The issue comes to a head tomorrow when Abdulla Saudi steps down as chief executive of the Arab Banking Corporation, the Middle East's largest bank, but with the apparent intention of staying as chairman of its London offshoot, ABC International.
At issue is the interpretation of UN financial sanctions. Washington believes Mr Saudi is or has been a key player in Libyan state enterprises.
The US Treasury's Office of Foreign Assets Control (Ofac) would like him to go from the London job as well but the Bank of England has been resisting. 'If I'm not judged to be fit and proper they (the Bank of England) will ask me to leave and they haven't,' Mr Saudi said.
Mr Saudi's impending resignation was announced in February following a high-level meeting in Washington attended by officials of Ofac, Bahraini financial regulators and ABC board members. Ofac had concluded that under sanctions ABC constitutes a Libyan enterprise.
In order to prevent its assets from being frozen in the US, Ofac insisted that Mr Saudi resign and that the Libyan shareholding in the parent bank - deemed by US authorities to be 32 per cent although bank documents list it as only 25 per cent - be frozen by the Bahraini authorities. This would mean that the Libyan government would have no voting rights or board representation and would receive no dividends.
The governments of Kuwait and Abu Dhabi each hold 25 per cent stakes in the parent bank, with the remainder held by private individuals, some of whom are believed to represent the government of Libya.
While Mr Saudi remains head of the London subsidiary, he could in effect run the bank 'from the bottom up', sources say, although that may prove impractical.