Kuwaiti banks to merge under rescue package

BANK MERGERS: Details of Kuwait's rescue package have revealed that banks and financial firms may be forced to merge to take advantage of the money. (Getty Images)

Kuwaiti banks and investment firms may have to merge if they want to obtain state help under the KD1.5bn ($5bn) rescue plan that has been drawn up by the central bank, it has said.

Earlier this week the state’s cabinet approved the stimulus package worth $5bn including state guarantees of up to 50 percent for any fresh loans banks provide to local firms.

However, investment firms receiving government guaranteed loans will have to comply with the plan's rule that "the firm enter a merger with one or several firms if this is required", according to the detailed plan.

The same applies to banks if they want state guarantees for their investments and real estate holdings, according to Kuwait daily Kuwait Times.

The plan was unveiled after several investment firms called for a cash injection to weather the global economic downturn.

The extra detail on the rescue plan for banks comes just a day after Standard Chartered predicted that the oil-rich state will slide into recession this year because the government is planning to cut spending.
 
Last month Global Investment House, Kuwait's biggest investment bank, announced that it had defaulted on most of its debt, while Islamic Investment Dar said in December it needed up to $1bn in loans.

Under the plan, the central bank will also decide which investment firms will qualify for aid depending on whether the firm is able to continue its business and has a "good" solvency.

Central Bank governor Sheikh Salem Abdul Aziz said on Sunday he expected local banks to provide loans to companies worth up to four billion dinars in the next two year – of which the government would guarantee 50 percent.

The Kuwait government will also guarantee 50 percent of all loans local banks provide to investment companies who reschedule their debts, and 25 percent of loans issued to foreign creditors.

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