden­ti­fied be­cause of the sen­si­tiv­ity of the mat­ter. Cit­i­group’s pri­vate bank counts Prince Al­waleed bin Talal, the world’s 58th-rich­est per­son, and Khalid al-Tuwai­jri, for­mer chief of the Royal Court, as clients, two of the peo­ple said. Both are among those who were de­tained in the probe.

Saudi Ara­bia has long been the tar­get of wealth man­agers such as UBS, Credit Suisse and Deutsche Bank AG, as well as other global banks seek­ing to ad­vise the coun­try’s ul­tra­rich. The kingdom was the 16th most pop­u­lous coun­try for high-net-worth in­di­vid­u­als last year with 176,000, ac­cord­ing to Capgem­ini’s 2017 World Wealth Re­port.

It’s not im­me­di­ately clear what im­pli­ca­tions the in­ves­ti­ga­tion will have on banks and their op­er­a­tions in the kingdom, the peo­ple said. UBS, Credit Suisse, Cit­i­group and JPMor­gan de­clined to com­ment.

One of the great­est chal­lenges for the banks is “to bal­ance their obli­ga­tions and abide by the le­gal re­quire­ments of their home coun­tries or the coun­tries where the as­sets are domi­ciled,” Ay­ham Kamel, head of Mid­dle East andNorth Africa at Eura­sia Group, said in a phone in­ter­view. “It’s too early to say that their busi­ness will be neg­a­tively im­pacted, but there cer­tainly will be ad­di­tional costs in­curred by all of the banks as they man­age the is­sues as­so­ci­ated with the anti-cor­rup­tion cam­paign and their obli­ga­tion to their cus­tomers.”

Switzerland’s fi­nan­cial reg­u­la­tor Finma is in touch with some Swiss banks over their busi­ness with Saudi Ara­bian clients, two peo­ple with knowl­edge of the mat­ter said.

The reg­u­la­tor is “fol­low­ing global eco­nomic and po­lit­i­cal de­vel­op­ments to as­sess what they would mean for the su­per­vised banks,” a spokesman said, de­clin­ing to com­ment on in­di­vid­ual firms.

Pri­vate banks don’t usu­ally dis­close the amount of as­sets they man­age for in­di­vid­ual clients and most as­sets for Saudi Ara­bian high-net­worth in­di­vid­u­als are held in off­shore ac­counts, mak­ing it dif­fi­cult to quan­tify the amount.

Crown Prince Mo­ham­mad bin Sal­man’s sur­pris­ing se­ries of ar­rests has im­pli­cated three of the kingdom’s rich­est peo­ple with com­bined as­sets worth about $31 bil­lion, ac­cord­ing to the Bloomberg Bil­lion­aires In­dex. As well as Prince Al­waleed, also be­ing held are bil­lion­aires Mo­ham­mad al-Amoudi, who con­trols in­vest­ments across Africa, Europe and Saudi Ara­bia; and Saleh Kamel, who op­er­ates in Is­lamic bank­ing, food and real es­tate.

Saudi au­thor­i­ties es­ti­mate that at least $100 bil­lion has been mis­used “through sys­tem­atic cor­rup­tion and em­bez­zle­ment over sev­eral decades,” At­tor­ney Gen­eral Sheikh Saud alMo­jeb said last week. A to­tal of 208 in­di­vid­u­als have been called in for ques­tion­ing so far and seven have been re­leased with­out charge, he said.

“Nav­i­gat­ing the dif­fi­culty of the po­lit­i­cal en­vi­ron­ment and the dif­fi­culty of the cam­paign in Saudi Ara­bia will present rep­u­ta­tional is­sues to the banks,” Eura­sia’s Kamel said.

“Banks have to nav­i­gate the chal­lenges from the le­gal and busi­ness per­spec­tive while man­ag­ing to re­tain their cur­rent re­la­tion­ships across the re­gion.”

Some Saudi bil­lion­aires and mil­lion­aires are sell­ing in­vest­ments in neigh­bor­ing Gulf Co­op­er­a­tion Coun­cil coun­tries and turn­ing them into cash or liq­uid hold­ings over­seas to avoid the as­sets get­ting caught up in the probe, peo­ple with knowl­edge of the mat­ter said last week. In Saudi Ara­bia, some are in talks with banks and fund man­agers to move money out­side the coun­try, they said.

While many of the big­gest Swiss wealth man­agers han­dle Mid­dle East client money from off­shore cen­ters such as Geneva, Zurich and Sin­ga­pore, some have also been build­ing a di­rect pres­ence in the re­gion. Banks with­out a li­cense aren’t al­lowed to mar­ket their prod­ucts in the kingdom and their clients travel to book­ing cen­ters.

Credit Suisse plans to hire more re­la­tion­ship man­agers in Saudi Ara­bia af­ter the Zurich-based firm es­tab­lished a plat­form al­low­ing it to of­fer pri­vate bank­ing ser­vices and prod­ucts in the coun­try, it said in July. The com­pany de­clined to com­ment on the sta­tus of these plans.

The bank man­ages about 70 bil­lion Swiss francs ($70 bil­lion) of pri­vate bank­ing as­sets in the Mid­dle East, Iqbal Khan, head of the com­pany’s in­ter­na­tional wealth man­age­ment busi­ness, said in a Dubai in­ter­view in Oct. 2016. The bank counts the Saudi Olayan fam­ily as one of its big­gest share­hold­ers.

JPMor­gan, which em­ploys about 80 bankers in Saudi Ara­bia, ranks the kingdom as the 18th coun­try where it has the most ex­po­sure, ac­cord­ing to a third-quar­ter reg­u­la­tory fil­ing, with $3.8 bil­lion in lend­ing and de­posits, and $800 mil­lion in trad­ing and in­vest­ing.

Saudi Ara­bia is the mar­ket where UBS has the big­gest sin­gle ex­po­sure in the re­gion, fol­lowed by the United Arab Emi­rates and Kuwait. Its net ex­po­sure to the kingdom is 577 mil­lion Swiss francs, ac­cord­ing to its 2016 an­nual re­port.

UBS plans to dou­ble head­count in Saudi Ara­bia in the next few years, it said last month. – Bloomberg

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