KUWAIT CITY (AP) - Kuwait moved Sunday to prop up the country's second-largest commercial bank and scrambled to protect depositors at other domestic banks, dashing hopes the oil-rich Arab Gulf 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. Kuwait's exchange was down 3.5 percent at closing. The losses tracked most other major world market indices, which saw declines Friday.
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. Because most of the region's banking sector is privately held, little is known about the institutions' true risk exposure.
The Gulf Bank news also appeared to have pushed the Kuwaiti government to take a step it has so far resisted - guaranteeing deposits. The country currently makes no deposit guarantees. 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." |