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Thu 9 Oct 2008 04:20 AM

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Kuwaiti banks propose fund to support bourse

Banking association wants 'huge' fund to intervene in local markets, more liquidity.

Kuwaiti banks and investment firms proposed on Wednesday to set up a "huge" fund with private firms and the government to shore up the local bourse.The Gulf Arab state's bank and investment company associations called in a statement for the establishment of a "huge portfolio" together with companies and government bodies to invest in the bourse.

The statement did not give the value or other details of the proposed fund to support the stock market, whose index has fallen more than 10 percent in the past four sessions.

Banks will have an additional 1 billion dinars ($3.74 billion) to lend under a measure announced earlier on Wednesday by the central bank to increase the allowed loan-to-deposit ratio for banks to 85 percent from 80 percent, the head of the banking association told newswire Reuters.

"It's effective today... This is in addition to the reduction of the discount rate cut..," Abdul-Majed Al-Shatti said.

The banking and investment firms associations repeated a call on governmental and semi-governmental institutions to move deposits to lenders to boost liquidity and support the economy. The institutions often keep deposits at the central bank.

The central bank has been injecting liquidity by offering short-term funds to lenders since last weeks, bankers said. The central bank earlier this week said it would ensure sufficient liquidity.

As a result, interbank lending rates fell for the fourth day on Wednesday after the central bank cut the benchmark discount rate by 125 basis points to 4.50 percent from 5.75 percent. The central bank also lowered the repo rate to 2.50 percent from 3.50 percent. (Reuters)

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