LONDON, Feb 10 (IFR) - JP Morgan has cut its
correspondent banking relationship with Emirates NBD,
Dubai's largest bank, as part of a global review of its
business, sources familiar with the matter said.
In a memo to staff last year, the U.S. bank said it would
scale back its relationships with foreign banks in order to
comply with regulatory pressure to tighten risk controls.
As part of this process, the bank has severed relationships
in its cash management business in the Middle East, and has not
spared Dubai's largest bank by market capitalisation.
"JP Morgan is undertaking a global review of its banking
relationships both on profitability and on compliance. In the
Middle East they have cut many relationships, including with
Emirates NBD," a person with knowledge of the matter said.
Another Dubai-based banker said he had received similar
information. "It is not very surprising given the pressure
they've been under from regulators. They are cutting any
relationship that holds even a slight bit of risk," he said.
JP Morgan does not comment on individual relationships, but
a source said: "It is well known we are tightening our controls,
especially in the corresponding banking business...and we
mentioned it in our Q3 earnings."
An Emirates NBD spokesman said the lender did not comment on
the relationship between the bank and clearing banks.
Correspondent banking, which involves activities such as
processing transactions and clearing U.S. dollar payments for
foreign banks, has historically been a core part of JP Morgan's
It emerged in August last year that this business would be
scaled back at JP Morgan and the bank would not take on any new
clients, particularly in the light of increased regulatory
scrutiny in the aftermath of the "London Whale" derivatives
Following media reports, JP Morgan said in a statement that
it was "important for us to pause and assess our business,
particularly in select markets, to ensure we are well-positioned
to meet our responsibilities for the long term".
Bankers working for international banks in the Middle East
said they would be surprised if JP Morgan was the only
international firm to cut relationships in the region.
"I think it is a little unfair to single out JP Morgan on
this issue - many of us will need to look at our relationships
again and there could be more developments of this nature," said
One problem facing international banks in the region is some
Gulf lenders' relationships with clients in Iran, though there
are no suggestions that the relationship with Emirates NBD was
terminated for this reason.
In February 2012, Dubai-based Noor Islamic Bank (now called
Noor Bank) stopped channelling billions of dollars from Iranian
oil sales through its accounts after pressure from the United
States, Reuters reported.
In May last year, the United States blacklisted two
Dubai-based trading companies - Al Hilal Exchange and Al Fida
International General Trading - accusing them of helping Iran
evade financial sanctions.