Kuwait moves to prop up major bank after losses

Source: AP

Kuwait moves to prop up major bank after losses
Sunday October 26, 11:20 am ET
By Diana Elias, Associated Press Writer

Kuwait moves to prop up major bank, eyes deposit guarantee as financial meltdown reaches Gulf KUWAIT CITY (AP) -- Kuwait's Central Bank stepped in Sunday to prop up one of the country's biggest banks and said it was considering guaranteeing deposits in domestic banks -- in one of the first concrete signs that the global financial crisis may next hit the oil-rich Gulf.


In Saudi Arabia, meanwhile, the government said it would deposit $2.7 billion into the Saudi Credit Bank to help lower-income citizens deal with financial difficulties, the country's Al-Ektisadiya newspaper reported.

The two moves came just a day after finance ministers from the six-nation Gulf Cooperation Council held an emergency meeting to echo assurances, which they have repeatedly voiced over the past few weeks, that the region's banks face no liquidity crisis.Kuwait's decision to stop trading in shares of Gulf Bank sent a shock wave through the country's bourse, which closed down almost 3.5 percent and brought its year-to-date losses to over 19 percent.

"The halting of Gulf Bank shares spread panic in the bourse today, because the government has been saying banks are safe from (global financial crisis) losses," said investor Ahmed al-Fadhli in a telephone interview.

The central bank order said trading in Gulf Bank shares would be suspended pending an investigation into the derivatives deals that caused the losses. The bourse's statement said some investors had balked at covering their losses, but neither the central bank nor Gulf Bank indicated the scope or timeframe of the bank's losses.

But one banking official with access to the information estimated the bank's losses at up to $749 million. The official spoke on condition of anonymity because of the sensitivity of the issue.Over the past few weeks, Kuwaiti investors have voiced clear concerns about the market. One stockbroker unsuccessfully sued to temporarily close the bourse while other traders last week stormed out of the exchange, demanding the government intervene to halt their near-daily losses.

Investor al-Fadhli said about 40 brokers walked Sunday from the exchange to the nearby seaside Seif Palace, demanding to see the prime minister, Sheik Nasser Al Mohammed Al Sabah, to ask for more government intervention.

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