Gulf Bank crisis under control, says central bank

GOOD HEALTH: Kuwait is taking steps to restore the financial health of Gulf Bank. (Getty Images)

Kuwait is taking steps to restore the financial health of Gulf Bank, which received emergency central bank support for derivatives losses, state news agency KUNA reported on Monday.

"This (Gulf Bank) problem had been brought under control fully and now measures are being taken to restore shareholder rights to (the levels) to their end of September levels," KUNA quoted Central Bank Governor Sheikh Salem al-Sabah as saying.

The central bank stepped in to save Gulf Bank on Oct. 26 and the bank's problems forced the Kuwait to move quickly to guarantee deposits at local banks in an effort to rebuild confidence.

Sheikh Salem did not give details on the steps the central bank would take. Shares of Gulf Bank have fallen more than 25 percent since hitting a two-month high on Sept. 29.

"They want to restore confidence in the whole banking system in Kuwait," said Talal al-Tawari, head of the GCC equities division at Gulf Investment Corp.

"It seems the government or investor would step in and inject cash to restore shareholders' equity back to September levels."

Sheikh Salem said the deposit guarantee law "would enhance levels of growth of deposits at banks and achieve a high level of stability in the liquidity of the banking sector".

"The banking sector in Kuwait enjoys healthy banking indicators in terms of profitability and liquidity ... therefore this should reflect positively on the prices of shares of these banks in the market," he added.

The governor reiterated that the Gulf Bank case was an isolated incident and other Kuwait lenders had recorded no losses from derivatives. (Reuters)

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