Emirates Bank Group of Dubai is buying up to 10 per cent of Bank of Beirut (BoB) in the latest of a string of deals which have brought Gulf Arab investment into the Lebanese banking sector.

The group, which is 80 per cent owned by the Dubai government, says the purchase is part of its strategy of expansion in the Arab world.

BoB has raised its capital by $22 million by bringing in new shareholders who include Emirates Merchant Bank (EMB), the investment banking arm of the Dubai group whose core is Emirates Bank International.

A statement by BoB's advisers, Middle East Capital Group, said that the Beirut bank's equity after the capital increase would be about $60 million. EMB's purchase of the shares has yet to be passed by regulators.

A statement from the Dubai group said it would also sign a memorandum of understanding with BoB to work together on areas of 'business reciprocity'. A BoB spokesman said his bank was pleased with the involvement of a large and well-established new shareholder from the Gulf.

Executives from the Dubai group were not available to comment on the deal or to say if it plans to buy into banks in other Arab countries.

Lebanon's banking sector, which has about 70 banks, is going through a shake-up as a handful of large banks buy up smaller ones. Gulf Arab investors are also moving in: National Bank of Kuwait has bought a small bank, while Saudi investor Khalid Bin Mahfouz acquired the country's tenth biggest bank, Credit Libanais, for $163 million last summer.

Another band of Gulf investors, using a vehicle called Ark Holdings, are buying up banks with a view to merging them. Other Lebanese banks are understood to be looking at the possibilities of joining forces with banks in Egypt and Jordan.