Bank of Bahrain and Kuwait (BBK) has submitted a request to the UAE Central Bank to upgrade its representative office in Dubai to a full branch, a spokesman for the bank told MEED on 25 April. The move follows an initiative announced in December to allow commercial banks from one GCC state to establish branches in another (MEED 9:1:98).

BBK opened its representative office in Dubai in 1996, and the bank is confident that the branch licence will be granted. 'We have demonstrated that we have business and clients in the UAE, and that we can add value to the local market,' the spokesman said. For the rest of 1998, the bank will concentrate on upgrading its activities in the UAE. BBK is also 'very interested' in establishing a presence in Saudi Arabia, and following the December sales of its stake in the Bank of Oman, Bahrain and Kuwait, would like to continue to do business in Oman.

Although the political decision to allow the banks to open branches in other GCC states has been taken, the individual central banks have yet to bring in legislation to enable its implementation. 'When they do, BBK is likely to meet any criteria they specify,' the spokesman said. The only requirements that have been set out so far are that a bank must have been in operation for at least 10 years and have shareholders' equity of at least $100 million.

Analysts say they do not foresee a rush by commercial banks to take advantage of the new legislation. 'They will have to carry out feasibility studies first, and it may not be desirable or viable for all of them to establish a presence in new markets,' said a Bahrain-based analyst. While the region's larger banks are likely to benefit, the smaller ones will be faced with tougher competition.

The only other offshore bank seriously considering new branch proposals is Bahrain-based Gulf International Bank (GIB), which is owned by the governments of the GCC states. A source at the bank said it is studying where and how to open new branches. 'Saudi Arabia is an obvious choice, as we already do a lot of business there and it is the largest market,' he said.