The National Bank of Abu Dhabi has received tentative approval from federal regulators to establish a branch in Washington that the Arab sheikhdom plans to use as a major vehicle for recycling its oil money throughout the Western Hemisphere.

The Abu Dhabi International Bank is completing requirements for a charter set by the comptroller of the currency and is scheduled to open for business later this year, said a representative of the bank regulatory agency.

The Washington bank will be a wholly owned subsidiary of National Bank of Abu Dhabi, which has assets of $4.5 billion and is the fifth-largest financial institution in the Middle East. Abu Dhabi is already among the most aggressive Arab nations in investing in the United States, and the Washington office is expected to lead to further participation in American financial markets.

"They want to establish a base in Washington for their investments in the Western Hemisphere," said David Toufic Mizrahi, publisher of MidEast Report, an international newsletter on Middle Eastern finance. "Their investments in the United States and South America will be channeled through this bank."

The Abu Dhabi bank will be the second foreign financial institution to set up shop in the District of Columbia under provisions of a new foreign banking law that recently went into effect. The National Bank of Pakistan opened an office on Connecticut Avenue earlier this year.

Abu Dhabi International Bank will also be the second Washington banking investment by residents of Abu Dhabi, a tiny Persion Gulf sheikhdom with few people but tremendous oil revenues.

The royal family of Abu Dhabi is part of the group of three Middle Eastern investors who have agreed to pay $160 million for Financial General Bankshares Inc., the third-largest banking company in the Washington area. That transaction is awaiting the approval of state and federal regulators.

Abu Dhabi's investment in Financial General is being handled by Abdullah Darwaish, financial adviser to the royal family, on behalf of Sheikh Mohammed, a son of Sheikh Zayed bin Sultan Nahyan, ruler of Abu Dhabi. The Abu Dhabi ruling family already owns 293,000 shares of Financial General, about 4.6 percent of the stock of the holding company that controls the First American Banks.

In addition to being the hereditary ruler of Abu Dhabi, Sheikh Zayed serves as president of the United Arab Emirates, a confederation of seven desert sheikhdoms that drew little attention until oil was discovered there 25 years ago.

Abu Dhabi is the biggest oil producer among the Emirates, whose oil exports bring in about $375 million a month. Abu Dhabi ranks alongside nearby Kuwait as one of the richest nations in the world, with a per capita income estimated at $14,000 a year. Fewer than 50,000 of Abu Dhabi's 250,000 residents are natives; the remainder are workers who have come to run the oil industry and the massive construction projects being built with oil revenues.

Abu Dhabi International Bank plans to set up what is known as a "limited federal branch" in Washington. Limited federal branches have most of the powers of national banks except the authority to conduct retail banking operations; they cannot handle the usual personal or small business accounts.

Since a new International Banking Act went into effect earlier this year, 20 limited federal branches have been chartered, and half a dozen have begun operations.

A member of the comptroller of the currency's staff explained that their usual business is financing foreign trade between the United States and the home country of the bank.

In its application to the comptroller, Abu Dhabi International Bank said its primary function would be to handle extensive, but unspecified investments in the United States by Abu Dhabi.

Mizrahi said Abu Dhabi is already a major investor in the stocks of several U.S. companies, particularly airlines. The country has bought large blocks of Trans World Airlines, Braniff and Seaboard.