The Federal Bank of the Middle East, also known as FBME, was founded in Cyprus in 1982 as a subsidiary of the Federal Bank of Lebanon SAL. The brothers Ayoub-Farid M. Saab (1939) and Fadi M. Saab (1949) are the sole shareholders of the bank.
In 1986 FBME changed their registered office address to the Cayman Islands. The banking operations were moved from Cyprus to the Cayman Islands branch, which partially moved the bank licensing requirements to the Cayman Islands.
In 2003, seven years later, there was another move. FBME had trouble meeting the capital requirements set by the Cayman Islands Monetary Authority. This problem was instantly solved by the takeover of the local Delphis Bank in Tanzania, which made it possible for FBME to move to Tanzania. At the same time the Cyprus branch became a branch of the newly founded FBME Tanzania Ltd. The name Federal Bank of the Middle East Ltd. was formally changed to FBME Ltd.
As of 2003 the main office of FBME is located in Dar es Salaam, Tanzania. Its assets being about two billion US Dollar, FBME Ltd. is considered the largest bank of Tanzania. While its head office is in Tanzania, 90% of its operational tasks take place in Cyprus. Although FBME has a significant and stable position in Cyprus, it has always taken the position that it does not compete in the local banking market. FBME has no retail counters and only very few Cypriot customers. As such, FBME operates in the market for offshore banking and provides services to ‘high net worth individuals’, tax planners and offshore businesses.
Banks with activities in the European Union have to participate in the ‘Deposit Guarantee Scheme’ (DGS). The DGS protects account holders in the case of bank failure. Individual banks have to contribute funds to the DGS equal to at least 0.8% of the total deposits of all account holders. The exact percentage required depends on the risk profile of the individual bank, and can be higher than 0.8%. In the case of FBME the risk profile is high because, among other reasons, many of its account holders have a vast amount of money deposited. This leads to a higher risk than a larger number of account holders with smaller deposits. The Cyprus branch of FBME Bank is a participant in the Cyprus Deposit Protection Scheme. This scheme was activated on the 18th of April 2016 in order to protect customer deposits and allow customers of the Cyprus branch to recover up to 100.000 Euro from their account at FBME Bank. The article on this website ‘FBME Bank Cyprus‘ explains the procedure and guides you to professional assistance that helps you to qualify for the payout while facing a limited risk of rejection.
The Central Bank of Cyprus, which oversees the Cypriot banks and branches of foreign banks in Cyprus, has given FBME a warning twice. In 2008 the bank was fined for limited screening and ‘due diligence’ of new customers and for not conforming to laws and regulations meant to combat money laundering. In 2013 there was another transgression. FBME undertook actions which made evasion of Central Bank supervision easier. Because of the combination of a violation of capital controls and a high risk profile, the Central Bank of Cyprus decided to impose a fine of up to 240 million euros for alleged violation of ‘capital controls’.
After FBME was put under administration of the Central Bank in 2014, the fine imposed in 2013 was collected. Because the fine was still being appealed by FBME, this transaction was declared invalid in February 2015 by the court of arbitrations of the International Chamber of Commerce (ICC). ICC is investigating the matter at the request of both FBME Ltd. and the Central Bank of Cyprus.
Also, in US court, FBME challenges the original notice of finding and final rule published by US based Financial Crimes Enforcement Network, also known as FinCEN.
Both cases discuss the liabilities. Banks customers have no stake in these cases and the verdicts do not advice the central bank to re-open FBME bank or to restore the branch license of the bank. If the verdict is against FinCEN and the central bank of Cyprus, a compensation will be paid to FBME Ltd, the holding company of the bank. This compensation has no influence on the claims depositors might have towards FBME Cyprus or FBME Tanzania.