Blacklisted Banks Invited into Kuwaiti Deal

Two of the banks reportedly blacklisted by the Arabs, S.G. Warburg and N.M.Rothschild and Sons, have been invited to join the underwriting of a $25 million bond issue co-managed by the Kuwait International Investment Co. (KIIC). A spokesman for the Warburg Bank commented that this development reinforced their feeling that resistance to discriminatory pressures would prove effective.

Yielding to pressures of the kind exerted by the Arabs in the past would harm Britain’s image as an international finance center, the spokesman said. That point has already been made to the Bank of England. It was also the argument put forward by the chairman of Kleinwort Banson, the lead manager of the Japanese Marubeni issue from which both Warburg and Rothschild were excluded.

Admitting that his bank had not been able to resist the Arab pressure, Benson’s chairman, Gerald Thompson, said that London banks had to bear in mind their responsibilities to their customers and principals if the City wanted to maintain its international position. It was very important that Middle Eastern institutions be “well represented here,” he said.

Both Warburg and Rothschild have made it clear that they do not intend to take any retaliatory measures. Banking sources in the City told the Jewish Telegraphic Agency that a united front of merchant bankers would prove the most effective means of combatting discrimination in the long run. But they pointed to the difficulties involved. Some banks would be loath to relinquish the special relationship which they have established with the Arabs, and the privileges ensuing therefrom.

The Bank of England announced today that it was “aware” of the problem and was in touch with “those concerned,” but refused to disclose what, if any steps are being contemplated. Banking sources said it remains to be seen whether the Kuwaiti KIIC decision indicates an about turn in Arab policy.