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Business / Qatar Business

Qatar asks US to investigate UAE bank for 'financial warfare'

Published: 18 Mar 2018 - 03:39 pm | Last Updated: 01 Nov 2021 - 03:27 pm
File Photo. Reuters

File Photo. Reuters

By Dmitry Zhdannikov / Reuters

LONDON: Qatar has asked US regulators to investigate the US subsidiary of the largest bank in the United Arab Emirates, accusing it of "bogus" foreign exchange deals designed to harm its economy as part of a blockade by Gulf neighbours.

The Central Bank of Qatar's law firm has written a letter to the US Treasury asking it to investigate NBAD Americas, the US subsidiary of First Abu Dhabi Bank (FAB), which is majority state-owned.

In a second letter, the lawyers - Paul, Weiss, Rifkind, Wharton & Garrison - asked the US Commodity Futures Trading Commission (CFTC) to investigate possible manipulation of Qatar's currency, the riyal.

"We believe NBAD has participated in an extraordinary and unlawful scheme to wage financial warfare against Qatar, including through the manipulation of Qatari currency and securities markets," said the letter to the US Treasury dated February 26, which has been seen by Reuters.

"These actions should be halted immediately, and we ask that you investigate whether NBAD has directly or indirectly supported the manipulation of Qatar's markets, including through NBAD America's dollar-clearing or correspondent banking services in the United States," the letter said.

A Qatari government spokesman confirmed the letters had been sent to US regulators but declined to comment on their content. New York-based law firm Paul, Weiss declined to comment.

FAB, which was created from the merger of First Gulf Bank and National Bank of Abu Dhabi last year, did not respond to questions about details of the allegations.

The UAE government did not immediately respond to a request for comment.

The US Treasury and CFTC did not immediately respond to requests for comment.

The Qatari central bank has previously accused unnamed banks of trying to manipulate the riyal by trading it between themselves offshore at artificially weak levels - to create an illusion Qatar's economy was crumbling.

The riyal has been pegged to the US dollar at a rate of 3.64 for more than a decade, but in the initial months of the boycott it traded as low as 3.8950 offshore.

In the letter to the US Treasury, Qatar's lawyers said they suspected NBAD was driving the riyal lower during illiquid periods, such as Eid al-Adha holidays last year, "reinforcing the manufactured narrative that Qatar's currency was increasingly volatile and its economy was too unstable for investment".

"NBAD's quotes - and those of other banks involved in the manipulation - were likely all bogus," the letter said without naming the banks and referring to foreign exchange quotes posted by NBAD.

"There is evidence that at the same time NBAD was providing quotes with great frequency and at rates lower than the official rate of 3.64, its traders were unwilling to actually transact at those prices," the letter said.

It cited one example on November 22, 2017: when a counterparty reached out to NBAD to execute a deal, it was told by a representative of NBAD that it had no riyal to trade.

FAB declined to comment when asked about the specific allegation.

The letter did not name the counterparty but said the central bank's lawyers were ready to provide regulators with a recorded chat between the two sides, on a confidential basis. It said NBAD stopped quoting the riyal in December after Qatar vowed to investigate.

The central bank also pledged on Nov. 23 to satisfy any market demand for dollars and the riyal has since rebounded in offshore transactions to trade close to its peg.

Many bankers in the region say that with more than $300 billion in central bank reserves and sovereign wealth fund assets, Qatar has more than enough financial firepower to block any attack on its currency.