NBK’s consortium to run Iraq’s Trade Bank

National Bank of Kuwait (NBK), the largest bank in Kuwait has been selected within a consortium of more than a dozen international banks led by American investment bank, JP Morgan to run the newly created Trade Bank of Iraq to finance imports and exports.

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By  Massoud Derhally Published  August 31, 2003

National Bank of Kuwait (NBK), the largest bank in Kuwait has been selected within a consortium of more than a dozen international banks led by American investment bank, JP Morgan to run the newly created Trade Bank of Iraq to finance imports and exports.

Five American banks and one British bank made the final cut of consortium applicants in August to head the new Trade Bank of Iraq, which was created in July by the Coalition Provisional Authority (CPA) to help revive Iraq’s economy enable Iraqi government agencies to make purchases abroad using letters of credit.

In a statement from the bank, Shaikha Al Bahar, general manager of the corporate banking group at NBK said the main role of NBK would be to facilitate the trading needs of Iraq at this stage, mainly import and export operations and documentary credit operations.

The Trade Bank of Iraq will initially work with the government, but is expected to expand to handle private-sector projects as well. Operating the Trade Bank of Iraq will give banks access to the financial system of Iraq, the world’s second-largest holder of oil reserves, where foreign banks have not operated since 1950’s and 1960’s, she added.

According to an article in the Wall Street Journal in August, the U.S. government estimates the Trade Bank’s business could range from US $100 million a month and reach as high as $500 million a month, when the country’s oil sector recovers.

Initial news reports indicate the bank will start operating by the end of September 2003, initially operating for twelve months with the option to remain open for another two years, official. The bank’s start-up capital will come from $5 million from the provisional authority and up to $95 million from a United Nations reconstruction fund made up primarily of oil revenues.

Peter McPherson, director of Economic Development for the CPA, told reporters during a conference call from Baghdad that the Trade Bank for Iraq will not be directly involved in the oil business but will expedite payments for oil firms.

According to Reuters, a U.S. official who briefed reporters said the United States hopes private commercial banks would eventually take over the business of providing letters of credit for trade.

Other members of the winning consortium include 13 banks from 14 countries: Australia and New Zealand Banking Group, Melbourne; Standard Chartered PLC of the United Kingdom; National Bank of Kuwait; Bank Millennium SA; The Bank of Tokyo-Mitsubishi, Ltd., San Paolo IMI S.p.A.,; Royal Bank of Canada; Credit Lyonnais, Caja De Ahorros Y Pensiones De Barcelona,; Standard Bank Group Ltd., Akbank T.A.S., and Banco Commercial Portuges.

NBK, the only Arab bank in the winning consortium, was founded in 1952 as the first indigenous bank and the first joint stock company in Kuwait and the Gulf Region. The bank has a capital base of $1.8 billion and assets of $17.6 billion.

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