The recruitments come as the tiny Gulf Arab state, home to sovereign wealth fund Qatar Investment Authority, spends billions on overseas acquisitions and invests in Arab states to boost its political clout.

Morgan Stanley's Qatar head Khalid al-Subeai resigned last week to join the investment banking division of unlisted Barwa Bank, while Goldman's Qatar Chief Executive Tamim al-Kawari has joined investment bank QInvest, part-owned by Qatar Islamic Bank QISB.QA, as deputy CEO, according to several sources aware of the matter.

Morgan Stanley and Barwa Bank declined to comment. A Goldman Sachs spokeswoman confirmed Kawari's departure, which took place this summer but was not publicly announced. The sources spoke on condition of anonymity as the matters had not been made public.

"You can see that the top brass (of Qatar) is grooming the young talent to take up bigger roles and the hirings could be part of that move," one of the sources said of Qatar, which has less than 300,000 citizens.

"These are the kind of people who will run the sovereign fund in future. It's a very smart move and very much expected of Qatar."

Qatar's lenders, led by state-controlled Qatar National Bank QNBK.QA, are on an expansion spree and are scouting for assets put on the block by big European banks who are scaling back in the region.

The Gulf state itself is investing about $30 billion a year globally through its sovereign wealth fund, which has picked up stakes in high-profile assets such as miner Xstrata (XTA.L), Volkswagen (VOWG_p.DE) and Porsche (PSHG_p.DE).

Subeai will join The First Investor, a unit of Barwa Bank, as deputy chief executive, effective January 1, one of the sources said. He had joined Morgan Stanley in 2010 from state-owned Qatar Petroleum.

Barwa, a Qatari lender part-owned by Qatar Holding, has been ramping up its presence since its inception about three years ago. The lender is planning an initial public offering, its chief executive said earlier this month.

QInvest is in talks to acquire the investment banking arm of Egypt's EFG Hermes (HRHO.CA).

(Additional reporting by Regan Doherty in Doha; Editing by Amran Abocar and David Holmes)

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