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Sun 27 Jan 2008 11:15 AM

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Qatar poised to take $3bn Credit Suisse stake

State-backed QIA looking to acquire 5% stake in Zurich-based bank, media reports.

Qatar-backed funds are poised to invest around $3 billion in Credit Suisse, one of Europe's largest banks, a UK newspaper reported on Sunday.

The funds, affiliated with state-backed Qatar Investment Authority (QIA), are looking to acquire a 5% stake in the Zurich-based bank, the Sunday Telegraph said, citing people close to the situation.

The paper said the QIA's plan had not been finalised yet and it could end up taking a larger stake than 5%. Swiss law requires a stake of more than 3% to be disclosed.

If the deal goes ahead the QIA, worth an estimated $60 billion, will be just the latest Gulf sovereign wealth fund (SWF) to invest in US and European financial institutions.

US banks Citigroup and Merrill Lynch & Company, as well as Swiss bank UBS AG, have all turned to SWFs in the last couple of months for extra capital in the wake of the subprime mortgage crisis.

However, analysts said any investment in Credit Suisse would not be viewed in the same way as the Swiss bank's exposure to the subprime crisis had been relatively limited in comparison to the likes of Citigroup and Merrill Lynch.

"This is not about shoring up an ailing balance sheet," one source told the Sunday Telegraph. "This would not dilute Credit Suisse's capital structure or signal anything like the message that other banks' huge writedowns and their need to attract large foreign investments have sent out."

A person close to the QIA said last week the investment fund was looking at possibly buying into financial services and construction companies in the US and Europe.

The growing influence of state-controlled funds, now estimated to be in control of around $2 trillion in assets worldwide, was one of the key issues being discussed at last week’s World Economic Forum in Davos, Switzerland.

The influence of SWFs has become a major concern in the US and parts of Europe due to a perceived lack of transparency and accountability.

However, experts said in Davos that protectionist fears about SWFs have so far been unjustified and they should not be over-controlled.

US president George W. Bush signed an executive order Wednesday to tighten controls over the inflow of foreign direct investment into the country, a key target for investment by Middle East and Asian SWFs.

The order was to implement a law passed by the US Congress in October last year that requires a more stringent, second review phase before foreign investment can be made in areas deemed sensitive to US national security.

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