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Gulf Arab Policy Actions on Credit Crisis - ASHARQ AL-AWSAT English Archive 2005 -2017
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(Reuters) – The global financial crisis prompted Gulf Arab states to enact a slew of policy responses to combat tight liquidity conditions in the markets and sagging investor confidence.

Below are details of government and central bank actions since the crisis began in September:


* The central bank poured $3 billion in long-term deposits into the banking system, its first direct injection of U.S. dollars in a decade.

* Saudi Arabia’s top economic body, the Supreme Economic Council, promised to guarantee bank deposits.

* The kingdom extended $2.67 billion in credit to low-income citizens having difficulty getting access to loans.

* The Saudi Arabian Monetary Agency (SAMA), or central bank, cut its repurchase rate cut by 100 basis points to 4 percent on Oct. 30 and lowered bank reserve requirements to 10 percent from 13 percent.


* Kuwait cut its discount rate by 25 basis points on Oct. 30 to 4.25 percent after the U.S. Federal Reserve rate cut a day earlier.

* The central bank had slashed the discount rate by a whopping 125 basis points earlier in October to boost liquidity. It also cut the repurchase rate to 2 percent from 3.5 percent in two moves last month.

* Kuwait passed laws guaranteeing all bank deposits after the central bank was forced to save Gulf Bank (GBKK.KW: Quote, Profile, Research), which suffered steep derivatives trading losses.

* The Gulf state set up a task force headed by the central bank governor to deal with the financial crisis.

* Kuwait Investment Authority, the state’s sovereign wealth fund, pumped cash into the bourse, the Arab world’s second- largest after the Saudi Arabia exchange, to help stabilize markets.


* The finance ministry poured $6.8 billion into the financial system in October as part of a $19.1 billion rescue facility. It said it would make another $6.8 billion available in the second week of November.

* The UAE, the Arab world’s second-largest economy, vowed to guarantee bank deposits and protect lenders from credit risk.

* The central bank cut its overnight repurchase rate by 50 basis points to 1.5 percent from 2.0 percent in October. It refrained from changing the rate after a second Fed cut in late October to bring its rates closer in line with its Gulf neighbours.

* The central bank set up a $13.6 billion emergency bank lending facility in September to provide liquidity to banks.

* The bank lowered the borrowing rate on this facility in October to 1.5 percentage points over the repurchase rate from 3 percent. It cut to 3 percentage points over repo the rate at which banks could borrow above their reserve requirements, down from 5 percentage points.


* Qatar’s sovereign wealth fund said it would buy between 10-20 percent of listed banks’ capital to boost confidence in the market.

* Qatar central bank said it stands ready to act if needed and had many instruments at its disposal but has so far kept to the sidelines.

* The central bank opted not to cut interest rates when other Gulf states lowered them in October.


* The island kingdom’s central bank slashed the repurchase rate and over-night rate by 125 basis points to 3.5 percent in a rare move on Oct. 30. It had reduced the rates by 50 basis points earlier in the month.

* The central bank expanded acceptable collateral for overnight funds to include ijara sukuk, a type of Islamic bond.


* The Omani central bank slashed its repurchase rate by 216 basis points in November to 2.08 percent.

* The central bank allocated about $2 billion to local banks at an interest rate of LIBOR plus 150 basis points to provide dollar liquidity to banks.