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Financial Crisis Churning At Kuwait's Gulf Bank

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The Associated Press

Published: October 27, 2008

KUWAIT CITY - Kuwait moved Sunday to prop up the country's second-largest commercial bank and scrambled to protect depositors at other domestic banks, dashing hopes that oil-rich Arabian Gulf nations would emerge largely unscathed from the global financial crisis.

The central bank halted trading in Gulf Bank shares because of high derivatives losses, just a day after gulf finance ministers said the region's banks were insulated against the liquidity crisis that has rippled through the global banking industry.

"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," investor Ahmed al-Fadhli said a telephone interview.

The Saudi stock exchange - the region's largest - fell by 8.7 percent Saturday and is down more than 50 percent since January. Saudi's benchmark Tadawul index closed down about 1.6 percent Sunday, while the Dubai Financial Market sank 4.7 percent, and Qatar's exchange closed down almost 9 percent.

Neither the government nor Gulf Bank revealed the size of the losses or their timeframe. But Ibrahim Dabdoub, the chief executive of the National Bank of Kuwait, told Al Arabiya television the losses were up to $742 million.

The Gulf Bank news appears to have pushed the Kuwaiti government to take a step it has so far resisted - guaranteeing deposits. The central bank said it would propose an urgent bill to guarantee deposits at local Kuwaiti banks in an effort to "boost confidence in our banking sector."

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