The year 1990 was not a good one for Sheikh Khalid bin Mahfouz. In fact, it may have been the worst of his life. That year - when he secured Irish passports for himself and his entourage - his business and his reputation were on the rocks. The bank his father founded, the National Commercial Bank (NCB) of Saudi Arabia, the kingdom's largest (and last year rated No 6 in its top 100 companies), was in such bad shape that questions were being asked about its future. Abroad, rumours were running wild about another of his banking interests, the Bank of Credit and Commerce International (BCCI).

And as if this was not enough, the Iraqi army was at the gates of his country threatening an invasion. As American troops poured in to respond, Armageddon appeared to be looming. His $2.5 billion fortune seemed little comfort in this sea of troubles.

It was a far cry from the days when he was known as one of the high rollers from the kingdom of oil. One analyst recalled Sheikh Khalid as a "very dynamic, gungho trader" who enjoyed the rush of commodity dealing.

In the 1980s he was one of a group of wealthy Saudis who financed a disastrous attempt by the Hunt brothers of Texas to corner the world silver market. He could boast of belonging to one of the wealthiest 10 families, outside the royal family, in Saudia Arabia.

In 1990 it was not the Iraqi army, ironically, which was his biggest problem. More importantly, his relationship with the royal family was at a delicate stage. As chairman of the bank which acted for it, Sheikh Khalid was in the impossible situation of having to ask its senior members, including, it was rumoured, the king himself, to repay their bank loans.

For decades the sheikh and his family had made profitable use of their royal connections. Such special clients not only put a lot of business and contracts their way, but also protected the bank from pressure to go public, as the other banks had been forced to do.

"Khalid used to do a lot for Prince Sultan [the defence minister] and the other princes. If there was any wheeling and dealing to be done for the princes, then Khalid was your man," commented one diplomat close to the Saudis.

It was Sheikh Khalid's shareholding in the BCCI bank which was to prove the most useful connection for the Saudi ruling family. A US Senate report was later to document an arms deal between Israel and Iran in the mid-1980s which was funded by the Saudis through the National Commercial Bank of Saudi Arabia. The deal was part of the package exchanging weapons for Iranian influence in releasing American hostages held in Beirut. The House of Saud denied all involvement in the deal.

Back home the royal connections began to show their downside. By the late 1980s, reports were circulating that royal loans from the National Commercial Bank of Saudi Arabia were running at billions of dollars, far exceeding what was appropriate to the bank's liquidity. Annual accounts failed to appear for a number of years.

Abroad, growing questions about the bank's viability led the foreign regulators to close the bank's branches in London and New York.

At the same time as his National Bank was unravelling, so was the international banking giant, BCCI. Between 1986 and 1990 the Mahfouz family had acquired 20 per cent of the shares of BCCI and Sheikh Khalid served on the bank's board of directors. The family also placed deposits with BCCI and received huge unsecured loans from it.

A US Senate committee report claimed that National Commercial Bank had an intimate relationship with BCCI, whereby BCCI "parked hundreds of millions of dollars of loans" with his Saudi bank. A year later Sheikh Khalid was finally indicted for fraud by a US grand jury.

The charges were formally dropped two years later when he agreed to pay nearly $260 million in fines and repayments to the US authorities. His Saudi bank, the National Commercial Bank of Saudi Arabia, was also ordered to pay some $245 million to BCCI's liquidators. By 1993 he had stepped down as the bank's chief executive, reportedly suffering the effects of diabetes, a heart attack and a car accident.

Just two years later he was given the chance of proving his worth when his royal connections paid off once again, and he was reappointed chairman of the bank he brought to near-ruin. Sheikh Khalid's main priority now, his close associates say, is to clear his name once and for all and prove to the world he is a good banker.